331: Hiten Shah On Building Successful Startups & Products

Hiten Shah is the co-founder of FYI, a company that helps you find your documents in 3 clicks or less. He previously co-founded CrazyEgg and KISSmetrics as well. In this conversation, we discuss lessons learned over the last 20 years in the tech industry, venture capital vs bootstrapping, the future of remote work, why labor costs decrease and marketing costs increase, and why creators are so well positioned to build massive companies in the future. =============================== Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost. Using the services provided by Blockset, businesses can build professional custody solutions, accurate and near real-time portfolio management solutions, auditing platforms, commercial block explorers, and much more: https://www.blockset.com =============================== Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link https://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. =============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

• 0:00Speaker 00

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off.

• 0:11Speaker 00

  Heaton Shaw is the co-founder of FYI, a company that helps you find your documents in three clicks or less. He previously co-founded Crazy Egg and Kiss Metrics as well. In this conversation, we discuss lessons learned over the last 20 years in the tech industry, venture capital versus bootstrapping, the future of remote work, why labor costs decrease and marketing costs increase, and why creators are so well positioned to build massive companies in the future. I really enjoyed this conversation with Heaton, and I hope you do as well. Before we get into the episode though, I want to quickly talk about our sponsors. The first is Blockset by BRD. You probably know BRD as the first Bitcoin wallet in the App Store back in 2014.

• 0:56Speaker 00

  They've launched a new product called Blockset that provides hosted blockchain infrastructure. Exactly what AWS does for Amazon, Blockset does for BRD and now you. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time at a fraction of the cost. Using the services provided by Blockset, businesses can build professional custody solutions, accurate and near-real-time portfolio management solutions, auditing platforms, commercial block explores, and much, much more. Go check them out at blockset.com. Again, hosted blockchain infrastructure. Exactly what AWS does in the traditional world, Blockset does in the blockchain world. Blockset.com. Next up is crypto.com.

• 1:40Speaker 00

  They're an all-in-one platform that allows you to buy, sell, store, earn, loan, and invest crypto all from one place. You can join over 1 million users currently using the crypto.com app. Go head over to crypto.com. They've got a killer URL and they're allowing you to buy, sell, store, earn, loan, or invest crypto all from one place. Crypto.com, a great URL and where mass adoption's happening. Lastly, don't forget that I write a daily letter to over 50,000 investors about business technology and finance. I break down complex topics into easy-to-understand language while sharing my opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com.

• 2:25Speaker 00

  All right, let's get into this episode with Heaton. I hope you guys enjoy it.

• 2:29Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 2:56Speaker 00

  All right, guys. Bang, bang. I have Heaton here. Thanks so much for doing this, man.

• 3:01Speaker 02

  Thanks for having me. Yeah, it's always fun.

• 3:03Speaker 00

  For sure. Let's start with just your background. I know you've been all over the world, but give us kind of a quick two minutes on your background, what you've done.

• 3:11Speaker 02

  Yeah, I started building software back in 03, 04. Got real lucky with one called Crazy Egg after trying to build 12 different products within a couple of years. That one's self-funded, still running. It's like over 15 years old now. My wife actually runs it, creates heat maps for people who are clicking on a page. Then I'm probably most well-known for starting Kissmetrics, which was back in 2008. We started that, 2008, 2009, and then that one went through a whole bunch of ups and downs. I wrote a whole blog post called "My Billion Dollar Mistake" and how I personally screwed it all up, of course.

• 3:50Speaker 02

  And then I've also invested in about probably over 150 companies now through kind of the last, like, I guess, 15-plus years of being in tech. And then more recently, I started a company called FYI that helps you find your documents in three clicks or less across all the different services you use, and we go beyond just a search box. So I build software. I help other people build tech businesses for the most part, and I've invested in all kinds of different companies, some that have turned into unicorns, others that are kind of failed and across the board, not just software. So different hardware companies, D to C before it was called D to C, stuff like that, too.

• 4:30Speaker 00

  I think one of the things that when you look at the companies that you've built and they are known for, they all have kind of the same type of feel, right? You're not outbuilding what would be considered kind of consumer social applications. You're not building the next marketplace in terms of Ubers and Lifts and Airbnbs of the world. You're very focused on like, hey, I built this piece of software. I sell it to you or I give it to you for free or whatever the monetization is, but it helps you do a very specific thing, right? And so maybe talk a little bit about like, why are you attracted to that type of model? Or why have you spent so much time building that type of software?

• 5:04Speaker 02

  Yeah, that's a really good question. The pithy dumb shit answer, for lack of a better answer, is like, I don't know. It just happened. So, you know, like, I think a lot of people pretend to be smarter than they are, like, trying to give you a solid answer. Look, hindsight's 2020. So like, I fell into it at a time when we, back in the day, I started a consulting business doing marketing. In 2003, I did that with my co-founder and brother-in-law Neil Patel. And we just didn't want to keep doing the same type of consulting where we get, we're charging hourly, right? We're billed for our hours and our team's hours. We started building software and neither of us are engineers. I fake it now. I don't think he tries to.

• 5:48Speaker 02

  I don't think he even wants to touch a lot of software if he can help it. I myself just found that like, for me, it's a personal joy of being able to build something and have people be able to use it, but use it in a way where like the value they get is extremely clear. And you can talk to them about that value and make the product better. I think with a consumer product, the criteria and the way you think about it is a lot different, even though the actual software development might be very similar at this point. And then when you talk about like other types of businesses like e-commerce or other ones like. I feel like I gravitated towards software. The main reason is just because I started with it,

• 6:31Speaker 02

  got good at it and found my spot where like I enjoy it. And the whole ecosystem around me has developed around building software and having more than one software company I work on or have or own or whatever. In short, though, it's like we just fall into what we fall into like it's like asking you like, dude, why'd you fall into Bitcoin? You probably have a damn good answer right now, but at the end of the day, you just lived your life. You were open to opportunities and boom, right? And like I first met you when you were starting a company, right? Not, not, I don't know you as the Bitcoin person or the person who talks about Bitcoin and monetary value and economic, you know, the economic system in the world and stuff like that, which like I know a lot of people know you for, probably a lot of people are listening.

• 7:16Speaker 00

  Yeah, I tend to think that things just happen. I think it's a great way to kind of to, to, to position it. And then Crazy Egg was self-funded. You took no outside capital for, if I understand correctly, Kissmetrics, same thing?

• 7:30Speaker 02

  Kissmetrics, we raised money for. So that was our first sort of venture-backed company. And then with, with Crazy Egg, it's been self-funded since day one and like we, we continue to like self-funded and have no plans to take outside capital. We also like tend to like, not with the venture-funded stuff, but like with self-funded businesses, just keep the team super small, focus on profit, not worry so much about growth rate and things like that in the same way that you would if you were venture-funded and had a bunch of money to kind of pour ahead of revenue.

• 7:59Speaker 00

  Got it. And in that sense, what is the kind of the pros and cons? Right? You've kind of seen what happens when you don't raise money and end up being successful. And then you've kind of seen the pressures and accelerated timelines and things around venture capital. And I think it's kind of become cool to talk about not raising venture capital now. But obviously we have plenty of examples where when a model works, it really, really works. And so being an entrepreneur that's done both, like, how do you kind of balance the two?

• 8:28Speaker 02

  There's so many camps, right? Like for everything, like there's a camp for this, like DHH over there, you know, who I have a huge amount of like admiration and respect for. And at the same time, sometimes he says things, I'm like, you know, that's, I get it. I understand you at this point, you know, like, like they were role models back in the day for us in a number of ways, not the self-funded side, but the software side more than anything else. I love how they write, copy and build products. So that's one camp. Then you have almost like an artificial camp, I would call it, which is all these investors, right? And, you know, I'll give a few anecdotes

• 9:10Speaker 02

  and then I will, I promise, answer the question. First of all, like, I don't know anyone else that's done both. And I think that changes my perspective. And I don't care if I have authority to speak on stuff. I'll speak on stuff if I don't have authority, but gives me a little bit extra authority to be like, look, I've seen both sides. I'm neutral. Like, I'm like, you gotta, you gotta do what's right. And if you pick the wrong option, you can change later. Probably not the business you're in, if you raise money, but that's even possible. We've heard of companies being bought back and sold and all kinds of funny stuff. Look, at the end of the day, I think like, are you driven by short-term freedom? Are you driven by long-term value creation? And, and depending on those,

• 9:55Speaker 02

  and your sort of lens on like time and your horizon in life, like whether it's how old you are, what phase you're in, or how conscious you are to this, you're gonna make a choice one way or another. So if you feel like, hey, I have this ambition and I want to go really far,

• 10:12Speaker 02

  you might just say, other people's money is the best way to do that because it can get me further faster. If you're saying, hey, I have a job and I want to quit my job, it's likely that raising money, unless you're in the ecosystem already, isn't the best option for you. Right? So I think this is very personal. And what ends up happening is people get, don't think of it that way. And instead, they're like, I'm in the Bay Area, I'm going to raise money and do a startup. Right? So around here where I am, I'm in the Bay Area. Most people are not self-funded. There are very few self-funded companies here just because there's so much of the of the energy, like the the work energy is all oriented around raising money, right? Well, if you look out there in the rest of the world, it's not the same in most places. I think there are exceptions, like New York might be an exception, LA might be

• 10:57Speaker 02

  an exception, but I've seen so many self-funded businesses from LA and New York as well and not as many from San Francisco. And it's not even like you don't hear about them. They just don't exist here. I think the the way I think about it, though, if I were to like, sort of take a much higher level view on it, is like, we're the amount of weight that people put on investors and their knowledge, I think is unfair, and also their consciousness. We're giving a lot of credit to other human beings that are just stewards of capital, just like an operator, just different type of capital, different type of goal. And so when I think

• 11:39Speaker 02

  about investors, it's funny, I was on a call right before we started talking now, and I had to hop off it to get on this. And the person I was talking to straight up said this to me, which is basically, hey, and this is just ironic and very timely, but hey, you know those investors that like, we talk about, I'm like, yeah, he's like, well, they don't know anything either. And I'm like, what do you mean? And he's like, you know, like, and we were talking about software and the things that I build and he builds as well. And he's like, you know, self-service and like, you know, low LTV and like, 10-month payback

• 12:18Speaker 02

  periods and, you know, not having a multi-year LTV? Guess what? I'm like, what? He's like, these investors are coming around to it. And I'm like, oh, so they realize that like, if your market's big enough, and it's cheap enough to acquire customers, it's okay if your LTV is not as high, because your customer acquisition cost is low. You talk to any operator, any operator that has operated a SaaS to some level of scale, a couple million bucks, 50 million bucks, whatever, they're going to tell you, it's CAC and LTV and like, some

• 12:53Speaker 02

  Formula in between there and that's it. And a lot of us that have focused on self-service SaaS with higher churn have had VCs come back and say, that won't work. But then we show them it's working and now after 10 years plus of it working, the investor's like, yeah, we'll fund that. We'll give you a $50 million valuation and a $2 million ARR with a 10-month LTV. It's like, wait, what? You weren't do that just like two years ago. What changed? Well, what changed is they need more, they need more companies to fund. And there's more data that proves that it can work. I'm not saying it will work, but there's companies out there that are massive, right? Hundreds of millions of dollars in revenue with a relatively high churn,

• 13:36Speaker 02

  but so much customer acquisition at the top of the funnel, that happens really cheap that like the business does work and it's viable and it's long-term viable. So that's really a good example of like, you take an operator first model is how I think about it. And what that means is as an operator of a business, what's the right way? What's the right path for you? How do you start? How do you go? So if you're at a tech company, you're an engineer and you feel like you're going to start your own company, it's very likely you're going to go raise money right away because the money for you is around you. There's like a half a million dollars waiting for you between 10, 20, 30 people that you've worked with before, right? Or their network, right? And they'll vouch for you. So you'll get that first check. Why would you go think about self-funding? If that's your scenario?

• 14:21Speaker 02

  Because it's just so easy. I'm not saying you shouldn't. I think you should. But it's that easy to start getting that salary or whatever, some level of comfort. And you know, some areas are expensive. Also, all these things are going to change. And I'm sure we'll talk about that in a second. But yeah.

• 14:39Speaker 00

  Yeah. So one of the things I want to talk about is what you just described is a model for building a business that the investors' perception of it changed. The model has always worked, right? You've shown that. But the way that companies are built is going to change as you're describing as well. And so whether that's the way we fund the companies or the way that we acquire users, the way that teams work from kind of a productivity standpoint, remote versus not, like, how do you think about the big trends there? What's going to change? And Let's maybe kind of focus on like, what do you think is almost guaranteed to change versus the things that people are like, ah, you know, 1% chance it might change, but if it changes, it'll have a huge impact on the world. What are the guaranteed changes for you?

• 15:21Speaker 02

  Uh, yeah.

• 15:25Speaker 02

  I think the one guarantee I see is that the cost of, uh, labor of any kind is gonna go down. That's guaranteed. We're probably gonna see that hit on labor costs and people's ability to make money go down for the next five or 10 years. We see it, it's cyclical. It happens every time shit hits the fan, so to speak. I don't know how many shits have hit the fan this time. Uh, so, you know, and how many more might come? My, my count is about three to five, depending on how you think about chain reactions. But I was just reading a paper earlier today, um, that was talking about, we don't even know the long-term impact. It was a whole study on that that just came out this morning. Uh, and I'm like, okay,

• 16:10Speaker 02

  well, and it, you know, I'd throw it back at you, be like, what do you know? Cause you probably have a whole different lens than I do. But I think from a building business operator standpoint, the cost of hiring people is gonna go down. The funny thing is, the cost of marketing, I think is gonna go up. And you can almost guarantee that. Um, and that's just the cost of every marketing channel or tactic or approach to marketing has consistently always gone up, especially compared to when it first, when a channel first starts. And these are things I think about a lot, having seen so many different marketing channels evolve and, and, and sort of cost more over time. And I don't just mean like channels where like you can pay for the traffic, like Facebook

• 16:54Speaker 02

  ads or something like that. I even mean things like, you know, how easy it was to get on Dig's homepage back in the day and how much harder it got over time as a bunch of us figured it out and started monetizing our, the attention we had on there. You're seeing the same with Twitter and things like that as well, where I think Twitter's a fascinating one, cause the paid side of it has never really worked out. And I don't know if it ever will, but the organic sort of Social media-ish aspect of it is incredible in terms of reach and brand building and all that stuff. So my, my theory is that, and this is like tried and true, if you talk to any marketer, that like every channel gets costly over time. And it gets harder and harder to keep your costs down and because you have to learn new tricks.

• 17:37Speaker 02

  Cause what happens is as people hop onto the channel, more tactics are utilized. They get drowned out, they get copied. I mean, this is, this is marketing, right? It happens all the time. The good news is there's new channels and new effective ways to even merge channels together to make things work. So that you can keep costs down, but that means that the sophistication level of your sort of marketing and your mix and all that stuff goes up. So what's not going to change is I think for a long time, costs of labor, any kind of labor is going to go down. There's many reasons for that. One of the main ones being people are now used to not having to work from an office. Just people, meaning everybody, they're, they're used to it, whether they like it or not like it, or whether their kids are home and all that.

• 18:21Speaker 02

  I'm not talking about that, they're just used to it because they have to do it. Business wouldn't work if all of us couldn't figure this out. We've figured it out. I mean, in fact, like I have some really good data that shows that like there's a massive spike in people looking for zoom sort of zoom-like product, video conferencing products. That spike has completely died and is back to the normal levels that it was. So it's literally like whoop and then like came down over the last like three or four months. And so revenues of some of the sort of newer players spiked and are now kind of at a more steady pace. Obviously they captured whatever they were going to capture. And now there's a lot more to do.

• 19:01Speaker 02

  I've seen jumps in ARR of like 5X for some of these companies, not counting zoom even, just some of the smaller ones. And when you think of it like that, it's like we've gotten used to it. That's my point, like the buying cycle, like we've gotten used to it. You can look at software buying cycles, see what we've gotten used to. We've gotten used to that, which means that. We're probably going to be able to hire people from anywhere. A lot more than we were used to as a society as a whole. I mean, I've been working remotely for seventeen years. I used to say I don't wish it upon anybody. Now it's upon everybody, right? And a lot of those things that I do, I feel like for myself and my businesses, I don't like being dogmatic about recommending it as what someone else should do. Because I think people are different, the way they want to work, the way they want to do things are different.

• 19:45Speaker 02

  For example, I'll give one before I kind of sort of, you know, stop on this one is like, I am super surprised at the amount of Zoom fatigue and complaining about it. And the reason I'm surprised about it is because you can turn off the video. You can just turn off the video. I mean, I was doing this stuff back in, again, I'm going to date myself. But back in the day, seventeen years ago, I'd hop on a Skype and hit the voice button or whatever they had because they didn't have video and just talk to someone. I did not lose anything. I have relationships from back then of people I've worked with for three or four companies. I barely met them in person. Some of them I've never met in person, right?

• 20:29Speaker 02

  At my new company, I'm trying to think who have I met in person? There's, I think, only two people out of a fifteen-person company that I've met in person. One's my co-founder and the others are head of engineering that I've worked with across three companies for eight years. But I haven't seen him in like two years or a year and a half in person, right? But we don't get out video calls unless like they're with the whole team or something. It's usually like voice. So anyway, what I think is happening is that there is, the way of working is completely going to change. And it changed because we got a big shot in the arm and now we have to do things. And the implications of that are the first one being, I think,

• 21:11Speaker 02

  because of the other factors that are that are kind of happening in the world, labor is going to be cheaper. And then when you add in remote work and companies like being super cool with it now compared to what they were four months ago, five months ago. Things are going to be cheaper to build, cheaper to make, cheaper to do things.

• 21:28Speaker 00

  Yeah, and so I guess one of the things that's interesting about this is, of course, marketing gets more expensive. The cost of building goes down. Also, there seems to be this trend of education where there's more and more people who have the skills necessary to write code, market, whatever we see. Do, does that ultimately lead to more innovation? Or is it hard to predict just because we have more people who are skilled, more people who are educated on these certain bodies of work? It doesn't necessarily actually lead to more successful companies.

• 22:03Speaker 02

  I like the question.

• 22:08Speaker 02

  I think back to your prior, if you take the prior thesis of like, look, there's, there was like a much clearer way where it was one path to build a large business, which was you raise money. Now there's a second way, which is don't raise any money, figure it out yourself. So we, the explosion of self-funded companies is immense. It's incredible. So I think there are going to be more successful companies in the eyes of the operators. So a VC might look at a certain company making a couple of million bucks a year, never going to make more money. Or maybe we'll make four in 10 years, right? Go from two to four in 10 years. But the operator, if the operator is operating with a less than five, 10 person company like there and is happy with that sort of growth.

• 22:52Speaker 02

  I mean, they could take home a million bucks, two million bucks, right? In the next 10 years, every freaking year. It's like the new, like, it's like the new doctor's office. It's like the new dentist. It's like the new sort of small business, basically, is all these self-funded software businesses in every niche, every category, and this is happening. There's going to be way more of that. Are those companies innovative? Very rarely, almost never, because they don't have the R and D budget, if you want to call it that, to go throw into innovation prior to revenue. So innovation happens at a slower pace and over time. If you look at sort of most of the innovation that's out there.

• 23:39Speaker 02

  The fact that more people are skilled, you would assume that there would be more innovation. I think there's gonna, there's gonna be not as much increase in innovation as we might have expected because there's a lot more sort of mimicking, copycatting,

• 23:58Speaker 02

  at best being inspired. And we see very little sort of creativity around the solution that you're trying to sort of build for a customer because if you can solve it without innovation, why wouldn't you, right? And in fact, all this knowledge makes you, makes people think more like that. Cause like, well, we can try that thing over there. We can try that thing over there. It's not our thing. It might work in our market. It's a different market. We're gonna try the thing. And, and, and the ability to see what everyone's doing is something that people don't talk about as much as, as sort of other things. So like, for example, I think the thing that's changed dramatically is like the tooling to like, see which apps are charting in the different app

• 24:43Speaker 02

  stores. That's like new stuff. It's five years old. Like it's not 10 years old. And so our ability to see what other people are doing and imitate it has increased. Our skill set, that means, in my opinion, needs to be a lot lower or can be a lot lower to achieve the same amount of sort of growth or, or, or create the same amount of sort of value. Just because the knowledge is all out there and the ability to see what another company's doing is like, you snap your finger, you can go look at a lot of their publicly available data and there's a lot of it that's available.

• 25:15Speaker 00

  Yeah. And we just recently were talking about this idea of like creators, I think are one of the groups that obviously are starting to kind of catch this bug, right? What they've realized is kind of three things. One, I've got an audience, right? So most companies seem to go build products and go find the audience. These people have done the reverse. They've got an audience, no product. Two is, hey, actually it may not be expensive to create a type of product, whether it's a software product or literally a t-shirt with some slogan on or whatever. And then three is they don't necessarily aspire to build these massive venture-backed businesses. They're not trying to build the next kind of billion dollar Uber, you know, whatever it is. They're actually pretty happy with a million, two million bucks a year, right? And maybe they can grow into something a little bit more.

• 25:57Speaker 00

  So maybe talk a little bit about like, what do you see happening in that part of the world? Where it's almost like this, uh, this graying of the line between the content creators and uh, kind of the business owners.

• 26:11Speaker 02

  Yeah, um.

• 26:14Speaker 02

  It, it's, it's incredible. Like I used to talk about this stuff 10, 12 years ago about how you wanted to build an audience first. Cause then you could guarantee that you actually can get at least the first shot of customers. Now what we're seeing is that audience building is much easier than ever. And, and the knowledge is there. And even the ability to create something really fantastic, whether it's like a video, uh, a meme, you know, what have you? Even like text, right? Like in the strategies, in fact, like one of the ways we met is when like you were really going off on Twitter and I wanted to learn more about it. Uh, and a mutual friend introduced us, right? And we talked about it, uh, and I learned a bunch from you about it. Like it's incredible.

• 26:58Speaker 02

  Like I think that what we're gonna see is more and more creators get really large audiences. And then they need to figure out what to do next. And so the ecosystem of support for them, I think, is what's, I wouldn't say missing, but it's definitely something that we're gonna see. We're gonna see, I think, a lot more development around it. So a good example would be like, uh, a company like Gumroad. They let anyone sell something online. We're not even talking about Stripe right now, right? Like that's, I mean Gumroad and other products are built on top of Stripe, I believe. And so, and so there's Gumroad, there's, there's things like MasterClass.

• 27:37Speaker 02

  There's a YouTuber that I, that I bumped into recently, who's a physician in the UK. Who was making like $1,500 or pounds, whatever, uh, a week at his job. And he's making 5,000 something a week with his YouTube videos that are like equivalent of like tutorials and unboxing. And then he mentioned Skillshare. And it turns out he did a video in 2019, it's 2020 right now, that still makes a hundred plus dollars a day for him. And this is a YouTuber. He shared a video about this and here's the thing he said, you're gonna love this.

• 28:17Speaker 02

  He basically said, and like, he's just good. I mean, I think he's millennial-ish or whatever, but he's just really good at like hitting the objection early on in the video. So this is the objection he had and it just cracked me up. He's like, "Look, I know like, you know, something along the lines of like, I know it's cliche or kinda, you know, stupid to share like how much money I make, right? But the thing is, and this was the kicker for me, I learned from people who did this, how to do what I'm doing. And so I'm gonna do this in the hopes that even if one or two of you watch this and get inspired, I've done my job here." Right? He didn't say it like that, but like, that's, that's exactly what the message was. And I think that, that kind of,

• 29:02Speaker 02

  that drops, that drops the mic on the whole topic. It's like, yeah, you watch a couple YouTube videos, you can figure out how to make money. In fact, I didn't know Skillshare enabled that kind of sort of ability for people. Cause that ends up being like $3,000 a month. That's a significant amount of money for a significant amount of people on the planet. And all you really need is some level of, of, of, I call a dedication to the practice. Cause you're never gonna start out like good. You might start out at some level of like somewhere between a three and a seven, depending on your skillset or your natural inclination for something. But then you, you practice and you build it up. And that's what this person did. It's amazing. And I didn't know Skillshare was like at that level where it could produce that kind of income for somebody

• 29:45Speaker 02

  just because of one tutorial video they did on some Photoshop thing or something.

• 29:49Speaker 00

  Yeah. And the thing to me that I think that's really interesting is like, what you're basically talking about is they created a piece of evergreen content, right? And that piece of evergreen content continues to monetize over and over again. And I think if you kind of pull back into, okay, let's take a podcast, for example, we were talking about Joe Rogan. And Rogan basically creates two types of content. He creates evergreen content where you could go back and listen to an interview he did with a certain person from five years ago, and it's just as valuable today as it is then. And this is things, you know, health or morning routines or kind of all that type of stuff. And there's a million people who kind of have similar type of content. And then he does things that are very, very kind of time sensitive. So COVID happens, all of a sudden, he brings a doctor in and that doctor starts to explain, here's what's happening right now in the moment, blah, blah, whatever.

• 30:34Speaker 00

  But when you then look at, okay, well, how does somebody like that monetize? I think the debate is almost like this false framework has been, should they sell ads or should they have some kind of subscription product? Really where I think your kind of thought process and mine aligns is like, why don't they just build things to monetize that attention? And whether that's physical products, whether that's a software product like, like ultimately you have the customer base. And you're either going to rent out your customer base to somebody else because they're going to pay you for ads, or you're going to monetize it yourself. And you monetizing yourself seems like that's the most profitable, sustainable thing to do, right?

• 31:14Speaker 02

  Yeah, I mean, why can't it be both? Why is it even like one of these things like where it's almost like this? If you go down one path, that doesn't stop you from going down the other path. And I think that's what the deeper discussion you and I got into, which is like, well, there's going to be some inventory where ads make sense. There's going to be other inventory where like, if you put your own ad or your own promotion to something that you've built, you're going to make more off of it. But there's always like the equivalent of remnant inventory or leftover. There's rarely a time when there isn't that. So for example, like if someone buys one of your products, they bought it. If you knew they bought it, why would you pitch that product to them again?

• 31:56Speaker 02

  Right? And there's obviously with podcasting and certain mediums like that level of sophistication doesn't exist yet. Right? But like, and I don't know if it's going to get there, but I think the point is just like, if you have an audience and you want to build a business, well, you have the audience. And even if you want to build a business, go get an audience. Cause then the optionality you have of what you do next is like wider. Like the what, the one issue with this, and this is, I think where venture capital does destroys optionality. That's probably the best thing I would say about venture capital for an operator. It destroys your optionality and destruction is what happens. And the reason is if you've sold investors on a certain type of business,

• 32:41Speaker 02

  they bought into that type of business, they're, they're, they're buying into it, right? They're buying equity in it and giving you money to go do it. At some point around like the investment round and at some stage, you don't get to change. You don't get to change everything. I mean, you can, but you don't really get to. You know, it's not easy. It's probably not worth the drama, so to speak. And I think that's where, that's where a lot of people's mindset get, get really stuck on. There's this type of business, so a podcast business, and there's this way that it's monetized. But when you look at all the sort of stories we hear about of outliers of success,

• 33:25Speaker 02

  they're outliers because they just went against the norm. They, they did the thing that was uncommon at that time, and that's what led to their massive success. Kylie Jenner, right? Really good example of going outside the norm. You can dig into the data and dispute the facts around like the numbers, because like there's a lot that's come out of that. But you can't dispute the simple fact that she had an audience and she really got an audience alignment with what she was selling then. That means that somebody understood the audience. Somebody knew what they would buy and then built out, built out whatever they had to, whether it's business processes, hiring, or just picking the right partners to monetize.

• 34:09Speaker 02

  And those kind of options, even those multiple options I said, you have that optionality. You can pick partners to do, do things today and sell to your audience where you don't have to do all the work either. As long as you're able to vet the partners and find the right partners, it can be very successful.

• 34:25Speaker 00

  Can you think of examples where kind of creators have built software products that ended up scaling? I think a lot of the examples that people normally go to are, you know, take the Kardashians, for example, where they use physical beauty products. You play things around merchandise, like it's always seems to be physical products. I would maybe make the argument like Naval and Nibi with the Venture Hacks that eventually turning that into Angel List might be one example. But any others that you could think of where audience built first and then a software product was piped through?

• 34:56Speaker 02

  Yeah, absolutely. I got to see this firsthand and kind of had my little part in possibly being a fulcrum for this gentleman. So there's a conference called MicroConf. It's a conference that I think is now eight or nine years old. I went to the first five religiously in Vegas when they were doing it. Not because it was in Vegas, just because that's where they did it. I don't actually gamble. I like watching people gamble, though. I'll put like all my money on red or black, in blackjack, I can call it. So I don't play poker or anything. I think life is the biggest gamble we have, and that's the one I like to invest in. So basically, there's this conference. It's for self-funded entrepreneurs called micropreneurs at the time.

• 35:39Speaker 02

  And there's this guy named Nathan Barry who was there. And he had this business where he was basically, he was a designer and a writer, is what I would call him. I'm not sure what he'd call himself at that time, but that's what I would call him. Because what he would do is he would blog and he would sell eBooks. And he would teach people how to blog and sell eBooks. And this is to a tech audience of folks who could program, for the most part. Like, and also are designers in the scene, so to speak, or in tech.

• 36:16Speaker 02

  And he basically was building these landing pages and sending emails and like doing the whole thing to like sell eBooks off of a blog, right? So he built the audience off of blogging, some really great stuff. He started sharing how he was doing it. And then he launched a product that I'm sure many of the people listening know called ConvertKit, which is a software product. And it was built on the back of the audience that he had built, not the software first. I don't even think he thought of the software first. And then, at one point, at a MicroConf, him and I were chatting. We were walking from one place to another after, kind of after-hours, possibly,

• 36:58Speaker 02

  maybe walking out of dinner or something, and he was just asking for some thoughts from me. And I just told him, like, "Look, you should just, like, if you're not convicted on your software, just stop." Like, don't do it. Do the other thing. Because the other thing is making you like 100 grand or 200 grand a year or more. I don't remember, but enough that like you don't need to do the software thing. And I think that that really was the was a big moment for him. And he's talked about it where he decided to do ConvertKit. Because I said it in a crude way. I was like, like, just stop it. Like, if you're not going to focus on it, it's probably not what you should be doing. Instead, he went and decided to do it. And now it's like a $20 million a year business or something like that. And so that's probably like the best example I have of somebody who started with the audience.

• 37:43Speaker 02

  I don't believe he even had any thought of building software. And then it evolved. And then he created the software. And now the software even has landing pages on it that allow you to do what he did back in the day. When he shared that, I was like, oh, you're back. You're going back to your roots, right? Like, this is like, kind of what you know and how you started this thing. And now he's enabling other people to do the same. They also added commerce where now you can charge. So like, I'm sure that business will get to kind of 30, 40 million in revenue over time. Just because of the moves that he's making. And that started, you know, humble beginnings, as they say. But as a personal blog, writing about how to make money selling eBooks, about different sort of tech topics that people wanted to learn about.

• 38:28Speaker 00

  It always cracks me up when I see entrepreneurs thinking the path to kind of large financial gain is, oh, I'm supposed to make no money for 10 years. And then like, there's this big windfall at the end if the company is successful. And really what you're highlighting is like, if somebody can make, you know, 2, 3, 5, 6 million bucks a year, every year for 10 years, like 20 to 60 million dollars is most is more than most entrepreneurs end up with when they sell their company for $100 million anyways.

• 38:57Speaker 02

  Yeah, and like, at some point, you get so much cash. You don't, it's not that you don't know what to do with it, but you don't need it. So then you start investing in things, right? Like, I think he's invested in a bunch of land and a house and this and that, like, you know, and stuff like that. But like, that's what you end up doing if you have cash. And then it compounds too, right? If you make actual investments that are compounding. I think the windfall of a big lump sum is sort of...

• 39:24Speaker 02

  A fallacy as the only target or the way that wealth is created. I think wealth is more commonly created even historically when it's compounded over time off of a business that's profitable, right? And you're just taking it home or reinvesting it or whatever. Again, I go back to that analogy. These are SMBs. These are like mom and pop businesses. This is the equivalent of a dentist's office and running one and making a decent amount of money. We're just able to do it from the comfort of our own home, so to speak.

• 39:52Speaker 00

  Yeah, I love that. I asked Twitter for a bunch of questions and they sent a number of ridiculous ones, but then also some thoughtful ones. So let me just run through the thoughtful ones and kind of just give me your thoughts on the fly.

• 40:05Speaker 02

  Yeah, sounds good.

• 40:06Speaker 00

  Talking about the future of remote work, how do you think cities evolve kind of in response?

• 40:11Speaker 02

  I think that cities are very good at adapting over long periods of time. They're poor at adapting quickly, very government oriented. And so that would be the first thing I'd say. So my prediction on how cities evolve is like, I think they become what they used to be, which is hubs of commerce. And the commerce is just going to change. So when people need to meet in person, they go to the city to go meet in person because the restaurants tend to be there and all that. Now, that's only if the restaurants don't start dispersing, which I don't see them doing because you still need a centralized populace or population. So I think cities are going to evolve and go back to kind of their roots, so to speak,

• 40:53Speaker 02

  where there wasn't as much residential and there was a lot more office space. The other question is if we really turn into a world in the far out, further out future where there's a lot of self-driving cars, you might see cities turn into parking lots of some kind, if I were to be silly for a second. But yeah, nobody knows. That's my guess. You know, I think they are going to evolve, but it's going to take a while for them to evolve because they change well, but they change slowly.

• 41:18Speaker 00

  I love that answer. What is the greatest indicator of success for a product manager?

• 41:23Speaker 02

  Oh, that's simple. It is what you're producing, what you create, what you ship, creating value that can be extracted by the business. And I say extracted very specifically, but can be delivered to the customer at the same time. So it's this incentive alignment between the customer and your business. And that a successful product manager is able to do both. And both is hard because you can get growth with the customer and not create enough value for the business, or you can create a ton of value for the business, but kill the customer, right? And mainly make it so that you don't get more customers. And a product manager's job is to figure that out. And the worst place a product manager can be in is when they've built

• 42:07Speaker 02

  a bunch of things and none of them are working because then neither of those things are happening. You're kind of screwed.

• 42:13Speaker 00

  When I was at Facebook, we had a saying, deliver more value than you take. And when you kind of think about that, it was always this feeling of like, look, Facebook's going to be just fine, right? And it's going to figure out the way to extract the value. But if you can actually give the give the value to the customer, then it makes less sense. When do you know to improve your product versus improve your marketing when things are not going how you want them to?

• 42:38Speaker 02

  Yeah, so I think these two things need to work in parallel. So you have product improvements and you have value proposition. Let's just call it value proposition instead of sort of marketing because I think the value proposition and the product kind of go hand in hand. So, you know, usually this is a product manager's task. And that's why I try to take the marketing piece out of it for the moment because if you're shipping product and you're not changing your value proposition or understanding what it is and who it appeals to, then you're not actually changing your product. You're literally just making improvements, hoping that something's going to change without changing the other aspects of the business. The other aspects of the business are kind of your doorway, right? Your doorway is your value proposition. That's what people know your business for before they even come and use it. And so to me, it's not about...

• 43:22Speaker 02

  When do you decide which one you change? I think the most successful businesses are constantly iterating both at the same time. The sort of evidence I have for this that anyone can look up is go to archive.org, which is the Wayback Machine, find the place you could put the URL. There's like two search boxes there. Find the right one, type in salesforce.com, go figure out what their old homepage looked like, compare it to every homepage you can find over the years. And my point will be proven, which is basically that as you ship product, you change value prop. If you're in the early days and you're pre-product market fit, you're constantly trying to figure that out. And so then what you realize is a product person's job, founder's job,

• 44:04Speaker 02

  whoever's working on the product itself and managing it, needs to also think through, how do I test value propositions before I build product?

• 44:14Speaker 02

  And if you can do that, then your value proposition, your marketing, so to speak, could be ahead. But if you're truly testing it, whether it's with ads, tweets, whatever you're doing, you're able to map what you build to what people want. Not what they, actually not even what they want. These days, I'm all about what they need, not what they want. Because that's the world we're in. But like, if you can figure out what they need with a value prop, I think building the product, it sort of goes hand in hand with that. And you have to do it at the same time. I don't think it's when do you decide. I think you're doing both at the same time.

• 44:43Speaker 00

  Yeah, this is one of the things I think was the most surprising to me when I first moved out to Silicon Valley, right? Was this idea of the best companies always seemed to be a half step ahead in what they were testing without having built it. And then, once they realized there's just enough traction, or there's just enough signal that, hey, this is going to be valuable, then they would kind of scramble to build it and kind of serve that need. And to me, it was always one of these things where, I think, for whatever reason, you know, and obviously wrongly, like, oh, people just build things and reveal it to the world. And obviously, guys, you kind of see the underworkings, a lot of the stuff. You're like, it makes a ton of sense to maybe, I don't know, ask people, hey, do you want this? Right? And if they say yes, then like, go build it, right?

• 45:24Speaker 02

  The key word there is momentum, right? If you don't do it like that, you don't build momentum. You just build product or you just build marketing. But really, the marrying of the two and what you mentioned, which is the testing ahead of what you have, that's the only way you build momentum. That's the only way you get to new places.

• 45:41Speaker 00

  I want to spend a couple of minutes talking about Bitcoin and crypto because as you would imagine, that was probably the most popular types of questions. Just kind of what are your general thoughts on Bitcoin, crypto, blockchain space? And any kind of insights or takeaways there?

• 45:58Speaker 02

  I find the most fascinating thing with Bitcoin and crypto was early on when,

• 46:10Speaker 02

  for lack of a better way to say it, without any judgment, because these are friends of mine, the shadiest non-tech friends of mine were into Bitcoin before anybody else. This is when it was like five bucks. And I think that where something starts and who it starts with greatly dictates where, where and how long it takes to hit like mass population. And that's, that's it. That, that kind of is my sort of Bitcoin summary, which is like, it's going to take a while for it to unravel itself so that consumers understand it.

• 46:48Speaker 02

  My, my opinion is that it, it's money. Everybody understands money. As long as you understand simple math, you understand money. This is the reason it's going to take a long time to like spread because we're used to money in its current form. Its current form at, in the, in the digital realm is wire transfers. Anybody that's ever done a wire transfer? I'm sorry, I do them a lot, especially with international payments and stuff like that. Man, like it's terrible. And unfortunately, I haven't seen Bitcoin come to a point where like I can do a wire transfer

• 47:33Speaker 02

  much easier because I'm using Bitcoin. And what I mean is interface, packaging. I don't mean I can't do it. I just mean I can't do it. And then there's a big stigma, which is like, is it really money? And so I know you know way more about this than I do. You're way deeper and so is your audience. But to me, it starts with the fact of where did it start? And how much of that needs to be undone for the consumer to use it? Average consumer isn't trying to do shady transactions with it. Period. And so if that's the case, then where do we? How do we get to a point where it becomes not an underground thing? And I know that might sound ridiculous because everyone's heard of Bitcoin. But not everyone owns Bitcoin.

• 48:17Speaker 02

  Not every and more importantly, very few people are transacting between each other with Bitcoin. And I could be wrong about that. That's my sort of objective view from my perspective. And you might have better data. And the things I've seen, though, it's become a protocol, not a currency.

• 48:39Speaker 02

  That's why when you say Bitcoin and crypto, like they're together, right?

• 48:43Speaker 00

  So I'm pulling two things from there. And I don't think that you're wrong on this. The first being kind of the origination in terms of adoption, right? It was kind of in this shady and not even. I don't think people go as far as to say like, it was all criminal. It was just as your point, like kind of the people who are always on the fringe in terms of ideas, actions.

• 49:01Speaker 02

  I'll go further and say it started criminal, right? Like objectively, illegal activity is where it started. I'm not saying that's where it ended. I'm not saying it didn't go fast, but I agree with you. At the same time, what I saw in the earliest days was people who could not, who had trouble exchanging money.

• 49:20Speaker 00

  Yep. And so I think like that part of it is it's this weird thing where like, if you go back and look at the arc of technologies, most of them that ended up being really, really big actually started there. But to your point, it took a long time for them to become mainstream, right? Like I always go back to like, who were the first people with beepers and cell phones? Like truck dealers, right?

• 49:40Speaker 02

  Yeah, totally. That's totally right.

• 49:43Speaker 00

  Okay, you know, what were some of the early websites on the internet that made a lot of money? Porn and you know, all that kind of stuff.

• 49:50Speaker 02

  Scambling, yep, yep, yep. Even like downloading music in movies, that's illegal, right? And now we have Spotify. Now we have Netflix.

• 50:01Speaker 00

  Absolutely. So I think that there's this weird balance between it's almost like the big technologies start out there and it takes a long time. So like you have an uphill battle in the short term, but over the long term, like history has proven that that's actually like a pretty good trajectory to take. But to your point, it takes a long time. The second thing, I think the more important piece is like, and this is kind of from somebody who, you know, is pretty bullish. A lot of people kind of come to me and ask me those questions. If I say, listen, the user experience of this stuff sucks. Like it is horrendous. And I always use two examples, right? One extreme is like, we're still sending like material amounts of money to random strings of letters and numbers. Like, my heart beats if I send too much money

• 50:43Speaker 00

  in one shot, right? You're like, oh, like, let me triple check that I really typed that in correctly. Then on the other side, you have things where even when you're not actually sending, just using it, storing it, accessing it, all that kind of stuff. Like, there is a very distinct difference between the quality of product in kind of the non Bitcoin like consumer facing world and technology and the Bitcoin world. And like, that should change, right? I think most people are generally like, oh, that'll improve, you know, over time. But I think that's actually one of the biggest challenges, right? Because to your point, people have heard of Bitcoin. But how do I get it? What do I do with it? Is it easy to do that? Right? Can somebody steal it from me? Like, those are all the things that we've all heard people say. A lot of it just comes down to user experience.

• 51:29Speaker 02

  The consumer advantage is not clear. And the transactions aren't happening on the most frequent purchases that are happening in the world. Those are the problems, right? Like, how it gets solved? Yeah, I'm bullish too. I mean, if you even think about the VCR and the video cassette recorder, like, what were people doing? They were recording things from the TV. And in retrospect, you're thinking, well, that's kind of, you record it, then you watch it with a bunch of people. That's illegal too, in its own sort of form. So everything starts that way. I love that point. And we'll see, like, we'll just see. Like, I feel like...

• 52:08Speaker 02

  We're in the sort of Forex trading world of it still. And I'm just looking for the signs where we get out of it. I thought we were going to get out of it sooner, especially with like the CryptoKitties and like stuff like that, because that just starts creating digital transactions happening. But that's still stayed pretty fringe, right? Great businesses and all that, like were developed, but like stayed pretty fringe. So, you know, we'll have to see. We'll have to see what happens. I'm long as well. I'm definitely not deep in it like you are. But the things I've seen kind of point to the fact that, like you said, it's going to take a while for a consumer to feel like they're using Bitcoin. Now, the question that that still keeps popping in my head is, are they ever going to feel that way?

• 52:50Speaker 02

  Because I'm guessing the way it turns out is a lot of the movement of money gets powered by it, but the consumer side still feels the same for the consumer, credit cards and equivalents.

• 53:02Speaker 00

  Yeah, we invested in a business out of Chicago called Zap. And we got a product strike where literally I send you $20 and you get $20, but they're using the Bitcoin rails to do it. And I tend to think like, that's a very easy onboarding because whether I'm using Venmo or this, like, I don't care what the technology stack is. I just want you to get a $20.

• 53:22Speaker 02

  Yeah, the Venmo, Venmo, something like Venmo built like this would probably do the trick. The only problem is like, you need one trick for the consumer to get hooked in. And usually it's giving away money. So we'll see what happens.

• 53:36Speaker 00

  Little expensive.

• 53:37Speaker 02

  There you go.

• 53:38Speaker 00

  I end each episode asking the same two questions and then you get to ask me one to finish. The first is, what is the most important book you've ever read?

• 53:49Speaker 02

  There's a book that I've read four or five times. It's called A Courage to be Disliked. And it's a Alderian psychology. This guy Alfred Adler came up with this, not Freud, not Carl Jung, a third one. And I just recommend everybody read it, especially if you've ever been the person that likes to be liked, which I think is about 80, 90% of the population.

• 54:12Speaker 00

  I've read it. It is fantastic. So I plus one that. Second one's more fun, which is Aliens Believer or Nonbeliever?

• 54:22Speaker 02

  It depends.

• 54:23Speaker 00

  Ooh, why?

• 54:25Speaker 02

  What's your definition of an alien?

• 54:27Speaker 00

  What's yours? I've had the pleasure of asking this to 300 plus people. So I've got a warped view of Alien world.

• 54:37Speaker 02

  So good.

• 54:40Speaker 02

  If everything is energy, then aliens are energy too.

• 54:44Speaker 02

  And so if aliens are energy too, then yeah, aliens exist, but they're just some energy that is foreign to us that we don't understand. And that's if everything's energy. So if you believe that like in quantum mechanics and everything being energy and the ability to like, you know, do all these things, then like to me, an alien is just a form of communication or awareness that we are not used to. And so a lot of things are alien in that regard. And so, yes, if aliens do exist, they're a form of energy. That would be my sort of response. And if that's true.

• 55:19Speaker 00

  What about intelligent life?

• 55:23Speaker 02

  Who's to say? Who's to say what intelligence is? We're defining it. So that would be my throwback. We could get very philosophical on this one. I've thought about this for a good part of my life. For another time, for sure.

• 55:38Speaker 00

  You are the first person to ever bring up the fact of everything is energy. Right? I think it's a fantastic way to view it. What one question you have for me to wrap this up?

• 55:49Speaker 02

  What's the question you wish people would ask you? And I'd love for you to ask yourself that and answer it. That's the one I got.

• 55:54Speaker 00

  That's a really good question.

• 56:01Speaker 00

  I'm gonna cheat because somebody asked me this just yesterday on the podcast. And I didn't realize that it was the best question someone had asked. But like when you heard it, you're just like, damn, that was by far the best one. And Cat Cole asked me, what's the thing that I have taken away from doing so many of these that I wish everyone knew? And yeah, that was a fantastic question. And after thinking about it, it was just like, we're all much more common than we are different. Right? And I think that like, we just have so many inputs in our life telling us like, we're different, we're different, we're different, we're different. And whether it's the tribalism, the divisive, the news, politics, all this stuff. Like, we're all energy, right? We're all made of water.

• 56:46Speaker 02

  I tweeted that the other day. I'm like, we're 60% water, because like, there's a lot of drama right now.

• 56:51Speaker 00

  Yes, that was you. Yeah.

• 56:52Speaker 02

  We're all 60% water, right? Like, oh my God, like, wow.

• 56:57Speaker 00

  Like, we are much more similar than we are different.

• 56:59Speaker 02

  That's right.

• 57:00Speaker 00

  And I think that, like, you just gotta see it, right? People from all walks of life, living in all these different places. And just, if we can keep that in the back of our head, I feel like we're not gonna solve all the problems, but like, the world would just be a little bit, you know, kinda more calm and nice, and that's probably the direction to go.

• 57:17Speaker 02

  I'm a believer.

• 57:18Speaker 00

  Awesome, man. Where can people find you and find out stuff about FYI?

• 57:23Speaker 02

  Yeah, FYI is at usefyi.com, and then I'm at at H N Shaw, H N S H A H, on Twitter. And the reason it's H N Shaw and not my first name, because I own heaton.com actually, is because it was the license plate for the first car that my dad bought in America, and he named it after me, the car, so his H N Shaw was the license plate. So anyway, that's the story, just to drop a story on you.

• 57:47Speaker 00

  I love that. I love that. All right, man, let's, thank you so much for doing this, and I'll do it again in the future.

• 57:53Speaker 02

  Absolutely. Thanks for having me.