Most Replayed Moment: The One Habit Behind Every Breakthrough Idea - Spotify Founder

Are you trying to innovate before you truly understand the problem? Daniel Ek is the co-founder of Spotify, the world's most popular audio streaming service, and the co-founder of preventative health company Neko Health. In this moment, Daniel shares the approach that lets innovators crack problems most people write off as impossible, and why a healthy dose of delusion only works when it's paired with something far less glamorous. He takes you behind the scenes of how Spotify prepared for Apple Music's launch, explains how to tell when to keep going and when to walk away, and reveals why every team building something new needs a skeptic in the room. Listen to the full episode here! Spotify: https://g2ul0.app.link/G2QZbVroP7b Apple: https://g2ul0.app.link/6bjbfAuoP7b Watch the Episodes On YouTube: https://www.youtube.com/c/%20TheDiaryOfACEO/videos T-Mobile: https://www.superbroadband.com/

• 0:04Speaker 00

  Welcome to another Moments episode. In this clip, Daniel Ek shares some invaluable business wisdom and reminds us that you have to find out what the real problem is before you try to innovate your way out of it. When Spotify took on Apple, they didn't just copy what was already out there. They interrogated what was actually broken in the user experience and built a fundamentally better way. Our sponsors, T-Mobile, are fixing business internet in a similar way. Internet outages are so common annoyingly, and many businesses like mine have to rely on a patchwork of internet providers, backup partners, and coverage workarounds. T-Mobile saw an opportunity and built Super Broadband. It pairs 5G with Starlink satellites to give you virtually unbreakable internet across every US zip code. Here's Daniel on what it takes to innovate like this.

• 0:50Speaker 00

  When I heard the Spotify story, I really wanted to meet you because I consider myself to be ambitious, but there are some challenges that I would just view as impossible. And at the time when you consider how the music industry was, that it's ran by these big record labels predominantly, and they own the music, to be a young kid from Sweden and believe that you could change that, for me is a special type of delusion.

• 1:23Speaker 00

  It's just an impossible task. It's what I just would have thought, okay, some things are the way they are. They're removable objects, that is one of them.

• 1:29Speaker 01

  Yeah.

• 1:29Speaker 00

  Why didn't you think that was an impossible task?

• 1:35Speaker 01

  Well, I think for several reasons, but I think that is the beautiful naivety of an entrepreneur as well, right? We move mountains. I'm sure Elon was, you know, even more insurmountable thing, electric cars, and hadn't been a successful car companies for, I think, a century or something, or at least, you know, many, many decades in the US, and he managed to do that. So I think it's part illusion, delusion, sorry. But the other part, I think, also is that what I realized is, before even committing

• 2:14Speaker 01

  to this idea, so the why not part, I probably spent 500 hours learning about this problem. And the scariest resource we have in the world today by far is time.

• 2:31Speaker 01

  And when you have high-quality people that spend thousands of hours on a problem, you find new solutions.

• 2:40Speaker 01

  And so the biggest thing for humanity, I believe, is simply that. I believe we're capable of doing practically anything, but there aren't that many people that can see these multi-dimensional things with that right experience that happens to come in at that right time, that are spending thousands of hours of trying to, you know, needle in a haystack, see that opportunity through that very, very tiny prism. And even today, when I think about it, some of my other businesses, it kind of worked the same way. So I started a healthcare business about five years ago, but I was spending, I think

• 3:22Speaker 01

  the first interview when I mentioned it was in 2009, and I started the company five years ago, 2018. So I probably spent a decade thinking about this problem, and I couldn't figure out a solution.

• 3:38Speaker 00

  2008?

• 3:40Speaker 01

  Yeah, yeah.

• 3:41Speaker 00

  You started the company in 2008?

• 3:42Speaker 01

  No, no, I started the company, the healthcare company in 2018.

• 3:46Speaker 00

  18, right.

• 3:47Speaker 01

  But I started thinking about it 2008.

• 3:49Speaker 00

  Oh, okay.

• 3:50Speaker 01

  So I have a notebook with all my crazy ideas, most of them amount to nothing. Quite often, someone else comes along, does them, and I'm happy, and it's amazing. But every now and then, nothing happens for a great period of time, and I kind of feel that itch to maybe make a difference myself. And I say that because like the realization there was, I had spent up until that point thousands of hours understanding the healthcare system, why it is the way it is, the incentive schemes, and what the NHS is doing, and what someone else is doing, and the public healthcare system, insurance, business, direct-to-consumer things, the longevity curves of human beings,

• 4:34Speaker 01

  the disease growth, the costs curves, like all of those aspects about it, similar to how you're describing looking at rockets. But, you know, imagine you spending a thousand hours on a rocket, not just kind of casually researching it. I am sure you will find novel ways of how to attack the problem. It may not be because, you know, if you're not a physicist, you may not come up with the next rocket engine, but you may find another twist too on how to attack this problem. And I don't really think it comes down to that. And so in the space of music, I don't know anything about the music industry going into

• 5:13Speaker 01

  it, but I would argue, a few years into it, I was probably one of the most foremost experts on copyright in the world around like the DMCA and what the US copyright regime looked like, and what other regimes looked like, and how, you know, performance rights, societies, label rights, and what kind of rights, mechanical rights, performing rights, all of those different aspects, all the different code, RC numbers, ISBN numbers, and how they're related, and so on and so forth. And, you know, I find like people either get too muddled in on the details and don't see the bigger picture, or they stay too top-level picture to really see the nuance.

• 5:58Speaker 01

  And the question is, how do you dive deep enough where you see it and figure out which problems to solve in what order? And I was at that point by probably 2007, having spent a year on Spotify, but the team was super small, so it really wasn't a big commit at that time, and I wasn't sure at that time. But then I realized that, hey, this is actually possible, because we'd built the product that showcased the technology of what we're doing, and it felt like if you had all the world's music on your hard drive. So then, the real problem ended up being, can we get the music industry to accept this?

• 6:38Speaker 01

  And to that, I had no idea, but I felt like this is so obviously, if this came out in the marketplace, what consumers would ask for. Now, the only question is, is the music industry going to allow this? And that took me another year and a half, 18 months, to learn the answer, and it was completely binary. We almost died probably four times in that process and ran out of money, and record companies saying, no, this is never gonna happen, until eventually, one day, the stars aligned, and we were able to launch. But that was not a given, but it felt like the right bet to make, because, you know, it was a binary outcome.

• 7:21Speaker 01

  Either we'd failed, the price wasn't all too bad. If we would succeed, it was clearly so that at least this would resonate very well with consumers.

• 7:31Speaker 00

  Was there any moments where you thought that it wasn't gonna happen, i.e. conversations you had with record labels where someone very high up says absolutely no way?

• 7:39Speaker 01

  Many times. I would say probably once every month or two, over a two-year period, I thought that this probably won't pan out. And it was incredibly demoralizing. I usually joke, but like, in the beginning of that process, I had hair, and then in the end of it, I lost all of the hair. I probably gained 30 pounds in weight during that period of time.

• 8:05Speaker 01

  It was awful. But throughout, my co-founder, Martin, probably a factor of just who he is as an individual, but also probably because he didn't participate in these meetings, kept being really upbeat, kept being, you know, amazing support, and said, don't worry about it, you're gonna figure it out. And he just kept believing in me. And then he also said a few times, you know, when that wasn't enough, he said, don't worry about it, we'll figure out something else if this doesn't work out. It felt to me like I always had a safety net, and it was just the amount of push that I needed to do this. And again, talking about not giving advice, but to the advice that I do give to other people is to share the burden with someone. It is so important.

• 8:50Speaker 01

  And I know I get most of the credit for Spotify, but it is really a team effort from the Gustavs and Alex and all those people, but then also in the early days from Martin in believing in me and knowing this kind of supernatural ability that I'm gonna pull it off somehow.

• 9:12Speaker 00

  I must have told you a story, which I guess has stayed with you, about perseverance and the power of perseverance. The double-edged sword to that is, sometimes it's right to quit as well.

• 9:22Speaker 01

  Yeah.

• 9:23Speaker 00

  And knowing when to persevere and knowing when you're just wasting your time, which is, as you said, the most important currency of all.

• 9:28Speaker 01

  Yeah.

• 9:30Speaker 00

  You know?

• 9:32Speaker 01

  That's where art meets science. There is no scientific answer because it depends. It's an art to know when something is futile and when something is worth doing. But I call it that sort of binary outcome, but with uneven distribution, right? So if you think about it as a curve, even if it's fifty fifty whether you succeed, but on the upside, you can win a lot more than you can lose. And all you can really lose is one time, but the upside may be a hundred. It's probably worth persuading. Obviously, that's the science part. The art thing is, okay, well, is it really a hundred times? Is it ten times? And have I already lost, but I'm just not aware of it? That's the art.

• 10:17Speaker 00

  And also in that, I hear an optimism bias from two co-founders. The constant, oh, we'll figure it out, we'll figure it out, we'll figure it out. How important do you think that is? Especially, you know, you hire a lot of people. Is that something you're like looking for in the people that you work with? That bias towards we'll figure it out?

• 10:32Speaker 01

  I think, again, it depends on the role you're hiring for. You need a team. I think it's really important that you just don't surround yourself with just yes, people or optimists. You need the naysayer in the room as well. You need the people who will balance it out and be the one who says, hmm, I'm not sure this is going to work out. And so often, I think that's the important part. We keep talking about it with CFO or salespeople. But again, you can have a deal making CFO and a salesperson that's happy go lucky. It may not be a great combo. You may want the CFO to be skeptical about the sales pipeline and a happy go lucky salesperson,

• 11:17Speaker 01

  or the inverse, maybe like really diligent that. And the CFO that maybe sort of like, don't worry about it, we will sort it out. But I think so much about that is the subtleties. We don't have a perfect model of the world. And the more experience I have, it's a cheesy thing to say, but the less I realize that I actually know. And so much of this are actually down in the nuances. And most people are above the nuances, don't really understand the issues well enough, or too bogged down in the details to understand the bigger picture. And going that sort of up and down, that's sort of super detail oriented, but also being able to go up and see the big pictures.

• 12:01Speaker 01

  That is, and simplifying very complex concepts. I think some of the most amazing entrepreneurs in the world are experts at. And that is the superpower. And that is certainly one that I'm trying to hone and work on. But when you see like Steve Jobs, when you think very complex things, and people say he didn't understand engineering and technical problems, it's not true. Yes, he may not have been an engineer, he may not have known how to write code, but he certainly can empathize with what made an amazing engineer tick, empathize with different technical solutions, would have different inputs and outputs. And he understood it.

• 12:42Speaker 01

  And he was brilliant in taking very complex ideas and understanding how to make that resonate for the everyday person.

• 12:51Speaker 00

  These tales I hear of you sort of being outside record labels and waiting for the CEO to come out so that you could catch them or trying to accost, I don't know, the assistant outside and asking when the CEO was coming outside so that you could get a meeting with them.

• 13:04Speaker 01

  Yeah.

• 13:04Speaker 00

  Are these tales true?

• 13:06Speaker 01

  As with many, they're probably exaggerated a little bit.

• 13:10Speaker 00

  Where is the truth?

• 13:11Speaker 01

  Well, the truth is that certainly happened, but it wasn't, you know, I've heard people recounted as that I slept outside of the record labels, kind of in a sleeping bag. That didn't happen. That happened another time in my career, but it wasn't, it didn't happen there. But it certainly happened that I'd book a week, fly to New York with no meeting booked, with basically an open calendar and about twenty phone calls a day, just trying to figure out a time to get on the schedule of a senior VP or a CEO, et cetera. That certainly happened. And that taught me another thing too, which is that these assistants, like you better befriend them because they are the keys to the kingdom.

• 13:56Speaker 01

  And most people don't care about them at all, but they're very influential. They're very powerful. And, you know, that was hard in the beginning. But then I realized that they got to see me as an individual. I saw them as an individual. And eventually, you know, this is not, we tend to believe the world is more logical than what it is, but a lot of it is based on relationships. So eventually, some of them started taking liking to me. And so when there was the opportunity and they could prioritize ten other things for that CEO to do, but I was there, I was friendly and easy to work with, show up at no moment's notice, even if it was twenty minutes before finding out about it, I would show up.

• 14:41Speaker 01

  And so I was, I was easy to deal with. So take away all that complexity in order to achieve the outcome that I wanted to do. And sometimes that is as simple as it is. Just be consistent, be the easiest person to deal with, and you'd be surprised how many problems it solves.

• 14:57Speaker 00

  Did you invest your personal capital into starting Spotify? Because I read again that you'd spent pretty much all of your personal wealth to start the company.

• 15:04Speaker 01

  Yeah, I did. So I invested not all of it, but quite substantial amounts of it. And my co-founder invested even more, but he obviously had a much larger sum of money from the beginning. Yeah, so all in all, I think we invested about ten million dollars into this by ourselves, which was also crazy because, you know, back then, today, ten million into a startup just was, isn't a big number, many startups that have done that before. But doing that on a seed stage back in two thousand and seven, that just was unheard of. It was usually five hundred K seed check sums, et cetera.

• 15:46Speaker 00

  What if it hadn't worked out? What would have been the personal implications for you financially?

• 15:51Speaker 01

  The personal implications, I went from not having to have a job to then probably having to go back to having a job. So I basically took that security that I'd built up, that twenty-two I'm set for life, and I gave that up in a moment's notice. And, yeah, I mean, I don't know what to say. I think from a purely logical point of view, it was probably a terrible decision. But betting on myself and betting on yourself would probably be, again, I say I should give advice, but it is probably the best advice I could give many people is, you know, because especially those that want to invest in various startups, et cetera,

• 16:36Speaker 01

  but they may not have a lot of money. And then I always say, well, why don't you just bet on yourself instead? Why don't you just try to like work for one of these startups, like you said, and maybe take a little bit more equity and a little bit less pay and take out of your cash instead? Because that way you increase the likelihood, hopefully if you know you're good, of the company being a success. And it just feels like the more prudent thing to do. And so I had a sneaky feeling that was the right thing to do. But investing as much probably wasn't the smartest thing to do.

• 17:09Speaker 00

  Spotify goes on to the, I mean, success is probably an understatement. I know the journey to that success had multiple near-death experiences to get there. One of the key things, key moments I reflect on as a Spotify customer is when Apple launched their competing product, Apple Music, in two thousand and fifteen, I believe it was. And there was lots of articles saying that this would be the death of Spotify.

• 17:33Speaker 01

  Yeah.

• 17:34Speaker 00

  I think I was even concerned as a very loyal Spotify user. I thought, fuck, you know, they have all the phones, they're kind of like the mafia. They could just squash you.

• 17:42Speaker 01

  Yeah.

• 17:43Speaker 00

  Most companies, when Apple comes into their territory, shaking their boots.

• 17:47Speaker 01

  Yeah.

• 17:48Speaker 00

  What was it like in your office that day when Apple Music launched a competing product?

• 17:53Speaker 01

  You know, when you live in the thick of the fire, you're not concerned about the things that everyone else is concerned about. I usually say public perception lacks about six to twelve months what's actually going on. And so in our case, we'd known that Apple was going to launch something for probably the better part of a year because they had the Beats acquisition beforehand, and we were hearing all sorts of rumors, et cetera, about what it was. So absolutely, you have to be worried when one of the greatest companies on earth decides to compete with you. So we were concerned about it. And we were kind of doubling down on what our positioning was going to be. So you kind of like double and triple checked whether or not, you know, you were deluding yourself into believing things to be true.

• 18:37Speaker 01

  And so, for instance, in our case, one of the big things, we had some strategic pillars that we were focusing on. One of them we call ubiquity, because we always knew this would eventually be the case. We thought that consumers would value the ability to work across all devices and all ecosystem. And our bet would be that any competitor we might have had would actually focus on reinforcing their own ecosystem and not care about all the other stuff. So the primary reason they were into a music service would be to make their own devices better, not to make the world's best music service.

• 19:18Speaker 01

  And so, you know, that's why we made such an effort of integrating into cars, integrating into all sorts of weird devices, smart fridges, whatever you might think. And so it was kind of like reiterating that, but I felt pretty good about that position and going back. And then there's always the sort of like, what if they figured out something that we just wouldn't have thought about? And I remember we were constantly talking to the product teams about this. And like, what if they come up with this? And we're literally trying this, game theorizing every possible angle on it. But I think at the end of the day, we kind of went through the thousand scenarios kind of thing.

• 20:02Speaker 01

  We knew we had prepared as well as we could. We anticipated a certain type of product. There was this kind of one percent or ten percent chance, whatever you want to quantify it as, where we would just be wrong. And they'd come up with something that widely superseded any of our expectations. But that very day. Remember, we'd been preparing for that day for so long. So the first reaction was kind of them announcing it, which we expected them to do. And then seeing the walkthrough of the product and realizing that, okay, well, we prepared for this. We thought about this, et cetera. And so weirdly enough, as the rest of the world kind of like gasped for air,

• 20:45Speaker 01

  we were thinking about it, okay, well, this was what we expected. And back to that point, distribution was the amazing thing. They hadn't come up with something on the product side that we just didn't anticipate. But it was really just about distribution and there was nothing we could do to guard ourselves against it. But we felt like we had a superior experience on the personalization side. The fact that, you know, if you have a Windows machine and an iPhone, Spotify would work, but Apple Music wouldn't at that time. So many of those things that we, I thought, had a better positioning than they had.

• 21:26Speaker 00

  I've, I've long thought that. I've tried both. I mean, I tried it when it came out and I couldn't stick to it. And I think me and my friends who are in my music group, we all concluded that the personalization, how Spotify understands me

• 21:37Speaker 01

  Yeah.

• 21:38Speaker 00

  is really the thing. It's hard to know why you do what you do as a consumer.

• 21:41Speaker 01

  Yeah.

• 21:41Speaker 00

  But from analyzing it a bit more deeply, it just felt like I built, there was a lot of investment I'd done to my playlists and all those things. But Spotify just knew me better. It seems to have much more data than, data on me and understands me and is more of a bespoke solution to me than Apple was. And also the, the user experience is not great and I just can't get past that. I just, so I tried it and I bounced. I, I just stuck with Spotify. Apple are, I used the word Matthew earlier on. A lot of people don't know this, but they take 30% revenues on pretty much every new app in the store.

• 22:16Speaker 01

  Yeah.

• 22:16Speaker 00

  They've rejected your audio book app multiple times. There's a rumor going around that they even delay how quickly you can release new updates of your app and delay how that reaches phones. What's your opinion on Apple and what they do and how they conduct themselves?

• 22:32Speaker 01

  Well, it's, as a consumer, let's start off with, Apple is a fantastic company and they make amazing products. I really do believe that. I've been a Mac user since, I can't even remember, probably late 90s, when I could first afford one, all the way to now. And obviously use the iPhone and Apple Watches and all that stuff. So let's start with that. And I think that's hard to square then that there's this other company that's fiercely focused on just itself and constantly trying to do things by itself and not working well with others.

• 23:14Speaker 01

  And those are perhaps two different sides of the same coin. But, you know, the, the way that manifests itself, I think that it's a company in many cases that still sees itself as an underdog, but don't realize that they've become Goliath. And so many of the tactics that made it the rebel kind of thing are now stifling innovation and it's really hurting consumers to great extent with the 30% you talked about, with the fact that, you know, Spotify can't, or any developer, if you don't pay the 30%, you can't even speak to your consumers. It's kind of absurd.

• 23:57Speaker 01

  So, you know, there, there's a ruthlessness on the business side of Apple. And, and perhaps it's always been so. I don't know. I never got the opportunity to meet Steve Jobs, but where, just from an ethos point of view, it's just not me. And I have a hard time squaring that with me as the consumer and me as the business leader. And needless to say, I, I do believe that Apple can and should play fair. And I think it would be way better for the world if they did. And I think that it would actually help them in many regards

• 24:39Speaker 01

  to switch their tactics and realize that they are the Goliath at this point and not David. And so, yeah.

• 24:47Speaker 00

  One of the things I want to close on is your philosophy. So I guess it's the same answer because Spotify's philosophy towards what's made it successful will probably be in many respects, a reflection of your philosophies towards business and, and more broadly towards life. But when I sit here, and I think a lot of people will sit here and say, there's clearly something unique about you, about the way you approach problem solving, problems, life, business, all of those things that has been, that has defined you and set you apart. Are you aware of what that is, what those principles are?

• 25:27Speaker 01

  No, I don't think so, but I think you're right in that, you know, the, the, the way I would describe Spotify to people, you're right that it is scary sometimes watching Spotify, trying to watch it from a distance and not just be in it. Because sometimes it's doing things where I'm like, how did, how did people know that we were supposed to do it this way? And it would be how I would approach solving a problem. And it's kind of how, you know, we've internalized certain things. But the best way is it's 17 years old now and it is a teenager that's liberating itself. So it's not a hundred percent me. In fact, it is this much broader, different being.

• 26:10Speaker 01

  There are aspects of it that hasn't taken after me at all. In product development, you know, Gustav is a formidable product leader as an example, and Alex is a formidable business leader. And the two of them are now leading more of the day to day. And they're certainly instilling their personal values and their personal perspective of, of the company too, which I think they're totally entitled to doing, having been with the company for 12 plus years, both of them. But it is interesting seeing it because we're approaching things now in a way I wouldn't always do. It's not inconsistent with important principles of mine, but, but it's certainly not directed. And the other part is I started this as a 23 year old.

• 26:54Speaker 01

  And the 23 year old Daniel, while many parts are the same, the 40 year old Daniel with two kids, having seen that have changed perspectives as well. I have a different feeling about work and, and the importance of that in my life. Still very important, but may not be the sole, most important thing that I do, just to mention one. And so it has similarities, but there's differences to me as an individual too. But I think if you compare me to 23 year old Daniel, to 30 year old Daniel, to 40 year old Daniel, I've evolved too.

• 27:34Speaker 01

  And candidly, I'm in that period at the moment where I'm perhaps trying to figure out who the 40 year old Daniel really is, because it's a different one than the 30 year old one. Maybe it's subtleties, but I think in quite a big way also, and just thinking about something like culture, the 23 year old Daniel, culture was having a ping pong table. 30 year old Daniel would have said, yeah, culture is important, but didn't really understand why. And the 40 year old Daniel would be, you know, the 30 year old Daniel would be more strategy than culture, actually.

• 28:14Speaker 01

  And the 40 year old Daniel is all about culture, almost to the point where strategy is secondary, if not even tertiary to that.

• 28:24Speaker 00

  40 year old Daniel is all about culture?

• 28:26Speaker 01

  Yeah, way more so.

• 28:29Speaker 00

  What is the culture?

• 28:30Speaker 01

  Well, that's the amazing thing because it is the most scalable thing done right of a company. And it's the hardest thing, right? Because it is everything and nothing. It is every positive action that's happening in the company. It's every negative action in a company, every person that's joining, every person that's leaving is impacting culture. And so in its essence, I believe culture is about rewarding the positive behaviors you want to see in the company and obviously dissuade the negative.

• 29:00Speaker 00

  What are the positive behaviors you want to see?

• 29:02Speaker 01

  Well, one of them is taking risks, failing. And how do you do that when you have eight or 9,000 people inside of a company responsibly? How do you, when the common status quo is, you don't like failure. You don't get promoted based on failure. You get promoted based on being successful. Annie Duke has this thinking in bets she talks about, I love that, is thinking about poker ships on the table. And, and she said one time when, when we spoke, she said to me is like, a company is like, everyone has ships at the table. We just don't know how many we have. And so the people that have been successful have way more.

• 29:42Speaker 01

  So they have leniency and allowancy in the culture of any organizations to do more than someone who just started. And perhaps have a lesser, lesser ones. And if you failed enough times, what's naturally going to happen is that you won't have the same agency in a large organization to impact things too. So then the, the counterpoint to that would be, well, how do you then create an environment where people are allowed to take risks? And then balance that with, say, Spotify at this point where we have a huge amount of responsibility too. We have tens of millions of creators that have their livelihood on the platform. We can't just experiment with how we're paying out and so on and so forth, right?

• 30:27Speaker 01

  And 550 million consumers, we have to be responsible with their data. We can't, you know, put new things in front of them without testing them and so on and so forth. And so there, there's this constant tension between being innovative, taking risks, and, you know, at the same time, obviously being responsible. And, and that's hard, but that's all about culture.

• 30:57Speaker 00

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