Stratechery (with Ben Thompson)

0:00 oh Market's got a nice bump today you had a good feeling about Jerome yes I get these vibes from him you know I wanted room to like wake up on his 2021 side of the bed one day just be like you know what time's for good back then we caused cataclysmic damage that needed to get Unwound at some point but while it was up it was all good do I really need to keep bringing down the camera let's

0:21 take this fomc meeting off I'm gonna post a story on Instagram just on a beach with a drink who got the truth is it you is it you is it you who got the truth now is it you is it you or is it you set me down say it straight another story on the way who got the truth welcome to season 11 episode 8 of acquired the podcast about great technology companies

0:51 and the stories and playbooks behind them I'm Ben Gilbert and I am the co-founder and managing director of seattle-based Pioneer Square labs and our Venture fund PSL Ventures and I'm David Rosenthal and I'm an angel investor based in San Francisco and we are your hosts today we are telling the entire history and strategy of strategory and we are joined by the man himself Ben Thompson on the eve of stratekery's 10-year anniversary strategory is innocently billed on his website as the business

1:23 strategy and impact of technology strategory as Ben puts it started as some guy in Taiwan with no access today strategory is a Powerhouse shaping the thoughts and conversation of the entire technology industry around the world at the highest levels Ben has interviewed Mark Zuckerberg Jensen Huang Satya Nadella Sundar pichai Rich Barton Meredith cope at levian of the New York Times Pat gelsinger of Intel and John Collison and many many more many of which are regular readers he is the

1:54 father of aggregation Theory the most important business framework developed in the last 20 years and Ben really pioneered the internet subscription newsletter business model we sat down with him to talk about a bunch of his recent changes going going big into podcasting bringing on co-hosts and expanding the Empire and even now launching a strategory property that he does not appear on at all regardless of what your business model is regardless even almost of what your content is I

2:23 don't think there's any Creator certainly not any business Creator out there today who doesn't directly or indirectly look to Ben and say you inspired me you paved the way for what I do I mean we certainly feel that way I feel that way David I even feel like you're in my friendship developed early on from Reading Ben's pieces and sharing them with each other with our thoughts we have these old email threads in 2014 of you and I discussing Ben's writing oh

2:50 totally we might talk about that on the episode here well for our presenting sponsor this episode we are back with fundrise CEO Ben Miller and we asked him to share with us what his inspiration was for launching The fundrise Innovation fund so technology will disrupt every sector including venture capital I don't believe any VC would argue they're immune it happened to Commerce happened to news entertainment public markets Etc but just like every other incumbent they may have trouble imagining it so the

3:21 mission of our company fundrise is bring about that sea change so how do we do it so in my experience what happens is an industry ages and the stories it tells itself which were once true become no longer true you saw this play out in real estate yeah so typically in a financial industry the essential story is about Alpha the incumbents raise money and create Alpha and that Alpha is usually about deal picking making the best investments

3:52 and in other financial markets for example public markets technology made those markets more transparent and more efficient over time and that Alpha went away and Vanguard basically consistently beat the best hedge funds in the world so that's going to happen Venture Capital it'll start where I think we're starting which is mid-delay stage companies where there is a lot more data and that's what we're doing the fundrise Innovation fund is a public mutual fund it's like a Vanguard for the private

4:20 technology markets and so if I can paraphrase it's less about picking the winners to guarantee Alpha but more about increasing transparency and access so that more investors can just get the benefit of beta these correlated returns where when the market goes up you're invested in that asset class that you get to go up with it right if you'd indexed into cloud from 2012 to 2017 and you just said I'm going to find the data that indicates the top 10 or 20 percent

4:49 of companies with product Market fit you would have done great I learned this in 2008 the cycle and the market is way more powerful than individual you think you're adding Alpha but you're actually writing these Mega trends I mean it's going to happen to venture for sure it's inevitable it happens to every sector I just want to be the one helping do it and for Founders once you're at that stage the actual natural best fit and form of capital for you is

5:17 the equivalent of mutual fund Public Market capital and that's what you're bringing for the first time to the industry right exactly our thanks to fundrise if you want to join the over 350 000 individuals investing with fundrise you can click the link in the show notes and if you're a founder and you want to get in touch about having the Innovation fund participate in your next funding round email not VC that's notvc fundrise.com after this episode come hang out with

5:46 the other 13 000 smart thoughtful members of the acquired community at acquire.fm slack we'll all be talking about it without further Ado this is not investment advice this show is for informational and entertainment purposes only and now on to our interview with Ben Thompson welcome to acquired thank you happy to be here it's great to have you with us we've done surveys over the years of our audience and we say what is the number one topic that you'd want to

6:11 see us cover or a person we should have on the show and your name comes up many many times so I'm excited to be doing this you'll promise me I was number one now I feel like there's a bit of a left out going on we asked who the number one was and you were very high in the rankings well we have another number one though that is very near and dear to our hearts Ben was searching his email today

6:29 and he sent me an image over text that was very sweet it was the first email between us and it was about strategory okay fine I'll take that David and I think got drinks and we're talking about Uber and it was your don't blame Uber piece from 2014. yeah well it's kind of interesting in retrospect to think about that I think that was about Healthcare and rights and workers and things on those lines it's pretty interesting you could probably write a

6:55 similar piece about easy money and the macroeconomic environment and lots of pieces so I mean it's funny I haven't thought about that piece in years and years I usually have a very good memory of everything that I've written but every now and then I will encounter peace whether someone linked to it or I'll come up when I'm searching for I mean I'm the number one user of Stack research you built that for yourself I completely forgot that I wrote about that and

7:20 usually I would go back and read them like oh that isn't bad sometimes I go back like I don't know I don't know about that one but yeah it is what it is that is what happens you've written thousands of posts over approaching 10 years now it's just prolific it's interesting I went back and just read the early days preparing for this you've posted you imported from a Tumblr in 2009 that are like all the way back in

7:40 the back catalog yeah I've started multiple blogs through the years I thought they were relevant and interesting and also I think it's useful to have a back catalog when you launch and that's something that I do when I watch podcasts now is it's important to sort of establish the first time someone encounters you that this isn't just a flash in the pan sort of thing it's something that is interesting you mean like doing 30 episodes of dithering

8:05 before you release a single one you know in that case we really wanted to figure out what that podcast should be and then also working with Johnny can be a bit of a perfectionist so it took a guys I don't know anybody else like that there was a technical component that went into that as well but I think it's good for both sides it's good for the Creator because if you can't have the discipline and sort of stamina to build

8:31 up a back catalog you're probably not going to have the discipline and stamina to keep going for a long time so it's almost good internally to sort of get that done but then also when someone encounters it and then they feel wow there's an excitement not just an anticipation of new episodes that'll be down the road but wow there's already a whole bunch of stuff here for me to listen to and if you like the first one

8:52 he goes into a second one and I think that sort of second one is super important this is the point I've made about writing in general anyone can come up with one really good post or one really good podcast I don't mean to say that dismissively I think there's a lot of people out there with very smart insights I think it's a very distinct skill and capability to come up with interesting things consistently and the sooner you can demonstrate that to

9:17 someone the sooner they are going to take advantage of whatever means you have to follow or to subscribe or whatever it might be because it's not just a promise of consistency but it's evidence of that and I think that's really important to online businesses in general I think about that element a lot I also think about every piece of content you create is a churn opportunity David and I regularly look at each other mid episode and we're like

9:44 okay is this of acquired quality or is it actually net negative for us to release this episode because we've now reduced the average quality of a thing that someone comes to expect from us yeah I mean well thanks for putting the pressure on me right up there I better make sure this is interesting but it's interesting because I would push back against that a little bit and this is why the consistency part is important I mean there's an ongoing discussion I

10:08 think there's that new Social Network post news or something and I just saw a thing on Twitter I'd actually follow through but they want to do micro payments for articles which I think are terrible and there's a tendency in a lot of things to get overly indexed on the consumer which kind of sounds wrong like why wouldn't you want to give the consumer exactly what they want but just to take the most obvious example if a

10:29 Creator is not making money well the consumer may get what they want which is free content but they're not going to get it for very long there is a short-term perspective versus a long-term perspective which well no by charging for this I can do this over the long run but from a microtransaction perspective I think one of the issues is to create the piece of content is very time consuming and then obviously you get the free Distribution on the back

10:51 ends you have zero marginal costs on the back end but the problem is you have a timing mismatch with microtransactions between when the payments made and when the investment is made and so you want to put a lot of time into an article and then hope it gets traction so I can not just make money but also repay what I'm doing from there and I think that the way to think about publishing online is what are you selling I think when you

11:14 get in the Trap of thinking you're selling a single episode or selling a single article that's actually getting the incentives wrong what I'm selling to my subscribers is consistency and yes certainly a quality bar when I write something that I'm not happy with I'm miserable for the next 24 hours or if it's the end of the week I have to wait till next week and that really sucks because I certainly have the drive and compulsion to make sure that what I put

11:37 out is high quality but at the same time there's an aspect of what I'm actually selling to my subscribers and this is more of an implicit promise but I think it's the reality is the consistency and the regularity and the knowing that something happens you're going to be able to get take on it and I think that's where subscription pricing does make much more sense for Content production because in this case you're actually getting the money up front the

12:01 money is funding the work as opposed to the work being a speculative bid for the money and one thing that I've pushed over time and I'm very happy about is trying to get people to sort of annual subscriptions so I think my audience at this point is like 70 annual subscriptions at 150 bucks a year is that right it's 12 a month or 120 a year so you do get a 24 discount by being annual you save on the stripe fees yeah

12:27 it's like a 16 difference so that certainly makes a big difference but then also I just think it's good for me and it's good for my customers to know that look I have a chance to make it up to you your internet media business about the business of technology is a very different business than our internet media business about the business of Technology across a number of Dimensions right there's obviously the business Ma model your primary

12:54 business model versus our primary business model you being subscriptions us being advertising but there's also the periodic nature of content I think one of the reasons we feel such pressure on each episode is we're only dropping one maybe two episodes a month how many pieces of content are you doing a week at this point well less than I once did believe it or not usually three written pieces one interview two sharp Tech episodes and two dithering episodes so I

13:21 guess that is eight pieces of content when I first started the daily update I was doing two free articles five paid articles and a podcast so that was eight so I guess I'm doing more now but revealing my secrets podcasts are easier to do than writing so it feels easier today than it was back then it certainly is a lot I don't think that will always be the shape of it forever but yeah there definitely is a lot more than two

13:44 per month so it's a fair pushback all right so because this is acquired and I'm playing format police David I'm gonna take us back to the beginning and we're gonna try not to dwell too long because Ben I know you've told your story elsewhere but I think it's important for context so you get this inkling of an idea that you can do this and you have an idea for a way to cover the intersection of strategy and

14:05 technology in a differentiated way than has been done before and you decide that you want to start doing it I think you are still doing it while you're at Microsoft in 2014 is that right Ben I started tons of blogs through the years I in some respects felt I had missed out because I'm the same age as folks like Ezra Klein and Matthew glacias and you know I was writer for a school newspaper and you know I started

14:30 a Blog I'm like man if I had sort of kept with it you know I could be doing what they do and then John Gruber started during Fireball around 2003 and so there was some aspect of like well it's a bummer I missed out on that it's like the famous Mark Andreessen you show up in Silicon Valley and you feel like oh darn it's already all happened without question so you know certainly people push me used to writing again you

14:49 should do it I think I did those Tumblr posts while I was at business school and yeah I mean it was definitely something that I always wanted to do just from a personal self-interest perspective but also it's not enough to just want to do something there needs to be a market there needs to be an opportunity the way I always put it is there's lots of sites writing about the products and Wall Street is writing about the financial

15:13 results but there's a big gap in the middle there you know like what is the strategy that goes into the products like what are the margins in the business models that undergird those products that drive to the financial results how does company culture impact decision making why do companies do stupid things this is a common question in business school and you would do these interviews any of you prepped when you're the first year doing secure students then you're helping the first

15:37 year students and my favorite question was always what's a decision or a product this company has made that you think is a bad idea or you disagree with and everyone would always have an answer to that but the more interesting questions the follow-up question which is why did they do that and what you would see is a lot of people their answer really was because they're stupid and the reality is no one at these companies is stupid a very popular

16:01 choice back then is Microsoft making the zoom player it's like that's a dumb idea blah blah blah why did Microsoft do that it's not just useful for critique but it's also useful for saying where companies should go so I think probably Microsoft either Microsoft or Facebook are probably my two biggest successes as far as an analyst you know I think particularly Microsoft where I think I very clearly articulated what their issues were and also by understanding

16:31 those issues the sort of organization they were the sort of capabilities they were and not just the weaknesses that entailed but also the strengths that entailed where they should go and the sort of strategy they should adopt and that's basically the strategy they have adopted and obviously it's tremendously successful but there's no one writing that sort of stuff back in 2013. one of the things we thought about a lot was we are not journalists and we came at this

16:56 from having worked in the industries that were talking about and obviously you did too having been at Microsoft Apple and plenty of other places was that in your mind like everybody you mentioned as reclines grouper is different we'll talk about grouper later but they were journalists they came out of the media whereas we were all coming out of the industry yeah it's interesting thing I wouldn't classify either Klein or glaciers as journalists I mean they were bloggers that's what

17:21 they were and they ended up as somewhat journalist although I would say both of them their best work has always been more analysis than journalism I mean maybe it's a stupid classification but I think about journalists as sort of writing about what is happening at best uncovering facts analysis is explaining why it happened and opinion is some aspect of saying what you think should happen you know those have certainly gotten conflated over the years that's

17:51 probably a different discussion but analysis and opinion I think do go together to some extent but it's actually a line that I'm actually pretty careful about I really try to not break news that's actually an explicit choice on my side I mean it was an easy decision to make at the beginning because I knew no one I like 400 Twitter followers when I started everything that I wrote was self-generated right it was just my own Insight my own view of the

18:16 situation you didn't have any particular access no access a negative access I sort of felt like it before because I couldn't write about Microsoft because I was some peon there I think that of my work experience the Microsoft bit was certainly the most impactful not just because of what I learned about Microsoft but just what you learn about big companies I think in general and it's very easy on the outside to ethomorphize these companies in like a

18:41 single entity sort of making decisions and doing what you want and doing what you don't and the reality is it's thousands and thousands of people there's massive coordination problems everyone has a different take different opinion which is why the culture stuff is so interesting which is why the broad shared understanding of what a company is and is not capable of is so important to understanding why companies do what they do because actually tends to be much more impactful than single

19:07 individuals and definitely single individuals below like the CEO level and even then what constrains the CEO's actions is a pretty significant thing but they had to build team to get apps for Windows 8 and so I was responsible for social media other than Facebook and Twitter so I guess blogging I was responsible for publishing so all the book publishers Amazon Kindle things along those lines I was responsible for

19:37 lifestyle so I really got to know the publishing industry very well both on like the magazine side newspaper side book publishing side and all that was certainly useful learning for writing about those Industries but also very useful for understanding App Store Dynamics developer Dynamics it was super fun very busy very hyped trying to get stuff out the door working with you know half built sdks and flying all over and working with developers and then Windows 8 launched it kind of sucked after that

20:06 but it was fun up until then so I was at Microsoft and I remember my wife and I it was our first ever trip to Hawaii I think this was the winter of 2012 to 13. and sat down and talked about it was like yeah it's probably going to be time to move on pretty soon I mean ending up Microsoft was always a bit of an upset I was always sort of an apple person that was my obsession I wanted to work at

20:30 Apple I had the Good Fortune of being able to intern there and I was at Apple University when Apple University had just started and the original vision for Apple University was that it's going to be really focused on Apple has this notion of like the top 200 although I think it's actually today more like top 300 or something they go to this big company Retreat there are the ones that know all the future plans and everything's going on and that's really

20:51 sort of the decision makers at Apple and it's not necessarily by management position like there's ICS that are you know you have no man's responsibility but are you know sort of part of that core that was an amazing experience and really trying to figure out like what makes apple apple sort of defining the culture and it did seem problematic that it's very hard to write culture down because then that's kind of a recipe I think for sort of ossification and

21:16 getting sort of walked into something what is interesting is it was written a lot about is this sort of Steve Jobs initiative and you know I'm sure he okayed it but he had basically no involvement at all Tim Cook was very heavily involved like the whole Tim Cook Doctrine thing that folks talked about together earnings call that was at Apple University first did you coin the cook Doctrine no I think Horus deju did from a Simcoe

21:40 oh yeah the reality is his culture comes from doing and it doesn't come from saying and there's an issue like if you've made decisions based on data right it's inherently backwards looking because the data has to be generated first and I think there's an analogy to culture along those lines that and the concern about writing it down and getting focused on that is you're sort of locking yourself in like cultures are very very powerful it's the way that you

22:05 coordinate a massive company and keep it going in the broadly same direction because there's so many things that you can't articulate you can't articulate that this is the way we do things if you did you would be bogged down like the transaction costs of communicating every little detail are massive and so culture keeps you going in the right direction but culture is also very dangerous because if you have to change direction suddenly you realize you're in a

22:29 straight jacket and I do wonder if writing stuff down and saying this is the way we do things is actually like sewing this right second I'm not sure how that pays off right culture and process accomplished the same goal in many cases and so either it can be done in a process light way because the culture sort of facilitates it getting done but then you have no processes to change something if the culture is no longer facilitating what you want to do

22:52 yeah I think that that's an interesting way to put it culture is probably the processes that can't be written down to some extent because it's just an understanding of this is how we do it I left that summer feeling like this is not the right thing for me you get to business school you have to get a job everyone else is getting jobs and you feel you know and it was pretty tough for me you feel like what you do

23:12 immediately after business school like there's such weight to that career decision and now you're just like yeah whatever it's like a job well I was hell-bent on being in Tech and I had lots of opportunities and offers obviously Consulting was an option it's interesting it's not a very non-traditional background being an English teacher in Taiwan you know I built a sort of distributed presentation system for a group of schools here so there was like some sort of like Tech

23:35 angle per se but really I I was just like an eagle teacher from Taiwan wait you know back to sort of the Ezra Klein Matt Iglesias you were kind of cut from that cloth before getting into Tech right like you were Poli SCI major right you worked in politics yeah and honestly a lot of that was my background and I grew up definitely Blue Collar but my parents were ministers and you're in a small town of 2000 like the pastor is

23:58 like the most educated person around by and large so there's an aspect while the alternative to working in the factory or on the farm is you go to college and you'd be like a professor or something there just wasn't even any awareness of any sort of opportunities and I think this is very not well understood by Elites in general and people on the coast where it's not a lack of opportunity it's a lack of even knowledge that there are opportunities

24:27 elsewhere and so for me going to the University of Wisconsin was like this big Act of rebellion and like oh I'm not going to go to a bible college or I'm not going to go to whatever and in retrospect I had the grades and test scores to go somewhere you know I mean Wisconsin is a great school but I probably could have gone to an Ivy League schools I didn't even apply that just wasn't on your radar screen not

24:51 even on my radar screen not on the radar screen of anyone around me and I think this is a perspective that is probably not very well understood by a lot of our audience I think to say the least and so I actually love Tech I was very into it I like I was the first person I knew around me to get an email address to sort of be online did you get the internet at home before you went to

25:11 college or was College your first experience with it no I pestered and pestered my parents to get internet I mean I think we started out with like a Juno account which is just email only oh wait was do you know the one that was a D Shaw spin out yes that was an incubation at De shop when Bezos was there before Amazon yeah it was like a standalone client that was email only and then emerged with Net Zero yep so

25:33 even in college you know I was super online me and my group of friends stay in the dorms an extra year just because of the broadband connection Broadband is used very Loosely here I think it's like two megabytes up and down I worked at the student newspaper which I loved one of the things that I did at the newspaper was I took over the editorial section my senior year and so we sat down we had five things that we wanted

25:57 to see happen well first we decided number one editorials will only ever be about things that affect students and what we did was look we're going to write an editorial every single day Monday through Thursday Friday the whole page will be given away to guest columns we're going to write an editorial every single day no matter what and we're gonna write about these five issues and did that mean you writing an editorial every single day well so we had a

26:17 editorial board but it basically ended up me writing a tutorial every single day it's what it came down to not every day with the vast majority and it's interesting because there is certainly there's an echo of what I ended up doing with my career right this sort of daily hitting points having to generate content but it was number one just from a practical perspective it was fun and interesting and something I definitely enjoyed and number two it

26:41 worked of our five sort of things we had goals we accomplished four of them so I want to go forward to you're leaving Microsoft give me the emotional moment where you're like it feels like it could work like I think there's something here I think I have content Market fit well so to go to the back of the Y trip there was an aspect about going to Microsoft's like well I should go to a place that is

27:08 theoretically oppositional to everything I believe in right and can I make changes at Microsoft you know very sort of arrogant really I learned a lot from Microsoft as opposed to the other way around I sort of signed up for it knowing this is probably not where I was going to be long term and after that trip is when I did start strategory I wanted to figure out a way to go back to Taiwan at some point my

27:29 wife from Taiwan and we enjoyed living here also again I just felt like there was this whole an opportunity and I sort of looked at Gruber as someone that was like well he did it but it was also pretty clear that in Advertising based model was probably not going to work I mean that was obviously a regular theme of mine about the centralization of advertising under Google and Facebook and that world of starting a blog and

27:52 throwing up some Google ads was not going to be a viable one what made you think that to my mind at least there is a very viable and robust alternative history where strategory is an advertising business model well I think that I would have to have started much earlier and I think gruber's model is the right one where I think he is actually underrated that I think he actually kind of invented native advertising because you read

28:17 every piece of content that he writes and one of them just happens to basically be an ad it's the same format same content as what's there and I would bet that the rate of consumption to encountering it for his ads are like higher than almost anything else out there and obviously Facebook does that at scale and it's all automated self-serve and you scroll through and there's different piece of content you're interested in and then some of

28:39 them are ads but you didn't think you could do the same thing that John does well I thought that was a possibility a potential leg of the stool but number one I didn't know that I could do the same format I mean what works for him very well is because most of his stuff are short Snippets and wink out it's very easy to check in and read everything I ended up moving more towards longer pieces I mean I did

29:01 experiment and play around with that format and it didn't seem right to me and then also just strategically you could see where things were going this idea that users are going to Google going to social media and that's the best and most obvious place to put advertising because that's where the users are there's understanding about them all those sorts of things you know advertising is an Roi measurement it's not just what's your return but also how

29:29 much work do you have to do to get it and why would someone want to go to a small blog and put the effort of putting an ad there it didn't seem like a very scalable possibility and meanwhile at the same time there have been this new company that was founded called stripe and it seemed viable to me that if you thought through the idea look if I produce super highly differentiated content that is something that

29:52 is not going to appeal to the whole world but to the people who like it they'll really like it and if you have that sort of audience you should maximize your Revenue per user and the way to maximize your Revenue per user is to charge them a subscription and the tools were then becoming available to sort of do that just to validate the point real quick and David this is my push back on there being an alternative

30:13 history where strategory could have been adriven for anybody who doesn't read during Fireball and doesn't know who John Gruber is that we're talking about quick lesson when Ben says that he invented the infeed advertisement you go to daringfireball.net yes.net and you see the same exact website that's been there for 10 close to 20 years at this point and most of it is links out to other things some of it's long-form well thought through pieces and some of it is

30:36 sponsored posts and I consumed just like many other people the entire feed in an RSS reader and the sponsored post would show up just like any other post in an RSS reader now I think the set of people who are likely to use an RSS reader and who are likely to go directly to dairyfireball.net as the play place where they're intentionally typing a URL or clicking a bookmarks bar and going to it that set of Apple nerds is far more

30:59 likely to do that behavior than anybody else in the world the world is Shifting away from going directly to pages and a lot of your readers are like I'm just getting my news from Twitter and wherever else at this point and I'm not doing the RSS thing yeah I think the more Niche you are interestingly enough that does subscriptions it can also work well for advertising I think Gruber was at the right place the right time for

31:19 Apple for sure not just in terms of Apple's growth but also the explosion the App Store there was a period where you would have lots of apps as those sort of featured things and so it works great for him again I did have sponsored posts a little bit when I did go independent because I figured I'd have multiple revenue streams I didn't remember that how long did you do that for like six months again the ROI wasn't

31:44 there for me either I couldn't charge that much and it was a big hassle in getting it arranged and then also there's a lot of complicating factors like pushing people to email was not a good fit for that and so I started stickery pretty clear that subscriptions would be the core bottle I was going to try lots of things to monetize clear to you though but you pioneered that I mean there was no sub stack and I think in many ways substack

32:07 was I don't know the exact history but probably modeled after you yeah I know substax seed deck says Chuck Arena box that was their pitch so this was a big innovation yeah I mean I think like the subscriptions did exist I think on Wall Street in particular but they were generally like twenty thousand dollars and you would get all the hedge funds to subscribe and the banks that model still exists and is actually a very very

32:29 profitable one but what I do think strategory innovated was sort of subscriptions at scale where you're charging a low price relative to twenty five thousand dollars or ten thousand dollars and you're doing on a self-serve basis people sign up their credit card and again stripe was a really important part of making this possible but there were no real subscription tools like I had to actually hack it all together when I first started there was like WordPress subscription tools then there

32:55 was ripe and you had to glue them together and it was sort of a big mess when I started a year after I started a company called memberful then launched which I switched to them that made things definitely much easier and then obviously I have my own system now you've worked with an outside development agency to custom build software for which you are the only user to publish strategory now right yeah well at the beginning it was all me like

33:17 I built my own page and I did all that integration myself and I'm not really a developer so it was very happy actually one of my nightmares was when I watched the paid product so starstruckery I messed around with format a little bit at the beginning actually the real Pioneer who I should mention was Andrew sulfin and he had this manic posting schedule like tens of posts a day and he did have a team to help him on the Daily

33:43 Dish and he switched to a subscription when I think he left the Atlantic and it was successful like he quickly was doing a million dollars in Revenue a year but he sort of maintained that manic posting schedule that was kind of made sense in an advertising driven world where you want people always coming back and getting lots of Impressions and the paywall was super loose it was like 30 posts and then you hit a paywall or

34:07 something and the reality is what happens he burned out I think he had some health issues and he ended up leaving and it was funny because when he left everyone's like blogging's dead it's finished was a failure and I looked at him I thought like no I think this was actually a huge success one of the problems was he had this posting schedule and system and then he tried to drop a paywall on top of it and so when

34:27 I thought about strategory I wanted to do the opposite where I wanted a subscription to not feel like from a customer perspective that I was taking stuff away but that I was giving them more just from a psychological perspective and so once I realized I definitely want to do a subscription model I started becoming super disciplined about never writing more than twice a week this was back in 2013 when I was doing such techri because my

34:51 plan was for subscribers if they subscribed they'd get more and it would be like an exciting purchase as opposed to oh I'm hitting a paywall this sucks and your audience that you were building up before putting the paywall in would still keep getting the same that's right and so my initial model was still daring Fireball like where I figured oh I'd have big articles and then if you subscribed you're gonna get a whole feed of a bunch of little stuff my commentary

35:15 on news articles I built a new website again as a not very good web developer and the metric I was paying attention to was people who visited the home page on days I didn't post because to me those were people that were hoping I had written and they wanted more from me and I figured the classic if I could just XYZ of Y but I thought if I get 10 to this audience that would be something that would be

35:40 reasonable and that metric was pretty high I mean I didn't appreciate then just how powerful social media was and Publishers bemoan social media but those are Publishers with old business models if you have a new business model with a very low cost structure social media is a godsend because you basically get free marketing what a lot of people don't understand is I think a lot of writers give away way too much content on Twitter and they're out there posting

36:04 it's like why should I read your site when you're just telling me everything you think on Twitter and the reality is the power of social media is not that it gives you another platform I have a platform it's tracker.com what it does do is give all my readers a platform to tell other people wow this site's really great look how smart I am for having a take on this thing that Ben wrote which you can read about on his

36:23 website right if you share something that's great you get the likes and you get the retweets and you get the status of people feeling like wow this person is sharing good stuff and that's really powerful this is probably an angle you mentioned the mark Andreessen quote about I thought I was too late in this case it turned out I was early I was the only person doing this sort of model out there and it was still an era of 2013

36:48 Twitter 2014 Twitter where people would share links to something and it would break through if it was consistently good this is also where the principle of having the second article be good is super important you know this is I think unique to the social media era where people following to a site and they have paid no attention to what the site is they don't even know what it is it's basically a Twitter article for all intents and purposes so I did want the

37:12 site to be sort of visually distinct so I did like a custom font which back then was very rare that was sort of a new thing I had the orange you know there weren't very many orange sites back then and I did a lot of these sort of hand drawings which were very visually distinct the Ben Thompson iPad hand drawing you're a good artist the boats even in the first post the sailboats is quite good yeah thank goodness for iPads

37:35 and the ability to sort of edit endlessly but the reason for that is what I was really thinking about was oh hey they've found an article like oh that's a good article a day waiter a week wait or a month later they follow another link and like wow that's gone wait I've been on this site before it's triggering my memory and that's really I think the key moment it's like oh yeah I'm gonna follow this guy on Twitter or

37:56 I'm gonna put this site in my bookmarks or I'm gonna put my RSS reader or whatever it might be and that's sort of the key thing that I think you want to accomplish this is one of my big criticisms of sub stack well I mean it's interesting because subseq I think is achieving some degree of network effects where everyone's familiar with it that your payment's already on file all that stuff is true but nothing visually about

38:18 substack is memorable every single site looks the same and also they'll be reading a post and I have to like bring down the editor who am I reading again the kerning is also weird this is a weird typography knit but I'm like it always looks slightly wrong to me when I'm reading the body text yeah I agree strategory even the name I know in many respects it's a bad name for a word of mouth sight to be a name that no one

38:41 knows how to pronounce but it's not an audio Word of Mouth aside it's a word of tweets it's super memorable for good or bad reasons it's one of those no exposures bad exposure sort of things more importantly the URL existed the Twitter handle existed it didn't exist in Google search so there was pluses or minuses when did you come up with it the name that I've always been the most jealous of is a Simcoe again to go back

39:04 to horse statue it has all those qualities with the advantage of being pronunciable and easily spellable so in retrospect I always make fun of the strategory name because it's easy to make fun of but I do think there's a lot of positive qualities to it that are underappreciated from this memorability aspect but there is an aspect where it is kind of hard to pronounce and people are afraid to say it because they're worried they'll say it wrong and if they

39:29 say it they know how to spell it so it's not perfect by any means it is based on the strategory movie bit right where it's supposed to be strategory yeah so it's strategy and Tech and yes there was a strategory bit and so then I'm like watch The pronounces Chicory that was a terrible idea I think I did that for the month didn't it even say on the website it's pronounced strategory yeah at the very beginning yeah and then I quickly

39:52 realized that was a very bad idea because it is strategy and tactical yeah lots of poor decisions it's very easy to look back and see all the good ones but this is how you build Brands the only way is to like do this stuff I feel like every every single time we talk to someone who built something in their own image from first principles with their ideas in a super opinionated way about how they wanted to sort of like birth

40:13 their internet child into the world it has all these really rough edges for a while yeah and that applied to lots of pieces I mean I had my people visiting the homepage of days I didn't post so in the meantime once I was really looking for a job at Microsoft where I could still block isn't that all jobs at Microsoft you just kind of chill and you plenty of time to blog but I couldn't write about

40:33 Microsoft it also it was getting a lot of attention again I was surprised at how quickly it blew up I mean this is where the other Gruber story comes in where an appendicitis I'm laying in a hospital bed getting ready for surgery and I'm like waiting around for a few hours I had waited to email John because for the same principles at the beginning I wanted to have a body of content not just like an introductory post say oh

40:56 check out my new blog how many emails does he get about that right and so I waited a couple months or a month or so when I email them say hey been a big fan he had just been on a podcast telling his origin story and he also worked the student newspaper and XYZ so I shared that you know like a rude related to this I regret not doing what you did back in 2003 but I'm giving

41:15 it a shot now here's a few articles I'll be interested and I heard nothing back I didn't no response and so you know I had my surgery it was very successful no problems a couple weeks later I'm at Microsoft and I get an email from him pointing out that I'd made a grammatical error I think it was something like a Jai Jim Jive like I used the wrong one and he's like I make this mistake all the time he's like tell

41:40 me the etymology of each one and that's all the email said no closing like I love your work or just like no full stop it was just explaining that I used the wrong word and what different words meant what I probably meant to use so I thought well he's probably gonna post a link to the sites I was very excited so I'm like sitting on the analytics page and I'm sitting on daring Fireball seeing what he will post and I

42:02 was hoping for just a short link right he has all those short Snippets instead he it's a full article and he starts out saying all my readers should be reading this new site and I've discovered I've discovered of course College it's the best new site I've encountered in years and he lists like three articles that I've discovered with the help of its author right he's like you should this article this article this article it's like 500 Words of just the most glowing

42:27 praise imaginable and then he gets to the end he's like but for the first time I disagree with Thompson and then he spends another thousand words saying I was wrong about something which was fine I mean I think he was wrong and there was the start of a beautiful friendship do you remember numerically what happened to your traffic after that so the thing I always was indexed on was Twitter followers because that was a very clear metric of

42:49 people who had affirmatively decided that they wanted to know what I had to say and I don't think it's the case anymore but for a long time my percentage of subscribers actually followed was a fixed percentage of my Twitter followers huh paid subscribers were a fixed percentage like people who subscribe to the daily update yeah which meant I knew my limiting factor on subscribers was awareness of who I was so I had 500 Twitter followers when he

43:13 posted that and within 12 hours I had 1500 Twitter followers and that sounds very small I mean I have 200 and thousand some followers now tripling out hour over hour is a great rate to compound at that's right and also it was a lot of people that were also bloggers or writers or influential there was two step changes instructors growth that was really the first one for sure the next day I get reached out by the head of

43:39 strategy at Microsoft or a week later he's like hey can I we have a meeting I'm like oh I'm in trouble oh he gets summoned to the principal's office at least it's not the head of PR that would have been way worse so he had to be with him he wanted to hire me he's like look I'll bump you up to level 65. you know I kind of want to go back who was the head of strategy at the time no

43:57 his name is Charlie song Hurst oh yeah so and I kind of sniffed him out I knew he was probably leaving soon he did end up leaving shortly after he's like no go live in Taiwan just fly back once a month it'll be fine but fortunately I turned him down but all this is a circuitous way to say I did feel I needed to leave Microsoft like this thing was taking off it wasn't sustainable number one I couldn't write

44:17 about Microsoft and it was stuff that people at the highest levels cared about it wasn't like writing about the finer details of vpns or something along those lines and so I'm looking for a job end up in automatic and that's where I met Matt so you went looking for a job in your like heart of hearts were you hoping that you could someday not have a job without question no strategory was my plan you just felt like you couldn't

44:39 do it yet yeah I mean I had a family like I had business school debt I needed to have a job that paid the bills I wanted to find a job that would let me continue to do this so automatic worked out it actually worked out even better because I was like hired as like a growth engineer or whatever which I didn't really know anything about but then the team I was on pivoted shortly after I was there to

45:01 building like a new back end of Wordpress and so there was nothing for me to do we didn't have a product out but fortunately there was a little bit of pushback internally because I was becoming this very visible blogger it's like what the hell like this guy's working for us I thought we were supposed to have because back then automatic was one of the few distributed companies could live in where he wanted to so I as soon as I got the job we

45:20 moved back to Taiwan and you weren't supposed to have a second job for sort of obvious reasons and I think Matt did run some interference for me where he's like no don't worry he's good and the one thing I did do for automatic is I went through a lot of the company what they were doing and I wrote this big strategy document about where they're at what they should do it had some impact I think on where they ended up going you

45:42 guys should buy Tumblr yeah that was at the time when they were it had been a very small company and around that time they decided to raise a lot of money and grow into being sort of a much bigger one again I don't know how much impact I had Matt says I had a big impact he may be being generous I don't know but I kind of actually end up working mainly directly with Matt and he mostly left me

46:00 alone and then he would have a question or whatever and I would think about it and write something up and come back well nominally being the growth engineer for this team that did not have a product in the market so I owe automatic a lot but it was also very stressful I felt really guilty because I'm like I'm really devoting all my energy and time to Zachary and I'm getting paid by automatic just that was internally very

46:21 stressful to me and you know that wasn't the idea like I mean I sound cliche but I you know raised in the midwest blue-collar town like I'm getting paid far more than I've ever made at any time in my life and I don't feel like I'm devoting all my time energy to this company that was very internally stressing and so I got this job to be like a consultant for this company that wanted to expand to Asia Pacific and I'm

46:45 like well I can do this consulting job and then I can make sure Checkers paid things I couldn't do that was that automatic again you couldn't have a separate paid job while being there and so you left automatic to go do this sort of potential Consulting thing well no first I left automatic because I'm like I need to build this subscription bit and this new website before I started this consulting job so I left automatic I'm working on building this what

47:08 happened was that concealer shop fell through it just didn't materialize oh no way you burned the votes and then there was no car so I watched the checkery and again the idea was you would log in you get this much Fuller experience and I watched it and number one I had something wrong with security certificate so the first 24 hours no one could make a purchase and so I'm like up 36 hours straight and I barely slept for

47:30 the week before because I'm like finalizing the site I stupidly had like reached out to like Kara Swisher at recode and so she had a pre-scheduled post that was going to announce I was going paid and so like I had this stupid artificial deadline that made zero difference other than stroking my ego and so it was awful it was a horrible experience but the worst thing was that the product sucked it was super confusing I didn't achieve my goal of

47:51 having a good experience for non-paying customers that were ideally lure them in and for paying customers it didn't work well and it was very janky and it sucked it was really really bad so over the weekend I'm just miserable and I know I screwed up and I've burned my bridges and all this sort of thing and I realized that look I messed up the business models write the products wrong so over the weekend I tore the whole

48:14 thing out I went back to the old website and I told the people that subscribed I'm like look I appreciate you subscribing the format's all wrong what I'm going to do is for your subscription I'm just going to email you I'll email you once a day with the extra stuff that I promised you and so I felt completely and utterly asked backwards in the email I thought it would all be on the website I've been thinking this whole time I'm

48:37 like we have not talked about email once yeah and bimentality has always been checking as a website first and foremost but it's like look I'll deliver you this extra stuff via email and it will also be on the website on the sidebar and you know it'll be archived there but you're gonna get an email and it worked out in the long run in the short run though I had a one day goal for new subscribers well I guess a two-day goal because the

48:57 site wasn't operable for the first day I had a one day goal a one-week goal and a one month goal and I failed to reach all of them and failed pretty significantly honestly to reach all of them and so I'm there I've given up this six figure job living in Taiwan business school debt and an idea that I thought could work but did not seem to be working very well and it was very very stressful I mean I

49:21 stopped paying all my credit cards because especially back then Taiwan was very cash trick so I needed to preserve cash I was you know not sleeping I also watched a podcast at the time which was exponent with James allworth so I'm writing as I mentioned before seven times a week plus doing a podcast I'm doing all the editing for the podcast all the production all this sort of stuff and I thought I'm gonna have to like go teach English again to like pay

49:43 the bills at the same time and then I think like the first month when I tore all that out I screw up the subscription so I double charged a whole bunch of people instead of process all these refunds as well as customer support and it was pretty tough I watched in April this is April 2014 15 2014. so next year will be 10 years checkery but nine years of it being my job so fast forward to the summer we're back

50:07 in the States my wife and I had planned a long standing trip we're gonna go to Paris and leave the kids with my parents you fast forwarded there a little bit but you must had some thoughts in those intervening months where you're like well shoot I'm just going to give up on all this right yeah but like there was certainly a pride factor I couldn't bail on it like I mean no one thought I would succeed I had lots of people reach out

50:26 be like hey man I love you but subscriptions are not a thing on the internet it's not gonna work and a lot of people intact especially VCS which is weird because they always know exactly what's right no they're very conventional wisdom driven I think in general so I can still picture I was sitting at the kitchen table at my parents house in Wisconsin and you looked at the numbers and my main subscribers were more than April

50:50 June was more than May and July was on Pace to be more than June and we're still talking like a couple hundred not very many oh and I had also had like multiple levels so some other people had like this 300 level where I was supposed to like chat with them and have subscriber calls and all this sort of stuff yeah everybody starts that way and then quickly gets rid of it and I'm also trying to do like sponsored posts really

51:09 just an overwhelming amount of stuff but I looked at those numbers I'm like I think it's going to work and so I paid off all the credit cards that had been running up for the last few months my wife's like should we cancel the trip like no we're not canceling this trip you know she was very mad at me she's like you threw away this six-figure job and so I didn't want to tell her how poorly things were going you didn't give

51:29 her access to the analytics no of course not and I'm like no we're not canceling our trip things are going great but so we flew to Paris right the credit cards all back up again of course and in Paris I remember I would wake up every morning at 4 a.m sit in the bathroom and write a daily update and then my wife would wake up and we'd sort of go out for the day and that end up being truth it just sort

51:49 of kept increasing I mentioned there was two big step changes the Gruber one being the first one in November I actually ended up reaching a thousand which is my one year goal so I hit my one year goal much earlier than I expected you know one year hundred dollars a year it's 100 000 run rate the funny thing about exponential growth you missed the early goals but you nail the later ones yeah I don't think exponential growth really applies with

52:10 my business but maybe more about the beginning there's more of an exponential curve I mean the problem with a word of mouth business and special growth is people run out of people to talk to and so that's the limiting factor right it's only the new subscribers give you the exponential right there's a little bit of exponential with every new subscribers they will tell new people but networks get exhausted and so it's more than linear but it's if you zoom

52:32 out it's really linear is the way this sort of growth works but so what happened was in November I put a little post out first I simplified my model I said no more of this 300 level cheap level one price and one product that's all you're getting and then number two I'm like hey I got subscribers business model works you know this is definitely going to be my job sort of going forward and in the next 24 hours you got 250 new

52:56 subscribers by far the biggest step change in my subscriber growth did all the VCS email you again and say Ben you're a genius will you please come talk to our portfolio companies I was right about my metric of people visiting the homepage in days I didn't subscribe what I was wrong about is that the vast majority of people thought I would fail and go out of business they didn't want to lose their money and so they didn't

53:17 subscribe but once it was clear I would be in ongoing entity then like oh okay I guess my money will be safe and so I will now subscribe I was right about the market I just I didn't understand that psychological aspect one thing I think is great for sort of the I went back to the sub stack make it easy to pay I think the real great thing for sub stack and subseac writers today it's not just

53:41 that it's easy to pay but people aren't scared to give their money to some random writer on the internet and they were previously and now they're not and I think that's really great and something I'm very proud of wait so what was it about yours where they suddenly became came not afraid because I had a thousand subscribers I was making a hundred thousand dollars a year it was it that they thought that before they knew that you were secure that you might

54:01 just stop writing and then they would have paid you and then they would get nothing for it that's right I think that that was really the case and so then since then I've never had a growth explosion like that since that 25 growth in one day but it's been sort of slow and steady since that point that accidental email hack how do you think about it now you say you still think about sister tequery primarily as a

54:21 website but how do you think about email now like obviously it's a big part of what you do yeah well it is but it's not I mean I think if you see the stuff that I've done for example now you can consume the daily update via a podcast or my articles via podcast I think that's actually very much in line with my vision and view of strategory which is this is a publication that I write and I will make it as easy for you

54:48 to consume in the way you want to consume as possible and back in 2014 that meant sending emails and certainly there's all the advantage of emails that everyone's talked about it's a fee that everyone checks daily you don't need permission to get into there there's no algorithm you know it's funny because I think one subset came along it became overwhelming and people started setting up rules to send other emails to a folder which they never checked so your

55:12 packets are the same problem a self-imposed algorithm which is where podcast is great it's the same idea it's a feed that people check that I mean it works through polling but to people it feels like push and that's certainly a great thing from an independent publisher perspective and I think in line with my vision I mean one of my criticisms of sub stack was I think there were two email Centric to start again I think the the web experience is

55:34 important it's super important for growth because that's where people find out about stuff is often via social media and sharing links and email is a tactic it's not a strategy and at the end of the day the strategy is about differentiation it's about consistency and I want it to be easy to use and fit in your life and email was a way to do that again sort of backed into now podcaster way to do that you can get

55:59 struck your articles on Via SMS which gives you a link and you can read on the website obviously I've always had RSS and I just want to make it as easy for you to access the content that you're paying for as possible because that sort of makes the whole thing go and you know you mentioned churn the beautiful thing about this model is number one from a writer perspective all I really need to worry about is keeping my subscribers

56:21 happy and so like you know should this be a free article should it be paid well you know what if it should have been free but it made it paid that's fine my subscribers feel like they got a great article that they paid for and they feel good about that and that recurring revenue is real really really powerful and then also that's my marketing channel it's them telling other people about that this is good and you should

56:39 sort of check it out and one of the things we do with passport is a big way stuff spreads is people forwarding emails and passport is the technology infrastructure you've built to enable other people to build strategory-like experiences if they're whitelisted by you how's that work no it's just my stuff for now I mean obviously we would love to make it broadly available but it's not all finished yet and there's customer support issues and things that

57:02 would entail that but something that I would like to do but one of the things we did with that is I linked to myself a lot which people make fun of and deserve really so because it's kind of a running joke between me and my readers but a way I think about is it's a live thing it's an ongoing sort of Journal of my attempt to understand the world to understand technology and sometimes I was right

57:24 about something and it's always fun to point back and says right sometimes I was wrong it's like why was I wrong what mistakes that I make sometimes there's a trend and it's like well this happened back then and this happened here and then again I think about it as being sort of a live thing and so linking back to myself is a way to do that it's also a great way to trigger that second article sensation where you read an

57:44 article and then there's a link right there and you go read another article wow that was also really good and then there's XYZ so one of the things that I want to do with passport was how can I really leverage email forwarding to accomplish this especially when I'm linking to paid articles so like one of the things we do there is every wink to myself in a strategory email is tokenized and that token goes one link deep so even if the email is

58:07 forwarded to you you can go read old stuff so you get that second article sensation now if you're in that second article when you click another link now you're getting a paywall and then you're gonna realize oh I have to pay to get this but there's all these little bits and pieces that the subscription model makes possible which is really weaning into just serving your customers trying to make it as good of an experience for them as it can be and the

58:30 other really important about subscriptions is there's always debates about oh people just write for clicks and blah blah blah and then the Publishers or the editors will come back say no we don't even show our writers their quick numbers like they don't know all we want them to do is write content and I think that's so foolish because everyone wants feedback they want affirmation they want to know did I do a good job and if you don't even get

58:53 access to your quick numbers where do you go you go to Twitter like what are people saying about me right you will find a way to figure out if you resonated or not right and who's on Twitter the biggest loudmouth right I'm one of the things I I word on Twitter about Twitter very early on was I would be very engaged on Twitter I'd be responding to people and then something it occurred to me I'm responding to the same 10 people or 30

59:14 people or whatever it is right so true yeah you're engaging with point two percent of your audience right and so that's a fixed number and meanwhile I have a feedback mechanism which is my subscriber number which is going up which means I know there's a huge number of people that like and appreciate and are sharing and it's all dark matter I don't know who they are I don't know where they are but they like what I'm doing and I need to

59:38 anchor on that not worry about what the loud house on Twitter are saying and so subscriptions give this feedback mechanism as feedback mechanism for people that will never email you that will never contact you but they will pull out their credit card and they'll give you money and I think that's so valuable and so positive from an incentive structure now there's a downside where subscriptions are Niche right and I do think you tend people will if they dislike you they can stop

60:04 paying and there is a worry and a challenge that you're not like pandering to your audience whatever it might be I think I'm kind of lucky because I was so early because I was the only person in the space doing this sort of stuff I got to a large enough audience size where I could not care and if someone wants to cancel the description I don't care in fact if someone comes back and if they are just over the top rude or

60:28 respectful or insinuating things about me I will not just cancel their subscription I will refund them their entire purchase and say please just never come back isn't that the nice thing about an approachable price point you're like actually your dollars are insignificant to me because my number of subscribers is so much larger it's very different than like if Apple decides to stop advertising on Twitter it's like oh crap oh oh oh I'm so sorry I'm so sorry

60:48 come back yup that's exactly right and again what I've been able to do that when I had a very small number of subscribers no but I mean it was easier back then because I mean I started in 2013 and the entire opinion of the tech press and Wall Street is that Apple was doomed because of course we'll come up with Windows Mac blah blah so I had the lowest hanging fruit in the world to sort of pick right it'd be like no I

61:09 don't think Apple's doomed to be honest you know that's why I wrote that white Christian was wrong because all the disruption people were like you know Apple's for sure screwed unless they go Dawn Market I'm like no I don't think they need to go to our market and so that was great because it's not like I was writing anything that controversial and so I didn't even run into any issues where people would try to hold it over

61:28 me and by the time I got into issues where that mattered I was large enough that it didn't matter so I think I was definitely fortunate in that regard for our second sponsor of this episode and all of season 11. thank you guys for a great season we have one of our very favorite long time members of the acquired family pilot.com pilot sets up and operates the entire Financial stack for startups and growing companies that means your Finance your accounting your

61:58 tax even higher level CFO like services like investor reporting all of which as we've talked about all season you would either be hiring a big four not a big five accounting firm to do for you or building out your own Finance team or doing it yourself as a Founder none of which are good decisions or good leverage on your time and resources as a startup pilot is a much better decision they take literally all the headache of

62:24 Finance and Accounting off of your plate as a founder and a startup team and they provide you with their own team of experts actual Financial Accounting experts and Technology to set up your financial infrastructure and run it right now we've talked about this a lot on this show but it really is worth talking about this defining characteristic of pilot they integrate with the apis of all the modern startup grade platforms like stripe and brex Gusto Shopify Square Etc but most

62:51 importantly the next five that come after that they know how to make that work seamlessly with your company's books so you can always use the best tools available to you and trust that your accounting bookkeeping provider will have the ability to keep up stripe itself is an investor in the company alongside Sequoia index and Bezos Expeditions there are no other accounting firms in the world that can say that so if you are still using QuickBooks on your own as a founder or

63:20 paying someone to integrate a bunch of stuff on your behalf or paying an old school accounting firm head on over to pilot.com acquired make your life easier thanks to the pilot co-founders Waseem Jessica and Jeff for providing this awesome 20 discount out for the first six months of service if you go to pilot.com acquired thanks pilot take your pilot can you share like what is the shape of the curve look like in terms of if you graph it on the x-axis

63:49 is time and on the y-axis is number of subscribers from the start of strategory today we talked about going up to a thousand and then adding 250 and that step change and even if it's like relatively linear has it sort of tapered off over time like are you saturating the world of tech people who care about business strategy yeah it's interesting because there's been different periods where it actually I thought it was starting to taper and

64:14 that actually accelerated this is probably 2018 2019 around there over the last couple years it has tapered off it's not quite what it was which is fine in terms of the growth is tapered off I mean it's subscription Revenue if it stays flat you're in great shape yeah well and then also I raised prices a couple years ago which is the only time I've raised prices and I still kind of mildly regret it it's funny because

64:36 everyone's like always your price is too low you should raise prices that's definitely the absolute easiest way to increase Revenue I think the easiest thing for me to do would be to just keep doing what I'm doing and just raise the price a dollar a year every year and for sure my Revenue increase would very much outweigh my churn I mean honestly the biggest change that happened when I did raise prices was it didn't affect growth

65:00 at all except that I had a lot more people switch to annual subscriptions because I like pre-announced it's like hey if you want to get a year at the old price which is great because I want people to know subscriptions as we sort of discussed at the beginning so I could do that that I think my view on it has always been I think on the internet in general the markets are much larger than people think I thought it was much

65:18 larger than all the folks that were critical of my model thought and it's been larger than I thought all along right I thought it would take five years to build or to watch as my business it took a year and I would rather explore the edges of that market how big it is as opposed to sort of maximizing my Revenue too soon and so that's sort of number one number two is I do want to have an impact I do want people to read

65:39 by definition the larger your subscriber base the more your sort of marginal customer is not aware of you is not immersed in the space their willingness to pay is going to be lower and so when you start raising prices you're gonna hit a wall very fast I think as far as subscriber growth sort of by definition that store number two the sort of shift over the last couple of years has been well is this it I've reached my natural

66:03 base or whatever it might be which is again massively larger than I ever expected I just wanted to pay the bills yeah out like tens of thousands of people that pay you to read your work and millions of people that I'm sure come to your website and read the free product like there is a real market for this I would definitely push back on the millions I think it's interesting because I do think this is an area where

66:26 I do feel like out there in time I think the ability to spread on social media on Twitter has really diminished you know Twitter famously really started devaluing tweets with links a few years ago which I think has made the product much worse I mean that's how we end up with all these threads because those spread more oh threads oh my God yeah which all should be blog posts so I think that has heard it the other thing

66:47 that has hurt my growth frankly is releasing stuff as a podcast so my subscribers love it half my subscribers now listen instead of read which is amazing that's how I consume every single Post Yeah and then the other good thing is people would churn because emails would build up and they look at their inbox they'd be like 20 unread emails and they're like why am I paying for this whereas eight minute podcast just feels like I can knock this

67:13 off real quick so it's been very good for churn but the problem is people don't share podcasts right you listen to a podcast you go to the next podcast you do XYZ whereas if you're reading something it's super easy to tweet it or to forward the email click forward yeah yeah so I do think that might be the biggest issue on why my growth slow down to be honest which is fine it is what it is and

67:32 you're obviously leaning more into podcasts right I did face a decision this year which is growth is somewhat leveled off do I raise prices and just sort of be happy with the base that I have and I figured it'd be worth a shot to see if I can restart growth in this case by sort of working to increase and broaden the value of a check resubscription and not just my own content so I watched tethering with

67:57 Gruber obviously is now my podcast partner a couple years ago that was like an add-on so you pay extra and you get dithering and that was really on the let me make more money for my best subscribers as a way to raise prices on my best subscribers without explicitly raising prices right what's launching dithering a business decision or just a this is gonna be a fun thing with a good friend or both oh both and then also I

68:17 had this technology for pay podcast that was a way to do it and so yeah we watched it it's been successful I mean it has you know I think like from day one we had like 10 000 subscribers and then it's sort of levels it's kind of like where are we stuck we didn't turn it all but like how do you grow paid podcasts we haven't done anything around free episodes in marketing we will but that was a de facto price raise of my

68:37 best customers and what I wanted to sort of explore this space it's like well is my market as big as it can be and is there a way to sort of go broader I figured out the newsletter thing like I think subscriptions make tons of sense for podcasts because people get so attached to a podcast they get so attached to a particular host and it becomes such a part of their routine to a much greater extent than reading which

69:01 is sort of more of an affirmative choice I have to go read this where it's like oh this is my podcast player I guess I'll listen to this next and so I think it's a great product for subscription but it's totally unclear how do you actually build a podcast particularly a paid podcast it's really hard to get people to start to listen to it and so in general I think writers tend to succeed with podcasts because writing is

69:22 a good marketing medium again it spreads easily you just pass a URL so people become familiar like oh yeah I'll try your podcast because I like you as a writer but if you're just a pure podcast how do you sort of grow and so what I've decided to do is gathering is no longer going to be an add-on it's gonna be a part of a sticker subscription so now now again your structure description is worth more because you have this sort of

69:42 extra piece and you got it for quote unquote free so you don't sell it separately at all but it is available separately again it's calling with John and some of your subscribers maybe don't like me so they want to subscribe they can but it's no longer as an ad on Checker if you are a subscriber you get dithering it's part of your subscription watch the new podcast called sharp Tech that again there's both free episodes and paid episodes it's available to all

70:04 Striker subscribers so your subscription is worth more and so people are sort of opting in just to make the point clear because I've listened every single episode of dithering including the back catalog before you launched I started resale listening to Sharp Tech and of course sharp China which you're about to talk about it seems to me that sharp Tech and dithering is sort of like well I get Ben and I get Ben's thoughts and I get a lot of the same thoughts and I

70:25 basically am picking whether I like Andrew or John better and I'm also picking the format and duration of the episode yeah right now the bundle is kind of a joke because it's mostly just me right and different flavors of been I only have so many opinions I have a lot of opinions but I only have so many so it's not in its long-term place now for sure and it's very tricky because there is an extent to your point about if you

70:50 release a Bad episode of acquired you know do you worry about churn am I diluting what strategory is to someone it's no longer just an email and now I'm reintroducing the possibility that people feel overwhelmed with content and then they also feel like oh Ben's repeating himself all the time I think there's a lot of underrated risks in doing what I'm doing but number one I think watching sharp China was a good signal to my audience of what I do want

71:15 to sort of accomplish going forward well that's a a collaboration with Bill Bishop who writes sinusism and it's the first Secretary product that I'm not on but I think it's a important topic understanding China I think it's of a similar tone and quality level of what you should expect from strategory do I expect all strike subscribers let's do it no of course not some people like me specifically and I'm not on there so they're not going to be interested it

71:38 but I think for a lot of folks it's like well I keep hearing lots of news from China where do I go I'm a relationship secretary subscriber there's this other product here and if they become a regular sharp China listener I've now decreased my churn that much more for that sort of person and I think again a big part description is just turn management it's like I want to make sure this is a long time subscriber and you

71:59 get that recurring Revenue over time as you might imagine there are plans for other podcasts you know sort of be added in the long run and we'll see what happens I mean growth has I think picked up over the last couple months so early indicators are that it's working where I'm increasing the value and will make up for the cost would I make as much if I just raise the prices and didn't bring on the additional cost of paying for

72:23 Andrew and other podcasters on those lines probably not again the revenue maximizing thing for me would be a stayed with member full and just write your check again and it's nice and simple yeah but number one I've always been worried about getting stale I know I have critics I hear about on Twitter who think I already am but they're 0.2 percent of your audience well who knows they're very loud on Twitter right number two one of the things I'm so

72:44 proud about worshipers obviously I'm most well known for strategory but I'm so proud of the business model and that it exists and the fact that sub stack is out there and there's hundreds or thousands or Harmony people making their living doing this and I feel responsibility for that in a very positive way and I really want to get this working for podcasts I think there's a similar opportunity and so helping to help Pioneer that is fun

73:07 building software is fun even though it's cost me a lot of money as you might imagine producing new podcast fun figuring out this bundle thing is fun how do you cross-link stuff like you know if you listen to check your episode because we know who you are because it's a unique feed to you you can just add another podcast without having to sign in or do anything like really smoothing out this experience of cross-promotion it's fun and I think I'm fortunate

73:32 enough that your techery has been successful enough that I can make choices that at least in the short term are more optimal for figuring stuff out and having fun even if it's not Revenue optimal and obviously there's upside maybe it'll end up being a huge thing and I'll make much more money than I ever would of just doing strategory but I do feel very fortunate that I can make that choice in the short to medium term

73:55 nice thing about having no outside shareholders you're your own little Zuckerberg over there ruling by Fiat on whatever sounds most fun to you yo no activist shareholders no for sure I actually thought about building a sub stack a few years before they launched I actually had a team together and it ended up falling apart but my big hesitation was always I just wasn't sure if it would be Venture scale and from my perspective if you have the stamina and

74:21 capability to produce regularly subscriptions are amazing ability to sort of bootstrap and again you're asking people to pay for the regular production of content it's actually a very straightforward transaction and can be sort of very sustainable how many of those are Venture scale businesses I think maybe not as many and you're right it comes with a bunch of compromises it comes with trade-offs you have to optimize in certain ways and I think Venture is a phenomenal thing I think

74:46 I'm not anti-venture at all just anti-venture for me personally I don't think it would make much sense I like the lifestyle so the lifestyle business for me you were talking to two Venture capitalists who have a business which is structured the same as yours so I love that we've had this part of the conversation because I was really curious I mean selfishly for us I'm curious your thoughts on there are corporations that have large numbers of

75:11 people that make products that are scalable and then at the opposite end of the spectrum there's being Talent you're a solo business but your business is being talent in other people's Productions but the internet has enabled this whole new class of stuff like strategory like acquired like not boring like what have you how big do you think this third class of whatever it is we are can be is that part of what this experiment is for

75:33 sure like I'm not passionate about like meta's business Prospect I definitely have takes on it you know I think that's the other company I've mostly been pretty right about over the years along with Microsoft for probably my two long-standing best calls but I'm not like waking up in the morning killing myself like if their stock goes up or down I don't really care you're not gonna go work at meta I'm not going to work at meta I think that's a pretty

75:54 safe I mean it wants to buy me for like 100 million dollars I guess I'll earn out but you'll rest invest yeah I will rest invest yes I mean Mark if you're listening but what does get me super excited I am really passionate about is this completely new Arena of possibilities and I think new jobs that are made possible by the internet and actually one of the reasons I actually am in general favorable towards meta is

76:18 I think they're an essential component in the broader ecosystem of Niche businesses because if the entire world is your audience how does the world find out about you I'm lucky because I produce content that people want to talk about and so they share it for free on Twitter right if someone makes like a really cool new piece of clothing or accessory like people aren't going to talk about that on Twitter like you need a way to advertise and I think that's

76:40 what Facebook advertising has always been the best at and I think it's really valuable and so I am in general a big defender of that because it actually is in line with what I am personally very passionate about which are the economic opportunities made possible by the internet what the internet does do in Industry after industry and this applies to creative Talent as much as anything else is number one there's always a barbell effect you're either very large

77:03 or very small you're very large you get scale you get aggregation effects and then you can make massive Investments or Acquisitions knowing you can immediately feed that to hundreds of millions or billion millions of people and get a payoff or you take advantage of the internet and open source software or wherever it might be or different platforms and your cost structures are basically zero and you only need a thousand true fans like the Thousand true fans was 100 true that was my

77:27 guiding vision and ended up being the case and so if you're stuck in the middle which all the old Publications were stuck in the middle they weren't big enough to get aggregation effects their cost structures were way too large to handle a fractured audience they were all in trouble and got a lot of tracks about saying they were doomed and then they were doomed right like you're saying about that's why they hate social media but if you're on the low end of

77:46 the barbell like us like you love social media no that's right it's an amazing asset so that's number one the internet has its effects number two the internet has winner take all effects in specific markets so it's gonna be hard for someone to be a generalist Tech and media analyst and do what I do it's possible I mean there's people that are very good but just because I got there first but that doesn't mean there's only

78:12 one analyst role available there's a guy Neil Seibert I think oh it's Lincoln equity research Department in a bank yeah he writes about Apple and he very much mimicked his business after me he was pretty early too so he actually did a lot of stuff himself he's done a really great job he's been an independent Apple analyst for eight years or something like that which is fine he writes well as Apple every single day believe me there are people

78:34 that want to hear about Apple every single day and so that's an example where it seems like we're doing the same thing but we're in different markets this is what the internet makes possible is the key to success on the Internet is you want to be the biggest fish in the pond but the success metric is not competing with other fish it's finding your own Pond the opportunity is Broad it's not deep like in each Pond there's

78:57 probably going to be one or two fishes that survive right but there's an infinite number of potential pawns you can Define your pond in very specific parameters I'm still surprised there's not someone that wrestled Amazon every day like it's a massive sprawling business there's so many things to write about I think you probably made San Diego Google Casey Newton basically writes about social media every single day it's been Christmas for him over there because the Twitter stuff but

79:20 that's fine I feel guilty right about Twitter too often it's very exhausting I cover lots of other stuff there's other things to talk about and so I'm writing about it more than I want to particularly yesterday I really didn't want to know Twitter obviously Twitter take on Apple is going to be everyone's been anticipating it right it's the Super Bowl of Ben Thompson fans I kind of have to write about it right right but Casey like that's the expectation is

79:41 that he arrive on social media so he's written about Twitter every single day for like a month and that's exactly what people want and I'm glad he exists from my perspective hey if you want Twitter coverage every single day go read Casey that's a great thing from my perspective and I think that sort of defines this market and so number one I'm really proud that this business model for newsletters exists I think it should exist for podcasts and I think part of

80:04 that is just figuring out the mechanics of it like how do you Market how do you grow stuff I haven't done a good job marketing my paid podcast I would say other than leveraging checkery but that's something number one we want to work on obviously there needs to be should be some video stuff like there should be you know what's the ratio of free stuff to Clips to Snippets things on those lines we're actually experimenting that more with sharp China

80:25 and sharp Tech where even if you're on the free feed you're getting more clips and Snippets also I think that the technological aspect is important it's funny even free podcasts it's like oh we're gonna have a guest on go us to his podcast go to your podcast player search for XYZ and it's like offloading this huge number of steps to the user hoping they follow through and do it whereas we've built something where go to your

80:48 show notes click the link boom it's your podcast player like I think that's something that's going to be important to sort of you know the sharing stuff is really tricky because people don't share podcasts naturally so I want to figure that stuff out and it's gratifying again not just because it's fun and new and different than my day job but also that is my passion my passion is these sort of businesses the internet not just destroy old business models but making

81:15 new ones possible and not just the big guys but like for individuals as well and so I'm very grateful and feel very fortunate that I sort of get to do both yeah I want to switch gears and ask you about aggregation Theory there's a multi-pronged question here so the business that you're running is far far far superior to a thing that I'm sure you've been asked a zillion times about why don't you write a book you make 150

81:39 a year per subscription at least that's what I pay for the full bundle I think no you got a refund in a discount to 120. all right then I pay 120 a year yeah dithering is now wrapped into a certificate subscription so yes I should be clear for anyone listening you got a credit on your subscription we did not issue refunds but you did get a credit but that is to say I have no idea what

81:58 I'm paying and there's some segment of your listeners that are so wildly priced insensitive about what you do that it doesn't matter so it's probably hard to price discriminate on them yeah no one should look to me for pricing strategies because I know it's not optimal but anyway my quick math was if you did 150 a year and I know it's 120 and you assume some five year Lifetime on customers and you compare that to like

82:17 what you would make selling somebody a book once which is what twenty dollars times seven percent goes to the author it's literally 500 times more Revenue to you to do what you do versus writing a book and on the other hand there's something that you've become known for in aggregation Theory and some other topics around the edges of it that sort of deserve a canonical work it's sort of the modern Porter's five forces it deserves a canonical notion rather than

82:43 something that's been edited and revised and attached and rethought through so have you thought about what form canonical Ben Thompson topics would take yeah aeration theory is the obvious one I think the time to have written that book would probably be 2017. I mean I was writing about the ideas of aggregation Theory from the very beginning it's hard to imagine but back in 2013 again like back then people thought Apple was doomed people thought the internet was inherently

83:11 decentralizing oh it was not long after the Facebook IPO and it was a disaster yeah Facebook was doomed well it then Microsoft is the other thing I was able to come out of the gate with really four takes that were provided tons of contents number one Apple's not doomed they're actually gonna be doing very very well number two the internet is centralizing it's not decentralizing everyone's understanding the Dynamics are completely wrong again today everyone understands that but it was

83:36 believe it or not very controversial a decade ago number three this is what Microsoft should do like there actually is a queer path forward they're not doomed to your relevance and then number four Facebook is way more dominant and valuable than anyone thinks and so that was again like I said lots of a little hanging fruit to sort of pick well it's easy you're being self-deprecating here obviously but I think a big part of the reason this is behind Ben's question to

83:59 you of you know it deserves canonical work the reason these are accepted truths and realities now is in large part due to your work it is a little humbling to be a writer because I think people would understand all those things had I not written it I think at best they understand that maybe a few months or at best a year or two before it becomes common knowledge and that's just the reality of the game The Edge you can

84:22 provide is usually measured in sort of months or years or very low number of years I do think aggregation Theory should be a book it was probably again more pertinent at the height of all these sorts of things maybe it's still pertinent now but number one now there's just a logistical issue I write every day and to your point I make way more money ready every day than I would writing a book so that's number one

84:41 number two there's a Fear Factor which is people think I'm very productive but I in reality have daily deadlines that spur that productivity in the absence of those daily deadlines would terrify me in terms of a book and number three there's a second Fear Factor which is a book is Frozen in time and if I would have written an aggregation Theory Book a couple years ago I probably would have centered it on Netflix and that ended up

85:05 being wrong it was wrong in another way that I wrote about where content is super important that's how you break away from aggregators as having high definition content and I had the balance wrong between Netflix's aggregation effects versus the power of content and so I'm very fortunate I didn't write that book whereas now I was still wrong but I have the medium and ability to go back say well I was wrong this is where I was wrong what does this mean for

85:29 Discovery Time Warner what does this mean for Disney what does this mean for the other platforms so that is a Fear Factor and then number four I think there's an aspect yeah maybe it deserves a treatment but trajectory is very much of the internet and I think a nature of the internet is it's transient it's not permanent again another thing people got wrong I think actually when the biggest mistakes Twitter made and it's understandable no one could have seen it

85:51 at the time but Twitter should have had disappearing tweets from day one it should have always been just in the moment sort of Social Network I think it would be a much better product honestly I think they still do it now people experience it and think of it as a in the moment product and then are stuck with this archive that induces fear induces ruin and it reduces the foresan of what it's like to be on Twitter

86:14 that's a big reason why Twitter is not what it used to be because now people are scared well to the aggregation Theory point I think I've heard you make this argument before but articulating it the way you have over the years and revising it on attackery is actually a better product than if you were to like have written a book five years oh I so disagree David it makes it really difficult to explain what it is to

86:33 people I'm like okay if I'm on the board of a company and I'm trying to like explain to them that they need to reframe their thinking and think about aggregation theory if someone's like what's that I'm like I actually don't know what to send you like read these things in this order to watch this guy contradict himself and say what he got wrong and then sort of take away what you think the modern interpretation is I

86:52 think you're both right there should be a set in stone treaties honestly there's just a matter of priority I mean I think again it would be good to share and point to this thing and go read this to be queer I'm in the middle of massive self-racialization right now for explaining why this is the case so take everything I'm saying with a grain of salt and the other thing is I'm just having more fun and more interested in

87:11 building software and figuring out podcasts and I would like to think oh a book is just really about my ego and putting it out there so I'm not that sort of person I just want to give back to the Creator Community that's why I said I'm definitely in rationalization mode you're definitely rationalizing but no I should write a book I just haven't I don't know if I ever will but I agree that I should have by now

87:34 written a book but alas one last quick question on aggregation Theory obviously you were building up towards it even as you said at the time I think was it one or two years you were doing strategory before you wrote the first post this is actually an example of the power of branding I wrote articles that were basically irrigation Theory well before I wrote aggregation Theory but giving it a term and coining it is what made it

87:58 stick and actually some of those articles that I wrote before there's one I think it was like economic power in the age of abundance doesn't have the same ring to it I think it's a better articulation of our irrigation theory in many respects I wrote it in 2014 I think and yeah number one does have a good ring to it number two is one of my least read articles up to that date just no one got it or understood what I was

88:19 talking about and it's a weird thing as a writer like there's things that I'm thinking about now or that I know I will write about but it's not the right time and that's something you just learn over time where you can be too early as a writer too this kind of goes back to like I didn't know how to communicate right like I remember I was in there's somebody at Microsoft and we walked out and my manager's like Ben

88:40 you're the only person in the room that actually understood the issue and what we should do and absolutely everyone no one understands what you're talking about and people are kind of annoyed at you and he's like the problem is we want to get to H but everyone in that room is on a and you cannot talk about H you have to talk about B and then it is JR yes and it's funny because that applies to writing online too number one

89:05 sometimes I'm wrong so it's good to wait or to be sort of sure but number two there's an aspect where there's just the right time and place for things there's always stuff I'm sort of thinking about and one thing I've learned is it's definitely better to write about something a current event which is bad from a book perspective because I'll write an article that actually has some key insights but it's talking about some event that happened like 25 teen which

89:26 no one remembers or cares about but in the nature of my business that is actually much better for helping people grock it get it spread it share it those sorts of things so there isn't a bit where the incentives of my business do work against Timeless pieces in a certain respect okay so when you hit publish though on aggregation Theory did you think it could be what it became I didn't know you know I thought about

89:49 the name obviously I was inspired by Clay Christensen disruption theory that was sort of one of the things but I had written a number of articles going up to that that we're clearly building to that point so there's one about Airbnb there's one about Netflix there's one about just websites and Publications and then aeration theory was sort of short and sweet because it was basically distilling what was in those previous articles into one thing I felt very confident I had a thing and I

90:19 wanted to have a definitive piece that was doing what it was and needed to have a name so that's what that was for our last sponsor this episode we are thinking our good friends at tiny tiny as you know is the Berkshire Hathaway of the internet and has built and acquired the world's Premier collection of truly wonderful internet businesses by now you all know their story Andrew Wilkinson started the really Premier design agency in the entire world metal lab from his

90:46 home in Victoria British Columbia beautiful Victoria British Columbia and they built the uis for slack coinbase Tinder headspace patreon you name it the best of the best and then he and his Partners became completely obsessed just like us with Berkshire Hathaway and Warren and Charlie and they realized wait a minute there are a whole bunch of companies out there that are internet companies who would be perfect Berkshire type companies but Warren and Charlie aren't going to buy them because as we

91:13 spent 10 hours talking about they don't get the internet but tiny can so they went out they bought companies like dribble pixel Union creative Market 80 20 girl boss Aeropress I'm among others businesses doing 5 million or more in recurring Revenue with 30 to 40 percent operating margins but that otherwise were sort of stranded Assets in the technology industry because they either couldn't raise venture capital or even worse they did raise venture capital and then it turned out that there weren't M

91:42 A buyers for them and they couldn't get to a scale required for an IPO yeah we're definitely in a situation now that the market has shifted where ninety percent of businesses already shouldn't raise Venture Capital but 90 of the businesses that raised Venture Capital probably shouldn't have either so what do you do from here well tiny has realized they can fix this situation for everybody if you sell the company to them the VCS can get their money back or

92:07 whatever the appropriate amount of their money back is Founders can get to take control back and set up an incentive structure with tiny that makes sense to keep growing the business to keep pouring their energy into their life's work and still have enough control over it with the right capital structure that actually makes sense for the type of business this that they're in they've done this with a bunch of businesses already this year Venture back companies

92:29 doing over 5 million Revenue 30 to 40 operating margins or the potential for that to quickly become the case and the most important thing is it removes the immense pressure on the business to get to an exit an exit doesn't matter anymore tiny is happy to own these businesses in perpetuity and man I can tell you in my previous Life as a professional venture capitalist and board member of many VC packed companies there are a lot of companies in VC

92:55 portfolios that fit this bill and it's just heart-wrenching what to do with these companies because they're making real products they have customers they have employees but they're just not going to get to an outcome that makes sense for a venture capital firm and so having an off-ramp like this is a godsend well if you're the founder of one of these businesses if you're the VC board member of one of these businesses don't let sunk cost fallacy get the

93:19 better of everyone recognize what the business potential actually is now that you have seen it if it could be a profitable going concern shoot a note to high tiny.com tell them Ben and David sent you and thanks so much to our friends at tiny well Ben I have one more section that I want to do which is you do all this analysis on companies and you have this very enviable position of getting to comment on and critique their

93:43 strategies after they announce them or an event after they do them and I want to play a game where I give you a company and I'm curious either if you were the CEO or you were giving advice to the CEO what would you do strategically and I think an interesting place to start actually talked about them a bunch on this episode is meta you are the new CEO of meta what do you do over the next five years well I think

94:05 beta is actually doing a fair number of things that they should now the Apple changes were very devastating and they're structurally devastating and so they deserve a significant haircut on their valuation because of that but I also think they were moat enhancing in the long run where I question whether any other company is ever going to build a top of the funnel advertising product that will be competitive with meta assuming they can Keep Their audience it

94:31 appears that they've done a good job womening the sort of the tick tock threat tick tock's growth is sort of flattened out over the last few years so I think they're actually in good shape what I do worry about is this is a company that's always been growing it's really hard for those companies to shift to more of a scarcity mindset I mean they weighed off 11 000 people which only brings them back like nine months

94:51 they probably needed a lot smaller but that's also very destructive to company culture and morale do they still have the people that they need to pull that off those are probably some of the bigger questions and obviously any aggregator is dependent on having that audience but I do think that the network effects of their products are still underrated I mean everyone has in their head that they're shrinking and actually every product they have is still growing

95:12 which I think is underappreciated so number one I think they're kind of broadly on the right track number two I would acquire Shopify and I would take the FDC and just throw it to court when they see a stop it I think they need to close the loop on e-commerce and advertising and again I think that'd probably be bad generally but I think it'd be very good for meta so I would do that as far as the metaverse stuff I

95:36 think it's a bad idea it's very hard to talk about metaverse because it's like what are the prospects versus is it you know XYZ I do think that it's not just a bad idea because it's taking so many resources and attention I think from Mark Zuckerberg but also I just don't think Innovation is necessarily born of mass expenditures in large companies we sort of skipped over a period of experimentation in ecosystem building that in the long run perhaps would be

96:02 Consolidated into a couple companies but instead it's just one mono with sort of trying to Brute Force this sort of bit and the reality is Facebook is a Services Company it's a social network and everything about their strategy works against that to succeed they not only need to sell headsets they need to sell headsets at sufficient scale and into friend networks such that people can social network on the headsets and so their place of winning is even

96:28 further away than I think people think and so I don't think strategically it's the best thing for them to be doing and I've been pretty anti them doing from day one they bought Oculus I said it was bad and again it's very hard to distinguish between well what are the prospects of this versus zooming out should they even be doing this but I think the market is overly down on meta in part because The Branding was too

96:50 successful this is still a Powerhouse in social media and advertising and the amount of money they're spending on the better verse is All Things Considered not that much they're still you know have a five billion dollar profit a quarter so yeah I would double down on what they are and I would consolidate that Acquire Shopify and spend three years fighting out in court because I think the payoff would be worth it all right second one rather than going with

97:14 another big American tech company I want to go with one that's an acquired fan favorite and one that's very close to home for you tsmc any change to what tsmc is doing now if you became CEO tomorrow not really it's a very complicated situation to say the least for lots of reasons not just political but technological I think probably doing what they're doing broadly it makes sense yeah I don't know I've written a ton about them and where they are and

97:42 you could talk about maybe some of the pricing stuff they were pretty slow to raise prices even in the face of shortages they've been much more aggressive about that over the last little bit which seems reasonable to me it is opening the door for win and if competitor comes along to undercut them in that regard I think they're probably blessed by the weakness of their competition but the long-term risk is obviously number one just the geopolitical risk the reality is is tsmc

98:09 a core to their model essential to the model of being so flexible being so adaptive of incorporating new equipment of accommodating hundreds and hundreds or thousands of customers is all their engineerings in one place and that place is Taiwan and that has geological risk and From tsmc's perspective I think that's just a reality you can't really hedge against that and so if anything yes they're building these Fabs in the US I think largely for political reasons

98:37 and sure do that if you know the Taiwanese government feels that's what needs to be done to keep the US on board keep us happy build a couple in Japan because Japan is a future Ally but I think you do have to sort of double down on Taiwan and roll the dice that nothing happens I don't think it's a hedgeable risk to China risk the other risk is the you know Moore's loss are running out I

98:58 mean euv has another five six years and then it's not super clear what's after that how can you get smaller than one Ben you just have one nanometer yeah there is visibility to under one but isn't it like two molecules wide or two is two atoms it's very small I'm not sure if it's quite that small but it's ridiculously small so obviously I would imagine they're investing heavily in David doing this like Advanced packaging like multiple chips on the chiplet sort

99:25 of approach amd's doing that Intel's not doing that and getting really good at that stuff is going to be super important I actually one thing I do like about the Japan investment is their trailing Edge I think they're 28 nanometer Fabs which is really where China is making a lot of progress because there's no real economic reason to build trailing Edge Fabs the whole idea is you build it once it's long since appreciated and you're still

99:48 making money selling cheap chips out of that Fab but I don't know maybe there's something in the trunk Edge more things need chips and they don't all need the Leading Edge that's right the economics of it are very difficult I mean the reality is that's why China's filling the Gap because that's all they can really make economically you don't just jump to the Leading Edge you have to sort of build your way up and so China

100:07 has a motivation and an economic rationale and a lot of the chips that they're manufacturing go right into products that are already made in China and so they're filling in that Gap you know that's something that would be beneficial but at the other day tsmc is Taiwan and that's going to always be the biggest risk and I'm not sure there's really much they can do about that okay last one Amazon David and I did seven hours of Amazon design.com and then a

100:29 big AWS episode and our I mean at least my big takeaway was it is day two and day two is about becoming a profitable company where the big sell story of Tomorrow is realized today and you gotta lean into that and that means lots of changes in how they organize how they innovate and What markets they choose to enter and I'm sort of curious for your take on is Amazon a day two company and then the same question if you were to

100:55 become CEO what would you do I think there's an analogy to like real life when you're young you're like I'm never gonna become an old fogy like those old people and then you get old like me and the people around you that are trying to still be young are just kind of pathetic and actually being old is kind of great my kids are fairly independent they can take care of themselves I can going out with friends you know obviously I have

101:18 more means than I did when I was younger and I'm a big advocate of just in general living in the present and embracing who you are and where you are your life stage and I think that's good personally and I think you're spot on if that's also true from a company perspective you can't be a startup forever and it's bad too I wrote about from day two to one day or something about Amazon when Bezos sort of like

101:41 reasserted control a few years ago I was like no we're gonna do one day delivery and there's been too much time spent trying to squeeze our suppliers for profits and margins and no we need to get back to this and in retrospect that was the seed of Amazon's kind of disastrous last few years which was they dramatically over invested in their Logistics Network their cost structure got completely out of control they over hired and it's probably a good example

102:07 and maybe it was a precursor of what we saw with Jeff Bezos personally of sort of losing track of where you are in life and what actually makes sense and trying to be young forever so I agree with you broadly with that bit about Amazon do you think that applies to AWS too or is that different realistically the challenge for AWS is number one what's going to happen with the real dry up in startup formation and

102:36 easy money in that space a lot of which went to Amazon they're sort of the default choice for startups number two you know Microsoft sort of bread and butter has been look you've been working us for a long time we're gonna package it at like suddenly you're not just paying for on-premise Windows it also includes Azure credits and we're going to be able to contribute that to our numbers and now you can sort of move pieces over and we'll help you do it

102:58 which I think is exactly what they should do it's been a very smart strategy but I think that the issue in any Market is it's like me all the initial easy stuff is like there's lots of low-hanging fruit but then the largest part of the market is still the part of the market that's sort of always been there and is initially fast moving and and Microsoft is just really cleaned up in that market we're the known entity

103:18 we can help you move over and I think from Amazon building up the support capabilities and rationalizing their offerings I mean it's weird because Amazon benefits because they have so many features right AWS is the Microsoft Word of Cloud providers in that they have an absolute absurd number of features and the interface is pretty terrible but every single customer is completely dependent on one of those features and if that feature is not there then they can't go away and that

103:47 actually ends up being their modes we were researching the episode and we were talking to longtime AWS veterans to sort of understand the mental framework to talk about them today and that became very clear that AWS doesn't deprecate features Amazon will kill stuff kill a fire phone kill local delivery for food they'll cut all kinds of stuff but an AWS land if a customer is depending on something aws's long-term Enterprise Value is determined by customers believing that Amazon will continue to

104:15 support them forever they don't deprecate Services even when those Services end up flipping upside down on the unit economics and they have to like maintain a costly service that they never figured out how to optimize right and every time a customer does something custom for AWS it's lock-in right I mean everyone fantasizes about this world where you know like every time it comes up whether it be you know containers or you have all these you know IBM's like talking

104:39 about doing this when they acquire red hat we're gonna make it so you can be Cloud agnostic right right and then it just turns out that well quite agnostic but this one little piece would be would be better service right and that you wake up and you know of course I wanted passport to be Cloud agnostic well passport's not moving off AWS like anytime soon I can promise you that and so yeah it's the Microsoft strategy

105:03 Amazon has a lot of Old Mac Shop people in it a ton it's really interesting to consider like the different cultures between Seattle and San Francisco Seattle just is a platform town like Microsoft was the originator Microsoft's always been the best platform administrator all that backwards compatibility that you want to make fun of from a user perspective is essential to building this Foundation that people trust and that locks them in and they're happy to be locked in because they don't

105:29 want to go change it anyway right and Amazon does WS obviously Microsoft is doing that with Azure and the Silicon Valley companies are just very very bad at that right like no one trusts Google right no one trusts Facebook Silicon Valley is much more consumer focused even the SAS companies those are consumerized Enterprise technology the whole idea is don't worry you never need to pay for an upgrade we're upgrading on the back and all ourselves but that

105:52 means like they will remove stuff because it's one thing to remove an API that a piece of software depends on versus removing a feature that yeah your customers are annoyed but it's not actually breaking like what they operate on and it's just pretty interesting to see those differences which I do think there's a geographic aspect to it I mean geography is what save Microsoft because when Microsoft was in the dumps if they were in Silicon Valley all their best

106:16 talent would have left and now to work for other companies but all their best talent had kids they had families they didn't want to work for Amazon those people are maniacs and so they stayed at Microsoft and they were miserable and they bitched and they wrote snarky blog posts about the company but then when Nadella came in and sort of Focus the company they had this Foundation of talent that the HPS of the world the yahoos of the world had long since lost

106:40 well Ben this has been awesome thank you for joining us and celebrating the almost 10-year anniversary of strategory with us what is the easiest path for everyone who right now is listening to this in a variety of podcast players you got Spotify and overcast and apple podcast what is the easiest way for them to opt into the strategory universe well I mean if you go to techery you can click any of the podcasts out on the

107:02 side you can subscribe I mean it's funny like the how does the funnels work right do you just go with checkering read and follow and I'll lure you in well you go direct maybe we'll put a link in the show notes yeah yeah we use the show note link 12 a month 120 a year you not only get strategory but you also get the update you get struck interviews we didn't talk about interviews that's actually been an interesting evolution

107:24 of stretcheckery yeah you're a primary source now what's going on well that was a challenge right because I started out I had no access I didn't know anyone and in some respects I miss those days I still remember the first time I had a company very angry at me and called me in and it was Twitter actually because I had teased out of their results that their direct response program was failing this was like years ago and they

107:45 got super mad in my next update I'm like well it's possible this and I kind of like walked it back a little bit and the next quarter came out and they're like yeah we're gonna need I don't know if they took a write down but it was a big thing and they said like it's not working out and I was totally right and I was so mad that I kind of walked it back a little bit but I'm glad it

108:03 happened because when I started out no one cared no one paid any attention now people care and sort of paid attention and so I'm glad I was right on that one because it sort of gave me courage going forward but one thing that's interesting about feedback from companies is everyone like from CEO down or VP down they always push back and they're like no you got this wrong you understand XYZ I never get pushed back from CEOs even

108:26 when I'm wrong and what I've come to realize is CEOs are surrounded by people telling them what they want to hear that's their incentives right the reason why the VP is attacking me is because he's worried I'm gonna make the VP look bad in front of the CEO right that's the concern whereas the CEOs like they're so thirsty for any sort of feedback that's outside of that rotten incentive structure that's just inherent in incorporation and so sometimes they know

108:52 they have more information that I do they're aware that there's things that I don't know but they're grateful to have sort of a different point of view and so over time I transfer having no access to having Total Access right I can reach out to basically anyone and just for people who haven't let's just go through the lineup you've had this year Mark Zuckerberg on you've had Jensen from Nvidia you've had I'm trying to think of

109:12 some of your early big ones Rich Barton on from Zillow and I think he credited you with you convince us to start buying houses you convinced Us in the open doors so it's trying to figure out like what do I do with this access I didn't want to become a reporter and I thought it was just important to me personally for my own Pride that my takes are my takes I'm not getting fed them from someone

109:34 else and so what I ended up going with was interviews and part of this was a product bit I had now you can listen to check your via podcast so if I had an interview that's a good reason to try the product out to get it so there was there's a product angle but also I'm like my whole take is I'm not exclusive I don't have exclusive information what I'm selling is my personal analysis and so if I'm talking to a CEO I don't want

110:01 the sense to be Ben's just parroting what a CEO says so if a CEO wants to talk to me it has to be on the record and it's going to be the full transcript and the full interview is going to be available to my subscribers and I want my subscribers to have all the same information I do and so when I write it's me it's coming out of my brain it's sort of unique to me and I think it's

110:20 worked out pretty well it's a change like instead of be running four days a week I'm basically three days a week plus an interview it's not just CEOs I think actually often the better interviews are with like other analysts or people in different spaces this also solved the how do I cover startups because part of not being a reporter and being independent is public companies have to disclose a lot of data and and they have earnings calls and they have

110:40 presentations and things along those lines with a startup you don't have access to very much of that and you don't know how much is blowing smoke how much is not so now I am doing like interviewing Founders where I say up front look this is completely subjective I'm not going to verify what they say I'm not going to XYZ it's their chance to tell their story what their business is going to be XYZ and so that's a way

111:02 to sort of cover that space given the limitations in the way schneckery operates and so that's one of the products it's not a standalone thing which I think is better it's still partish or techri I thought about should be a standalone product but I think there's an aspect of I don't want there to ever be any sense that that's a driver of my bottom line I want to be able to say that I think the metaverse

111:25 is probably a bad idea that's really tricky right like I mean though Mark Zuckerberg one obviously it's a huge get I think that his interviews with me are I'm biased but I think our white ears better than he does anywhere else you and Eli had the best interviews with him of this whole last cycle right it barks that he thinks I'm Fair whereas he thinks a lot of other journalists aren't but what's the line between that and

111:46 being like you favor Facebook because that's not the case at all number one it doesn't drive subscriptions I always make them free to be queer like no one's going to have to pay to get access to that because you shouldn't subscribe to strikery because you want to read Mark Zuckerberg that's not a reason but then it was really annoying because Facebook had that bad earnings call and their stock went down and I like crap I'm gonna need to write an article about why

112:06 this reaction is unwarranted they're actually fine it's gonna be like three weeks after I just had Rock sucker for gone it's gonna be a relatively positive article but that's like where you build up your reputation over years right and sometimes you can't always beat a positive sometimes you do a withdrawal me writing meta myth was a withdrawal on my reputation yes it didn't look great that I just got an interview with Mark Zuckerberg and I wrote a positive

112:30 article a contrarian positive article about meta three weeks later but I hope I've built up enough sort of credibility with my audience over the last nine years that they believe that no that I would have written an article with or without that interview you're also unabashed about your incentives you're like look everyone my incentives are to have as many people subscribed for as long as possible my incentive is not I think I'm gonna be Mark Zuckerberg's

112:55 best friend so I'm really hoping that he invites me on his PJ and we get to hang out yeah well it's tough because like I said I'm super positive on meta's Advertising product because that's aligned with my passion so I do find the Zuckerberg ones the most challenging just because I generally have a contrarian opinion about meta overall and it's generally positive so I'm super wary about that I also feel like I get more interesting stuff out of him than

113:19 most other interviewers so I want to do that and sure it's a feather my cap to interview him but I definitely don't want that to ever be perceived as the realities interviews don't drive subscriptions and so I do it because again I want to push the tech product I want people to use my podcast product and then it's a different kind of work as you guys know preparing for interviews is a lot of work it's also

113:42 different than necessarily like writing an article oh for sure we could not be writers yeah you can't stay the same forever you can't be like the startup forever right I can't be the guy on the outside forever which I was when I started like with my chip on my shoulder and I'm just some dude in Taiwan giving his opinions about Apple that worked for me and I'm not that person anymore and it'd be sort of dishonest to pretend

114:05 that I am the reality is I probably have the best access of anyone in Tech I can literally contact basically anyone and get access to them and it's more honest to my product and what I do to wean into that I think than to pretend it's not the case all right so listeners click the link in the show notes go experience the strategory Cinematic Universe not just a guy in Taiwan giving his opinion on Apple we're coming hopefully

114:28 with that thank you to fundrise Pilot and Tiny after you finish this episode come hang out in the slack with 13 000 other smart kind clever curious members of the acquired Community acquire.fm slack get some sweet acquired merch we now officially have live the acqt we've got Market size on constrained with the original AWS logo oh we gotta do a collab with Ben on acquired strategory t-shirt for the merch store oh that's a good point I

114:59 have a strategory t-shirt I almost wore it for recording this episode I also have a framed aggregation Theory I don't want a fanboy in front of Ben but on my desk I have a framed aggregation Theory illustration so I don't know check out Ben's merch store too we'll put a link to that in the show notes but the other great acquired merch that dropped a couple of weeks ago is The Benchmark T that in the Benchmark style of course

115:21 says there's always room at the top if you want to listen to the acquired LP show and get more acquired crammed in before the holiday season got some good stuff search acquired LP show in the podcast player of your choice and with that listeners we hope you have a wonderful holiday season I believe we still have one more episode coming after this you know yeah we've got something special coming we got a little fun holiday acquired present for everybody

115:46 yes and with that listeners we'll see you next time we'll see you next time is it you is it you is it you who got the truth now huh