Invest Like the Best with Patrick O'Shaughnessy - Matt Mullenweg – The Past, Present, and Future of the Internet – [Founder’s Field Guide, EP.20]

Episode Date: February 11, 2021

My guest today is Matt Mullenweg, co-founder and CEO of Automattic, the company on top of the open-source project WordPress that Matt helped start. Today, WordPress powers 40% of all the websites in the world. Our wide-ranging conversation covers the state of the internet when Matt first started WordPress, the symbiotic relationship between open source and proprietary projects, and how the most successful companies are really master world builders. I hope you enjoy this great conversation with Matt Mullenweg.   For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Tegus. Tegus has built the most extensive primary information platform available for investors. With Tegus, you can learn everything you’d want to know about a company in an on-demand digital platform. Investors share their expert calls, allowing others to instantly access more than 10,000 calls on Affirm, Teladoc, Roblox, or almost any company of interest. All you have to do is log in. Visit tegus.co/patrick to learn more. ----- This episode is brought to you by Vanta. Vanta has built software that makes it easier to both get and maintain your SOC 2 report, at a fraction of the normal cost. Founder’s Field Guide listeners can redeem a $1k off coupon at vanta.com/patrick.  ----- Founder's Field Guide is a property of Colossus Inc. For more episodes of Founder's Field Guide, visit joincolossus.com/episodes.    Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus   Show Notes [00:03:15] – [First question] – What the internet felt like when he first started building Wordpress [00:05:11] – What was wrong with his impression of the internet then [00:06:50] – Being a connoisseur of things overlooked  [00:08:34] – How permission less publishing and open source software shaped the internet [00:12:30] – Balance between centralization and decentralization and where we are in the cycle [00:14:08] – The cycle between direct-to-consumer and having intermediary [00:16:32] – New opportunities and challenges of the internet today [00:18:49] – Potential of cryptocurrency to enable big changes on the internet [00:21:22] – The idea of distributed work via the internet and the utopia of it [00:21:38] - Sam Harris podcast with Matt Mullenweg [00:24:31] – Advantage of having a team distributed across geographies and timezones [00:26:46] – What he learned from the Amazon’s API mandate [00:29:12] – Landmines of distributed work [00:31:13] – Interesting lessons learned building Wordpress [00:34:55] – Company building as world building [00:35:52] – Lessons from Microsoft on platform building [00:38:53] – Key ingredient to world building within your company [00:41:09] – Lessons from Wix and Shopify  [00:42:23] – How to decide what to do next in resource and capital allocation [00:47:00] – How to engage with other stakeholders in a platform business [00:50:06] – The continued connectivity created by the internet [00:53:14] – Kindest thing anyone has done for him

This episode of Founders Field Guide is brought to you by Teegas. I started hearing about Teegas when when several of my close professional investor friends sent me passages or ideas they'd found on the Teague's platform. Conducting effective primary research shouldn't take weeks. It should take hours. Searching for answers shouldn't be lengthy, cumbersome process. It should be easy and nearly immediate. Expert calls should not cost $1,000. Teagis solves these problems and makes primary research faster and better for professional investors. Tecis has built the most extensive primary information platform available for all investors. With TIGAS, you can learn everything you'd want to know about a company in an on-demand digital platform.

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myself included, love Teegis. Visit tegis.co slash Patrick to learn more. This episode is also brought to you by Vanta. Does your startup need a SOC2 report to close big deals or do you already have a SOC2 report and want to make it easier to maintain? Vanta has built software that makes it easier to both get and renew your SOC2. With Vantas continuous monitoring solution, you avoid hosting auditors on on site and taking hundreds of screenshots to prove that you are compliant so you can focus on building

your business. Vanta partners with audit firms who file your SOC2 report directly inside of Vanta at a fraction of the normal cost. Hundreds of companies, including more than 100 Y Combinator businesses, are leveraging Vantas today to streamline compliance and focus on building their businesses. Founders Field Guide listeners can redeem a $1,000 off coupon at vanta.com forward slash Patrick. That's vanta.com forward slash Patrick. Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Founders Field Guide. Founders Field Guide is a series of conversations with founders, CEOs, and operators building great businesses. I believe we are all builders in our own way, and this series is dedicated to stories

and lessons from builders of all types. You can find more episodes at investorfieldguide.com. Patrick O'Shaughnessy is the CEO of O'Shaunicee Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunsi Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy asset management may maintain positions and the securities discussed in this podcast. My guest today is Matt Mullenweg, co-founder and CEO of Automatic, the company on top of the open source project WordPress that Matt helped start. Today, WordPress powers 40% of all websites in the world. Our wide.

Ranging Conversation Conversation covers the state of the internet when Matt first started WordPress, the symbiotic relationship between open source and proprietary projects, and how the most successful companies are really master world builders. I hope you enjoy this great conversation with Matt Mullingway. So Matt, I always try to name these episodes in my head before having the conversation as a sort of frame for what ground we can cover. One of the ones that me and my team toyed with for this one is the past, present, and future of the internet.

given what a integral role you and WordPress and automatic have played in the development of the internet, I thought it would be fun to start by asking you what the internet felt like in early 2000s when you first started building WordPress and ultimately automatic. What did it feel like to be a participant back then? It felt like I missed the wave because everything that happened in the 90s around Netscape, the internet boom. I was in high school. The dot-com crash was just something

I observed as a teenager. When I got to San Francisco in 2003 or 2004, a little bit of a, not a ghost town, but it was like people were trying to reinvent things. I think the catchphrase at the time was Web 2.0. And Web 2.0 was trying to correct the excesses of Web 1.0. So everything was open. It was connected.

There were open standards. Services would integrate with each other. Flickr would integrate with Delicious, would integrate with TechNorality, would integrate with all the blogging systems. And in my particular area, which was Web CMS and blogging, is really how WordPress started, was just around blogging. It felt done. There were either huge things like LiveJournal, Zenga, blogger had already sold to Google.

Google had its blogging system. All the other Internet giants did at the time. So the big companies, I feel so old saying this, by the way. It's like AOL, Yahoo, Google, Microsoft for tech giants of the time. Each one had its own blogging system. So Microsoft had one called Spaces, AOL had journals, Yahoo had 360, and then Google have blogger. And that was kind of the environment where WordPress was starting.

It felt very saturated. Knowing now, obviously, that that impression was very wrong, what do you most attribute that to? It turns out to have been very early in development at the time, which now is allowed for this explosion, basically ever since then, in a very consistent way. What was it there that you had wrong in that impression? I definitely, and ever since, have liked looking for areas that feel like people are writing them off. Blogging was being written off at the time because it was finished.

A few years before search had been written off. What could be written in Likos and excites? And was it Alfred or I forget the S-Jeeves? It was done. There wasn't anything left to solve. But one thing I like about that, Sam Francisco me, was total mecca because it was all the true believers. The carpet baggers, those folks who were just there to make a quick buck, had kind of moved on to something else. I don't know, maybe subprime mortgages or something.

I don't know. And the folks who were left really cared about the web, and they were passionate about it. It's actually fun to see some of those characters like Stuart and Katerina at the time. We're doing Flickr. Later, Stewart does stock. That just over $29 billion. That's crazy. A big exit at the time was like $20 million.

If Yahoo bought your company for $20 or $25, that was like a lottery. That was actually part of the path I thought that we were going to be on. I was very lucky that one of the first people I met was the journalist O'Malek, and he became a very good friend. Still my best friend. He was like, yeah, it's easy. You just like start the company, put Mike Moritz on the board, his on the board of Yahoo. You're both written in Ph.P.

They'll pick you up in a couple of years. Prince Ross for Pete. And I kind of thought that was a good idea, to be honest. I was like, well, maybe. I'm just kind of doing this blogging thing. I like it. Have you continued to be a connoisseur of things overlooked? Is that something that either within the business or your activities or I don't know if you're an investor as well, is that a common theme that's continued?

Yeah. Investing for me is very much on the side. I think of it like a way to pay it forward to other entrepreneurs. I've done over 100 angel investments through this vehicle, Audrey Capital. And the most successful ones have been things that had a little bit more trouble getting funding. This was calm and I think it was 2012. Well, I was really into hardware for a while, so I was in August ring. But at the time when I was meeting those entrepreneurs, it wasn't wearing it was doorbought, and it was having trouble getting funding. A hundred's a lot of reps. It makes me think probably the number you saw was some multiple of that. Was this idea of written off or neglected?

I'm just really intrigued by the areas that have been written off. That's like the classic value strategy or thinking applied to angel investing. And my heart, I'm an engineer. I work with a lot of really, really super smart engineers. What are we excited about? There was a funny history. WordPress.com was the first major internet service that's at Bitcoin. And the article about it for Bitcoin magazine was written by Vitalik, who obviously would later

do with you. Bitcoin was $12 at the time. And we thought, oh, maybe if we buy some before they announced, it would be a good idea. But it was just what people were doing in their spare time. And we kind of, I guess always with automatic. So WordPress is the product and the open source. Automatic is my company. It was my full-time job.

the CEO there. We try to bring in that. What is the thing that we're really passionate about after hours? And how do we bring that to the work as well? Because that was kind of the idea why the company was created was, could I make a full-time salary working on open source? Can you describe how this idea of permissionless publishing has so shaped what we think of as the modern internet and maybe describe why, whether it had to be this way? Like, was there another path that had we gone down it, the internet would look very different. I'm just really intrigued by open source and permissionless innovation and publishing. Say, intro at two levels.

One is everyone has a boss, right? Whether who you are, there's someone, a partner, a parent. There's a permission somewhere in the stack. Even if you're running like a tour, hidden service, it's running somewhere. Maybe it's your internet provider. Maybe it's your Comcast. Who knows? But there's some path on and off.

The information is super high right. in terms of more open systems or could the internet have gone differently, I think that there is a very natural cycle that happens between open and closed systems or proprietary and open source is another good way to think about it as a modern instantation of open and closed. People think that one is going to permanently win over the other. But actually the success of one creates the conditions for the other to thrive, almost like symbiotic species. One gets overpopulated and that allows something else to come in. So typically what happens when something super open becomes extraordinarily successful,

actors who maybe don't buy into the philosophy of the keeping things open can go in in almost a parasitic form and capture more value from that ecosystem than they put in. I'll give an example that everyone likes was Gmail. It's built on a completely open email infrastructure, SMTP, to create something different. And of course, today has essentially forked email to where certain emails go and of certain sections that they decide on, how they do spam, how they allow rate limiting, et cetera, has essentially closed what was a completely open format. Some of the downside of open systems also comes from abuse.

So spammers. And I think of spam is a much bigger issue than hate speech or other things. Because spam, it's like a super boomeravology. It can kill off all the other life in a system. You can probably think of, if you remember what it was like to get spammed by MySpace or something like that, I think it's actually an unappreciated. part of the story, how much of the success of the systems that won, like Facebook, was a result of them having really amazing spam control. And Gmail is another good example of that.

Then the closed thing gets too big, too successful. The rest of the market says, let's work together to create something open and essentially teams up against the closed proprietary thing. And then that creates the super cycle the other way. It's kind of happening with AWS, where everyone got together for Kubernetes, said, oh, we're going to make this open standards. Now, Amazon's pretty smart. can parry it with that. It's not always in a straight line, this cycle happening, but you can basically zoom out to societies, to democracies, to governments, to everything, and see versions of this cycle happening over time. You can look at it with the Gutenberg Bible, Martin Luther's thesis, nailed to the wall. Can you flesh that out a bit more? I just want to make

sure I follow that example. Sure. If you consider the Catholic Church at the time as essentially a proprietary implementation of how to operate in the life and what happens in the afterlife, a mediator of the relationship to the vine. Martin Luther wanted to disintermediate that. He was the open source. The idea that, I mean, the Bible used to not be translated. So even the idea that the Bible was available in a language that people could read was revolutionary for its time.

I'm Catholic. It was, I think, just until Vatican II, the masses were still in Latin. I'm not an expert in this area. There's so many versions of this that happen. And you just kind of have to put that lens on and you start to see it everywhere. You can see it with Encyclopedia, Britannica, Wikipedia. You can see it with centralized finance versus decentralized finance or cryptocurrencies, Bitcoin Ether and being most interesting is like a great example.

The success of the provider system is creating the need for the alternative. Where do you think we are generally in that pendulum swinging or cycle right now, recognizing that we may be at different points in the cycle for different parts of the ecosystem, but if you had to just summarize the zeitgeist as you feel it as an engineer, Where do you think we are in the balance between centralization and decentralization? I think the nadir was probably 2013, which was roughly a 20-year cycle. Let's use a heuristic test. What are people putting on billboards in the 90s?

People would put AOL keywords on billboards. And of course, that was kind of a proprietary URL. You type in the keyword and you could pay AOL to come up first or to have a special listing. It was the equivalent of the racket that's Google AdWords now. 20 years later, people putting Twitter handers in Facebook. addresses on billboards. That has started to shift. The success contained the seeds of its own demise. Facebook started to pull the rug off people who built up followings on their pages. Said, okay, you don't actually ever direct relationships with them. You're going to have to pay us

to reach them, except in very rare cases. You had paid to get the followers, and now you had to pay to talk to the followers, which nice workers you can get it. But like a lot of the people for whom that happened to said, all right, I either move to networks where I own this or I need to have a much more direct relationship. That was around the time I think Ben Thompson started Shreknery, 2013, 2014. He wanted a direct relationship. And of course, Kevin Kelly's 1,000 true fans was a 10,000, and then Leach ended up the amazing update of where she took it down by an order of magnitude. It's much more valuable to have, I think, a thousand people who follow your blog or subscribe to your newsletter than it is to have 100,000 followers on Twitter.

This 2013 is an interesting point. I just love this idea. I've never thought about this way. So part of it too seems like the direct-to-consumer relationship versus the intermediated relationship is also on this same cycle. Am I right in thinking that we accept intermediation because it serves as like a quality filter? The open standards create such a large N of anything. The search costs actually start going up. We're like, God, I don't even know where to begin now. So I'm going to trust some centralized player to be the curation filter, the spam filter, the whatever it might be, the bundler.

it's the same bundling, unbundling thing, I guess, that you heard Jim Bark still always talk about it. Am I on to something there? I love that that was just an offhand comment too. I didn't know that until recently. He just kind of like fire that off offhand when an investor asked a question. It is unbundling. I mean, consumers do have fatigue. Now, I think some of that is used as a fig leaf by the bundlers or unbundlers to justify

their business models. Turns out consumers can handle, I don't know if you ever look at your screen time stats. Apparently, I get like 500 notifications per day. I'm trying to bring that down. But it turns out, I can't. handle that. I wasn't even aware that I was getting that many notifications. We have a good capacity to handle a lot as consumers and perhaps increasing. Now, how valuable does that make paying attention in silence and the people who invested time to write longer form things? One of the little things

we have in automatic is a publication called Adivist, which publishes once a month, typically more than 10,000 words, and then long reads, which is more of a curation site for pointing to long-form text. We have a small editorial team at automatic, which is actually something I think every company should have an editorial team. It's amazing to me the demand for that content. I think I would have assumed. And in fact, it was a very common prediction when phones started coming out. I was like, no one's going to read anything long on that. It's all about the short bites. I guess it was kind of the idea of quibby. People won't watch longer videos. They need these super short ones. I think that when we underestimate people, it's usually to the detriment. And it turned out

that not only would people read really long things on the film, what was shocking to me is they were right really long things on their phone. And this is when phones were quite bad. People write thousands and thousands of works. I think of a lot of the photography, the best camera is the one you have on you at the time. The best computer is the one that's on you at the time. And you can do all the things that you would normally do on your computer to varying degrees of friction or not. Thinking of the 2021 internet, what are the most interesting relatively new features? of the internet that you think represent opportunity and then maybe on the other end of the spectrum might it represent challenges for innovators, creators, builders, whatever word you want

to use for them. So what about today is notable that's a rate of change of some sort and what are the pros and cons of it today? I say the biggest threat right now is Apple feeling like an underdog. They have this mentality where everything is getting more and more closed. And the centralization of access to applications in the app stores on the most prominent devices, things that there's billions of these smartphones, is challenging. I'd say the other than it's really challenging is the open internet is one-old term internet nationalism. So the idea that every country should have its ability, sovereignty to say what is allowed

or not allowed in that country. And some try to extend that to apply the rules either explicitly through legal means or implicitly through economic means internationally as well. Examples of this could be economic ones, could be China and Disney in different movies or China and the NBA. You know, and I think Darrell Moore for the Houston markets said something about Hong Kong. The Hammer came down. Saudi Arabia and the dissident film,

which is a documentary about Jamal and Khashoggi. And like, it's just been blocked from all the major studios and all these sorts of things. That appears to be economic flexing of a major player in the space. essentially applying its own rules, trying to extend them to the rest of the world. So that I think is a pretty big challenge. If Apple and closing ecosystem and nationalism, which is kind of interesting, similar version of that, is on maybe the negative side or challenges to the open web, are there things that counteract that on the other side that are more interesting or exciting or ripe with opportunity today than five, seven, ten years ago?

Everything. So, you know. Good. Encryption, cryptography, decentralized protocols, blockchain, open source, WordPress. All of these things are both making the internet more open for its direct users and forcing the competitors to open up to compete. It seems as though cryptocurrencies, you mentioned WordPress being one of the first to accept Bitcoin way back when are surging. Certainly, someone that's tracked them very closely. I was really excited in 2016, I guess I just looked like the price of Bitcoin in terms

of my excitement, which is silly. But it does seem like the on-ramps for real consumer use cases are ramping in NFTs, basically things where, like, crypto is the rails. It's the means, not the end. It makes something possible on the internet that wasn't possible before. What's it looked like from your seat? You sounds like you're familiar with it really early on. How would you describe your personal view of the potential of cryptocurrencies to enable good things on the internet? We're still in the Nokia and Blackberry age of it. There's obviously a lot cool stuff happening. It's changing a lot of people's lives, but the price can be a real distraction. By the way, WordPress.com no longer accepts Bitcoin. All the people who spent 30 bitcoins to buy a

business plan in 2012, it's like the pizza, right? But what's nice about the price thing is it does draw more people into learning about and holding crypto, which at some point leads to it being used unless there's entirely a new generation of buy and hold forever investors, which doesn't appear that the history of the stock market and everything else would appear that is not true. Getting more people involved with it, getting more users of the companies like Coinbase that are creating kind of safe on ramps to interact with these things, I think is ultimately really, really positive for what is going to be the truly disruptive uses, which is the more daily use. It's a way to uphold the other day inside automatic.

Who wants to receive their salary in USDC, which is a stable coin tied to the dollar, of people currently receive in dollar salaries. Like, would they want some, a percentage, all of it? Are they interested in other crypto? Like, what is it a good mix? Like I said, we have a lot of early adopters in the company. A lot of people are on the bleeding edge. That starts to get interesting to me.

As a company, when I look at the things we deal with Forex and reserves and a lot of stuff that could be, we employ people in 77 countries. Sometimes it's hard to pay people in certain countries. Sometimes bank accounts get frozen. Sometimes countries go through hyperinflation. One interesting thing about how to, having colleagues in 77 countries, is there something happening in one of those countries all the time? There's revolutions. There's coups. There's hyperinflation. When COVID was happening, it was hitting

different places at different times. Just being empathetic, connected to your colleagues gives you a lot of early indicator of things that can or will happen elsewhere. I mentioned this idea of past, present, future of the internet. We've talked a little bit about the first two. When you think about the future of the internet, I think work, distributed work is a really interesting angle on that future. As I said, you've described in a couple places, especially I would recommend people check out Sam Harris's conversation with you on this topic. I thought the detail is just awesome. We won't replicate that here. But I was like going to the extreme. So now everyone's got a data point here. Like everyone's doing Zooms and has some rough sense for this. You've thought this through to

its logical conclusion, which is I'll call it like utopian distributed work. I'd love you to describe that state, which we may never reach in as much detail as possible, because I just think when I've heard you talk about it, it's very mind expanding and eliminating for what's possible, even when just think about who you can recruit as an example and the talent pool available to you. Can you describe level five in as much detail as you can? The fifth level of distributed autonomy is where you and your team are doing better work than any team in an office could or you ever could if you were going office every day. That seems impossible, right? Like, how could people working from home or working from anywhere be more effective? So just imagine this world. Every day when you go to do your work, you're in

an environment which is perfectly tailored for you personally. If you're allergic to dogs, there's no dogs. If you love dogs, there's a litter. There's the smells you like, maybe candles. It's a temperature you like. It's not like put at some freezing temperature just to keep the office sanitary. You can eat when you like. The music is fine. You are connected to the people whom you want to be connected with, not who your job chose to stick you next to. Your day is, you're measured by the results, not how you're doing the work. If you want to design your day to go skiing from 9 to 11 and then work from 1130 to eight, sure. Or if you find yourself very productive from like 11 p.m. to 2 a.m.

you can design your day around that. You can be with your loved ones, whatever you're like while bringing that energy to your collaboration with colleagues in the work you're doing. In the work realm, you are working with people who are all also similarly fulfilled. Each one of them is doing the very best work of their career and has the most balance between their life and the work, so able to give the best to both. you're working with the global best. Your companies say they hire the best,

but they then add this geographic filter of people who are in or removed a mountain view or some arbitrary geographic location, which by definition excludes 99% of the population of the world. There's probably over six and a half billion people that you're excluding from that. Either you believe those people aren't valuable, which I hope not, or you believe that talent and intelligence is equally distributed

and opportunity is not. And if you were to open that opportunity up to those billions of women, more people, those could be as valuable or maybe more valuable contributors than the folks who happen to win the ovarian lottery to be born in the place where they could have access to your office job. There's one detail which I found interesting when you talked about it, which was almost the potential advantages of different locations and time zones, most specifically. Say a bit about what you've learned with the 77 countries where you employ people and the role

that time zones play in productivity and collaboration. Level five, work is asynchronous wherever possible, meaning that the collaboration between folks working together on something could be real time, but it doesn't need to be. So if I'm sending you something, that quantum of information has everything you need to move that puck forward or whatever the analogy is that we want to get to the next iteration of the product. There's no night shift in a distributed company necessarily. When you have people all over the world, they can work their normal hours or the hours they feel most productive. and you can have 24-7 coverage. We had a particularly good version of this early on in Automatic, where we were 10, 12 people.

Our competitors were 200 plus people. But we essentially had three shifts of coding going on. So we would get 15 days of work done in a five-day work week. It was small enough at the time as well. We could kind of pass the baton between the different time zones. And some of that was also probably some overwork. And the fact that we were young, I was probably on the computer 14 hours a day.

I knew around midnight, I could pass a baton to my colleague Donica in Ireland, who'd be kind of like waking up, starting his day, and then I could go to sleep. And by the time I came back, he will have fixed those bugs, iterating on that code, done the things. And as he was ending his day, I could pick it back up. Some version of that is possible in the Nirvana state.

I would say that's extremely difficult to achieve, as anyone who's worked with remote teams or other folks has probably experienced, but it is entirely possible. You can do versions of this within the company for larger things as well. If you imagine whether the genius of AWS and Andy and Jeff, like creating the saying that every service must be decoupled, you can have no private communication. It must all be over public protocol and it must be designed to be externally consumable as a way to stop that coordination tax of when companies get larger. That happens between too many of too many of the teams, blocking too many other things. You can imagine a distributed world version of that.

In fact, I believe many of these large tech companies effectively have this inside of them. That is really, really powerful. Can you say a bit more about what you've learned from that famous Amazon letter detailing this requirement of how teams interface and work together? We'll link to it as well. But from an engineer's perspective, I'd love to just hear your interpretation of the power of that way of doing business, especially in the digital world. Well, famously, Amazon made a cost center into a profit center. It saw that the problems it was solving for itself. And some of this is mythology added later, but their peak demand and everything like that.

the capacity needed, they developed a lot of learning. The hyperscale companies were doing things that other companies should have adopted. By the way, I thought this was either going to be Yahoo or Google that did this. I would have not predicted that Amazon would be the winner in this space. I have nothing else than Yahoo and Google are so much more inquisitive. It'd be so much easier to acquire companies if they were already on your infrastructure. There is an effect that when you make something is externally consumable, meaning others are going to be able to use the API and interact with it. You clean it up. You make it better. You document it better. The same same effect that maybe we've forgotten this in COVID, but like when guests were coming over to your

house, you would tidy up a lot more than maybe you would for your own personal, whatever your tolerance was for messiness or tidiness in the house. There's that guest effect, publicity effect, that is actually really, really powerful, particularly for engineering teams. The external consumer becomes a real customer. When you have a customer-centric culture, that is probably the most valuable thing. I like to say usage is oxygen for ideas. Without it, you don't really know whether the idea is valid or what is, they can't truly live and thrive and iterate. And too often inside these larger companies, there would be internal products that everyone was forced to use that never really had the crucible that usage applied to them.

And it becomes particularly acute when an external alternative is a possibility for a team as the internal alternative. So if your internal resources, like let's say your version of your internal cloud or Kubernetes infrastructure. It has to compete. Any team could use that or they could use the external thing. That starts to get really interesting for what are the true advantages of it. I also think what's interesting about this is that we're still so early. It is shocking the trillions of dollars of the economy that is not yet digitized. And of the things that are digitized, that is still like a Dell box in a closet somewhere or in an office somewhere. It is almost an unbounded opportunity ahead of us.

I love this idea that hand in hand with remote distributed work is the concept of more formal async interaction between services and teams that make everything very clean. What makes distributed work not work? What have been the things, I know you've done this for as long as anybody, you know, I'm one of them, like considering a much more distributed team and almost have that be the standard, what are the landmines that you think are easiest to avoid? It's still important to develop relationships. and trust for people. You need to figure out how to do that in a distributed fashion. By the way,

one of the ways we used to do it was get people together. So we'd say the whole company will come together once a year, the teams will get together a few times a year. We too have been navigating how to build that trust, that camaraderie, that connection will not be physically proximate with each other. Because there is something at the very base like lizard brain that when we sit across a table and break bread or a share of beverage, there's just something that gets activated. By the way, that's just human evolution. Like something you can, so just be aware of it,

figure out a way to invest in those relationships. I think that when work is completely asynchronous and you're managing more by the results than by seeing if someone's in the desk every day, you can have a higher lifetime or latency to knowing when there's someone's having trouble. So I say for managers, it's figure out the cadence of checking in

and figure out what might be early indicators of someone going to something tough. that could be a work issue. It could also be something else going on in their life that you just want to be aware of so you can support them. It feels weird to send a Slack DM that says, my partner has cancer. How do you do that?

And if the next one-on-one is not until for two weeks or a month away or whatever it is, how do you bring that up? How do you state your needs? How do you state where you are in life? And as a manager, then how do you stay attuned to how you can best support your people? if someone is missing a deadline in that context versus a different context, you're going to deal with it a very, very different way.

So going back to the beginning of the story, you thought you had missed the wave when you started WordPress. Now, I don't know what the status today. It powers some insane percentage you can share with us of the internet itself in terms of web pages more than the third. What are the most interesting business lessons that you've learned building automatic WordPress, the products that your team has put out,

just kind of as a retrospective, in addition to what we've talked about, you've been a very unique builder. You know, most people I have on this founder series are tech venture backed or traditionally backed companies that kind of have this similar trajectory in whatever way. You've had a very interesting journey. Given the interesting journey, what are the major business lessons that you think back on? One thing I love about great creators, you can imagine like a J.R.R. Tolkien or something. It doesn't just write a book. It creates a world. There's an Elvis script that he wrote poetry. There's like a whole thing around it.

And then the best creators and creative works also then create worlds that happen after them. You know, on Tumblr, we have so many fandoms and fan fiction, people who like take the canon work and then expand it. They create new art, new stories. You can do that with companies. And my favorite companies do that. We take for granted because we look at when we talk about Salesforce, we talk about their acquisitions or Mark Benioff and Brett Taylor. like these sorts of things. But you miss that they created a world,

the trailbla series, that they train people, their events, where they share information, their interactions of the communities, for their name of the tallest building in every city, like all these things are part of the universe, the mythology,

the world of something like a sales force. That's also what we tried to do with WordPress. Is we said it's not just product, it's a movement, it's an ecosystem, it's a philosophy, it's a worldview. It is something that people can have ownership,

of you own WordPress just as much as I do. You can define a future of WordPress as much or more than I can. You can fork it. You can contribute to it. No one company makes more than probably 5% of the revenue in the ecosystem. So the fact that open source is a hack for getting competitors to work together and that there are multiple $100 million era companies built in the WordPress space. That is to me far more rewarding and far better for the longevity of WordPress. Another thing with it being a movement is I want it to both outlive me and at live, everyone currently working on it. What is going to make it work over decades? Jeffrey West has an amazing book where he talks about how companies tend to die, but cities

tend to live. They survive even nuclear explosions. The cities are still around, still people living, still have economies, still are growing. What makes that happen where companies, very large organisms also follow this? They typically max out. And so he also talks about megafauna, giant. Whatever, mammoths, lizards. Willie mammoths and things versus insects. There's species of ants that have been warring for thousands of years. And then if you zoom out unto humanity, look at the planet, that iconic picture, the pale blue dot that Carl Sagan talks about.

Are we an antpile? Are we an organism? Like, what are we? And when we're at our best, do we do? where I get most excited about humanity is when we work together to create something that's bigger than the sum of its parts. Wikipedia is a great example there. This is the best source of the best knowledge ever collected in humanity.

That was done through essentially someone who's created an environment and a set of rules and then allow iteration in a community to evolve it. I absolutely adore this idea that I've never heard before of company building as world building. What else have you done personally or seen Salesforce is a great example, such a good example? What other companies have done this effectively that one could go study to study this concept and maybe examples from WordPress and Automatic specifically that you found to be effective at building that world? It's hard to find an ultra successful company that doesn't have a version of this. It might not be in our consciousness.

Actually, Microsoft is one of the companies I've studied the most because they created a true platform with Windows in a way that. that actually no platform since then has matched. And the way they did it, I think is really, really fascinating. It's particularly fun to read, like, the books from the 90s or about Bill Gates or biographies and things. Because then you have the advantage of, like, knowing what happens next in the story. The book ends on like the eve of the launch of Windows 95. And, like, you know, it's a big thing.

And you're like, oh, what will happen next? The possibilities are endless. What did you most learn studying Microsoft about effective platform building? Was it Gates that had the line about the definition of a platform of more value created on top, then captured by. I can't remember if those gates or somebody else that said that. What have you learned about studying Microsoft for would-be platform builders out there? He did say that. It's funny because he actually said that in the context of, I think, the Facebook platform, saying it wasn't a true platform, which obviously we have seen that play out. It was

not a true platform. I found this rule. I should probably turn it into a law, a little way, third law or something, that every truly successful platform, there tends to be a ratio, of the platform creator capturing about 5% of the ecosystem. So that kind of 1 to 19, 1 to 20 ratio is very, very consistent. And I started to see it. You could see it in the old X86 infrastructures. And so the ecosystem on Intel. And on the eve of the launch of Windows,

Microsoft was saying that for every dollar sold for Windows. And also to put this in context for the Youngmans, it was like a new iPhone launch. People were lined up and camping outs outside the stores to buy this box. I think Rolling Stones did a song for it. It was one of the biggest cultural events of that year was everyone excited about this release of Windows. In their press, they would say, you know, for every dollar we make for Windows, $20 is made

in ecosystem around Windows. I have kept that in mind with Automatic and WorkPress. Automatic is obviously company I lead. I have the fiduciary responsibility to my investors and my families of my 1400 colleagues and things like that. So it is a real business. I also keep in mind how do we grow the overall pie where we can keep our portion of the WordPress ecosystem around 5%.

Because if we got too far beyond that, we'd start to take the auction out of the room. And when we get too far below that, you end up getting a tragedy of the comments. Effectively, like you can have, where I talked about sometimes open source has parasitic parts or people who take more from it than they put in. Automatic, through its culture, puts a lot back into the core. Not all the companies in the WordPress ecosystem do or in any open source ecosystem. So if they start taking all the revenue, it stars core as well. So that's part of why I say that we need to succeed, not just for ourselves, but actually because

we are defining the possibility of both our business model, distributed work, open source, and the future of WordPress. We have a big influence on. Is there an example of a time that you made a decision that maybe in the moment, an outsider might say that you're doing something against your own interest or suppressing your own interest to with that 5% concept in mind where you're thinking more about growing the overall pie than the share of it that automatic or WordPress is capturing from like a monetary standpoint? Never, if you think long term. Where I find there's conflicts there or differences of opinion, it is a difference of thinking short-term versus long-term.

I mean, I'm sure any CEO could list 30 things that they could do the boost revenue this year. But at the cost of some longer-term customer loyalty, partner relationships, anything. So all the best leaders I had follow and admire. are very long-term thinkers. The concept, again, just to close the loop on this notion of world building, do you think that it requires some sort of North Star or everyone talks about mission and vision? How do you continue to build a cohesive, effective world? Is there a key ingredient in that that you've observed in your own experience or in others? I think that the best learnings here come from studying things outside of companies and business. So you ask me for like companies and

business examples, but study religions on the dark side of it. Study cults and where things go wrong. Because by the way, sometimes startups turn in, exhibit some of those negative behaviors. Study the evolution of politics, particularly democracy. Study cities. We're Jeffrey West, sociologists. I think a lot of economics and incentives, both behavior economics that's for the micro-level, the macroeconomics for what are the long-term incentives in the system. What's the Charlie Wonka quote around incentives? Show me the incentives and I'll show you the outcomes or something like that. Yeah.

I mean, show me a place where that doesn't happen. World views, if there are short things, anyone listen to this would say. I would say that it's more fun to be the pirates than the Navy. Like, have something that's different about you. Too many when I read visions or missions, there's nothing that another company wouldn't agree with. That's probably some of our biggest concept eternally is like we want to add something to mission. And we're like, well, what's the thing we could say that not every other company would say? We have a creed, and one of the lines it is, open source is the most powerful idea of my generation.

And I'm more motivated by impact the month. Those are two fairly controversial ideas. I don't think everyone would agree with it. And that's great because I don't want to employ everyone. I want to employ only the people who are excited when they hear that sentence. We actually put the creed on the offer letter. So after all the legalese, there's in the creed, and then you sign your name. I was actually inspired as well by Dan Ariely, who did like a study around.

Sign your name next to something makes you take it much more seriously. That's where I think about it. And then are you capturing all the value in your ecosystem? Wix, Shopify are both amazing businesses. Wix probably captures 98% of the value in its ecosystem. Shopify is probably capturing high single digits. So between 10 and 50%. They're not a platform, but they're not not a platform either.

And they've done a good job navigating that. The Wix Shopify comparison is one I haven't really thought about before. What is it about how Wix is run as a business that dictates that 98%? capture. What's the denominator in that ratio? And same thing for Shopify. I just want to make sure I understand the lesson between those two deeply. So let's say which revenue is about a billion dollars. They are making most of the revenue in their ecosystem. There's not that many businesses built on top of that. And I would say part of that is they're incredibly aggressive. By the way, not a bad thing. It's good to have that in the market. But to just give one quick example, Wix literally doesn't

let you export your content. Their supports page says there's no way to do it. Even Facebook lets you export your content. No, I'm amazed to get away with it. It's not an antitrust thing or something. Or user advocacy. Everyone else lets you export your content. So that's just maybe an example of how aggressive this company is in trying to capture every bit of value and really lock in every single customer.

Other companies that do this, you can think of companies that bring you in really cheap and then upsell you or make it difficult to cancel. That can be profitable in the short term. It can capture a lot of. a lot of revenue in the short term. I think that long term that creates the seeds of your own demise. How have you thought about what to do next through the history of automatic and WordPress? So you had some initial thing you did and that thing now powers some huge percent of the internet. There's a lot of things that you've built over the years. And I'm thinking again of this world building

concept, which is now going to be obsessed with. What have you learned about good decision making for resource or capital allocation within your business? I obsess about capital allocation. I think it's partly because we ran the business so long on very little outside capital. That's not sure anymore. We've now raised over a billion dollars. There's a lot of capital on it. The first 2005 to like 2014 was on a total of $11 million of outside capital.

And so we went from like 0% of the internet to I think 25 or something in that time on very little outside capital. So we just got very frugal in a lot of really good. ways and we debate a lot internally, are we working on the right things? Do you have people in the right areas? I hope to do WordPress the rest of my life. I really want to build an operating system for the web. So my goal is not the number two or three in the market. It's the 85 or 90 percent natural monopoly that can happen in technology when a truly open system becomes the de facto and the Azure standard for everything built on top of it. Linux kernel may be being a really good

example. We don't think about it anymore, but that's kind of why it's one. you really have to justify if you're going to create a different kernel, run a cloud service on something other than Linux. I would like for the web to be like that in the future, where even very, very rich different applications you can build on top of WordPress. Part of what keeps me excited about automatic as well, and this isn't as well known, but we're structured internally somewhat the hybrid child of like a Berkshire and an IAC and an alphabet. If they got together, we try to make automatic a fractal organization.

so that as you zoom in and out on the organization, a 20-person team inside Automatic looks and operates a lot like when the entire company was 20 people, how we looked and operated. If you zoom out to a division, which might be 200 people, it has some version of that where it has a CEO, and it has an executive team, and it has constraints in some ways and boundaries in some ways, and then no boundaries in others.

Usually we do is we, as the CEOs of these businesses manage to P&L, they really just manage to P, they don't manage to L. we try to get them as much resources as possible to grow in a smart way, the same way an investor would. If you're a fast-growing company, you're, I don't know, let's say clubhouse or slackback or something, your investors aren't saying to you like, hmm, I think you should really trim this cost. If you're riding a rocket ship, if you've captured the opportunity, if you're lucky enough to find one of those, you get it as many resources as it can smartly consume. And so the question doesn't become about how much resources.

It's about, is it smart? Is there a positive ROI on each incremental dollar we're putting into it? And those conversations, I mean, one of my favorite things about our executive team is we'll actually have GMs of businesses say, hey, I think this thing in another division is more important. Why don't we take one of the teams on my division and put it over there? And in a traditional culture, if you lose headcount, you're less important. Even the fact that we call it headcount, I think is so callous. and we try never to use that word inside the company. But if you're really thinking of the holistic,

you're an automatician or a member of the company first, you're incentivized for long-term health and growth of that company. It makes perfect sense to say allocate people away from something that is not having as much growth or as much promise, something that is. We do that a lot, we obsess about it a lot. And where it gets really hard is,

I would say, choosing to invest in something that hasn't kicked off yet. You know, our enterprise business is doing really well. it's a big part of why Salesforce invested $300 million, which I believe was the largest investment. It might not be true anymore. There was a point five years ago where the board was talking about shutting that business down. I kind of thought to keep it going. Sometimes we're right about those things. Those are the stories they tell. Sometimes I'm wrong about those things. I can tell those stories, too. There's definitely things we kept going that we probably should have shut down or that we went for too long on. But that's where it gets really tough. And that's also where when I kind of pay it for it,

I got so much help when I was a new entrepreneur in Silicon Valley. I tried to invest and work with other folks. The hardest thing is when to say, like, you're on the right path of misunderstood and you should be comfortable being misunderstood for a very long period of time versus you're being stubborn. And the market and the customers and everything are very clearly giving you the signs that this is the wrong path. And you should change something.

Any closing advice for people that are building something where there's this platform concept, this 5% concept where the, the ecosystem that spins up around their efforts will just create growth for lots of different people and how you engage with those other participants that aren't under your umbrella, but are key to the success of your ecosystem. Anything you've learned there in closing about your posture or relationship with those stakeholders? Look at every decision you're doing and saying, if I iterated on this decision, repeated it for 10 years, for 50 years,

what would be the outcome? let's say you're an open source project to give a real example. If you hire every single contributor and you now employ 98% of the contributions, okay, what's it? You're probably going to be true forever. MySQL when it's sold for a billion dollars. 98% of the contributions were coming from employees in MySQL. What if instead you hired a few of those smart people and you got the other one's jobs

at other companies where they would then get those companies contributing to WordPress and benefiting from WordPress or again, I'm using a WordPress example. Now play that out over 10 years or 20 years is, are you having to provide 97% of the new code, or is there maybe a different percentage? Typically, I said, we have 65 people working full-time, WordPress core. A typical release will have 6 or 700 contributors. We've managed to be like, you know, we're probably 10% of the contributions of the people contributing. How do you maintain that over time? How welcoming do you make it for new people?

What are the incentives around folks getting involved? is it fun? Oh, the fun question is such a good one. Is it fun? And how can I make this 10% more fun or really valuable? Because again, no one wants to be in a world. You're creating a world. No one wants to be in the world that's boring or pain or drains your energy or isn't exciting. They want to be part of the world that is inspiring. Elon Musk, an incredible example of this. It's not about the cars or the batteries. That's a means to an end. The world is literally in the world. Mars and there's various versions. We're going to make our world a lot better, both to try to save that one.

And then we're going to become multi-planetary just as a backup in case we mess this one up. Okay, that seems like a big deal. WordPress, we're trying to democratize publishing and commerce. If we succeed at that, the world is a much fairer and freer place. If we set a good example as a distributed company of saying, like, you can be incredibly successful doing that. Guess what? And this has happened.

Other companies will start to do that. and the economic opportunity that unlocks other countries, how that wages the global minimum wage, how that increases people's quality of life, having a commute an average of 29 minutes per day in America each way. Like all of those things unlock so much good stuff that we're working for more than just the paycheck. That's inspiring. It gets me excited. You can probably tell I'm pretty excited right now. And I'm a pretty laid back quiet guy. But I feel like when you're able to articulate and set up those things, and particularly when you're able to connect the near term. business goals with the long-term goals of humanity, that can be really, really powerful. What has you most excited about the future of the internet? Connection. Everything we've talked about are versions of humanity becoming more connected.

If you look at every communication revolution, it's funny to read the resistance to, like, newspapers. Everyone's spending all their time on newspapers. There's drawings of people on the subway in New York. They're not talking to each other more. They're just heads buried in the newspaper. And how that was seen as the end of humanity. And we now have this version with people looking at their phones. For every step function and communication speed, we essentially are like increasing the clock speed of humanity's intelligence interacting with each other and getting better. I'm excited about the cross-discipline approach that we've taken to tackling COVID-19 and the fact that scientists have never worked together and now working together. And we got so much of humanity working on a

single problem, and we are addressing it with an incredible speed. If you look at every type of challenge like this we've ever had in the history, our communication networks weren't fast enough and a way of sharing knowledge and the science, like everything, the basis wasn't there. And the internet feels like it might be the natural conclusion of that. So we've reached the epoch of connecting potentially every single human. And Starlink is going to change that in like 5G and like all the things we're iterating on it. But fundamentally, we have the bones of the system that could connect every single human. You could imagine effectively all seven billion humans on the planet connecting with each other. When that happens, they'll start to work together on things.

They'll start to collaborate. They'll start to share information. We can essentially increase the speed of evolution in ways that I'm optimistically excited about. Like obviously, there's people who think we're going to create the AI monster or whatever like that. Can we mess things up along the way? Absolutely. Every technology typically has a stronger capacity for offense than defense. Literally every technology. So that's why in computer security, we can attack a lot better than we can defend. Even the U.S. government, which is the most sophisticated cyber attacker in the world, also gets owned. You can think of weaponry. We can create a nuclear bomb. We can't protect ourselves for as we create these new technologies. We do create new threats for ourselves. But on the whole,

I'm an optimist about humanity. I believe humans are fundamentally good. And even our ability to resist the outliers is increased when we become more connected. We have this system called a kismet, which is an anti-spam system. And basically what would happen is like, you used to have an anti-spam for your blog. And it would work for your blog. But then the spammers got smart. And they started using millions of IP addresses or giving different spam.

So you might only see something once. The way to address it was great in a SaaS service, use machine learning to adapt really quickly. all the kids on the playground teamed up against the bully. The bully who was the outlier ultimately is not more powerful than all the people with positive motivations who are members of the social contract working together. Wonderful. I mean, what a cool closing thought on connectivity and collaboration and the way that the tools that you're involved with and so many others are allowing that progress to happen. It's such a cool closing thought. I have the same question that I ask everybody at the end of these conversations. So I'll ask you as well,

what is the kindest thing that anyone's ever done for you? I remember I was driving on this highway in Houston. It was kind of that intersection of a highway called 280 and 610, 20 lane wide things. I was in the left lane because I was a teenager driving too fast. One of my tires exploded. I had just come from watching a James Bond movie. So my first thought was sniper. It was funny because there was this huge boom and my car started blowing around.

But I ended up in the left lane of this. It was a connection. So it was even wider than. normal highway, this 12-lane thing stuck. I'm kind of shook. My girlfriend at the time's in the car, we're like, what's going to happen? By the way, versions of this happen in Texas all the time. I love the friendliness of Texans. That's why I move back to Texas. A guy in a pickup truck, essentially who's near the front, people start like going really slowly past, but there's obviously huge traffic thing. By the way, also really unsafe. He gets out of his truck. He's like, hey, can your car

drive at all? I was like, yeah. And he was like, okay, just kind of waves. He starts stopping traffic. across his 12-lane highway so that my car can limp to the right side onto the shoulder, where, by the way, it's safer for me and everyone else. I turn to, like, thank him. And he just kind of like, gives me a thumbs up, hops back and his pickup and drives away. I was like, wow, that was incredible. This complete stranger, just getting out to help someone who they would never meet. I will never know who that person is. If you're listening, please get in touch. But we're never going to connect again. I just appreciate that so much. It felt very kind. It was maybe a very extreme, like, example of kindness. I love it. Matt, I've had such an interesting time talking

you today. I've learned a lot. I love the way you think about the world and the principles with which you attack the problem that you've been working on for a long time. Thanks for all the time today. I'm a dedicated listener, so it's a real honor to be honest. Thank you. To find more episodes or sign up for our weekly summary, visit investorfield guide.com. Thanks for listening to Founders Field Guide.