Invest Like the Best with Patrick O'Shaughnessy - Scott Belsky - Focus on the First Mile – [Invest Like the Best, EP. 213]

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Starting point is 00:01:55 I'm Patrick O'Shaughnessy and this is Invest like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com. Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunacy Asset Management. This podcast is for informational purposes only and should not be relied upon as a

Starting point is 00:02:29 for investment decisions. Clients of O'Shaughnessy asset management may maintain positions and the securities discussed in this podcast. My guest today is Scott Belski. Scott was the co-founder and CEO of Behance, the world's largest creative network, and is a prolific angel investor having made early stage investments in Pinterest, Uber, Carter, and Airtable. His company was acquired by Adobe in 2012, where he is currently the chief product officer. In this conversation, we cover the importance of focusing on the first mile of a customer's experience with your product, why every user is at first, either lazy, vain, or selfish, and what the rise of creativity tools means for creators and

Starting point is 00:03:09 investors in the future. We also cover the major trends that Scott thinks will dominate for the next decade. This was one of those conversations where I left with 10 great lessons that will stick with me for a long time. Please enjoy my conversation with Scott Belski. So, Scott, I've been so excited to do this with you. I think we'll make the first part of this conversation about the psychology and process of building great products. And then we'll talk a lot about everything else that you do. You have your hands in so many interesting things. My opening question, I guess, is just very broad,

Starting point is 00:03:39 which is what is your philosophy of building great products, generally speaking? That's a great question. And I mean, I am ultimately anchored by customer journeys. I've always believed that a prototype is worth 100 meetings. And the greatest failings I've seen in the product world, including my own, are when, you build something out of passion for a problem rather than have empathy with those suffering from the problem, which means you just have to kind of get more shoulder to shoulder than

Starting point is 00:04:11 you've ever felt you could with customers. And it's somewhat counterintuitive because a lot of those things you do are just not scalable, but they're what you do to just really feel what a customer is feeling. And I think that dictates not only product experience, which we can talk about, and the first mile of product experience, which I think is woefully neglected and underestimated and underinvested in, but also the marketing experience, the copy, the email frequency, the notifications. I mean, every single aspect of customer experience ultimately is anchored with what the person experiencing them will feel.

Starting point is 00:04:47 And so how could you orchestrate all that without really getting close to the bone? Talk a little bit about for a given customer journey, whether that's a business that you're investing in and looking at or something that you're building yourself at Adobe. Where do you begin? You mentioned the first mile. That's kind of an interesting phrase or concept. How do you begin to understand or attack one of these journeys? I do think it starts with that first mile because at the end of the day, all the matters is really who you can get into your funnel. And then whatever customer or potential customer sees first at the top of the funnel is the only thing that all customers will ever experience. And then it's just downhill from there.

Starting point is 00:05:23 It's only at the end where designers and engineers and developers and product leaders are thinking, wow, so what should the default landing state in this product be? And what should the copy be when you land there for the first time? A lot of these things are the tour. All these things are just kind of last minute decisions oftentimes, especially in startups. And it's like the only thing all of your customers will ever see. So I think that that's a good anchor point. And then as you go deeper, you have to start to decide, and because the reality is always

Starting point is 00:05:52 tradeoffs, which problems you want to optimize to have later and which ones you have to solve now. And that's the path of building a product. Can you give me an example from your own experience of working to make a first mile better? I was pick Creative Cloud, which is a massive suite of products that I'm responsible for. And it was built out of a hodgepodge of different products that were bundled together first on a business level and over time as a product. And so for us, it's come down to, all right, like, let's start to understand every screen of the experience. What are the various landing pages? What do customers get immediately after signing up?

Starting point is 00:06:30 When they land, do we know anything about them? Oh, no, we don't know anything about them. Well, how do we build a personalized experience for them based on their first mile, like what we detect and what they tell us? And then you start to go down various paths of, well, if they stop doing this, how do you help them? If they struggle with this, how do you help them? And again, it's all empathy driven, because if we can add. actually understand what each individual customer is going through, then we start to craft those paths for them. And that's where it gets a lot of data intensive experience as well, because now

Starting point is 00:07:00 you're dissecting the funnel and you're trying to extrapolate from that personas, you know, in different journeys that customers are getting lost in. Now, here's the tricky part is that once you get a first mile that's working in a product, it doesn't mean it will continue working because every cohort of new customers is different. I think a great example of this is Twitter. Twitter had the perfect first mile experience for people who were willing to craft their own timeline. Those of us who went in and would follow people and unfollow people over years to make the perfect timeline news source for us, Twitter was optimized for that out of the gate. And then they hit like a ceiling of people who were willing to do that.

Starting point is 00:07:39 And everyone beyond that came for news. And the idea of having to follow accounts was just too myopic for that next generation or that larger cohort of customers. I don't know what it was. Like the first hundred million or so we're willing to tolerate this. Then it broke down from there. And so, of course, they've had to now lean in towards topics. They're always thinking about how do we have a more topic-centric experience?

Starting point is 00:08:02 And you're seeing that in the product. But you have to kind of go back to the first mile continually and say, hey, now let's have a new sense of empathy with our newest cohort of customers. Where are they struggling? What have you learned about user progress? I've been studying video games a lot. And it's amazing how finely tuned the feedback. loops are in the best, say, mobile games for making the user feel like they're learning something very rapidly and quickly. Does that same concept, the sort of user progress concept apply to

Starting point is 00:08:30 first mile and great product experiences, do you think? So I actually think it applies to every product, even enterprise products, and I don't think a lot of people understand this. I call it ego analytics. People want to know and see that they are being successful. And I always like to say that in the first 30 seconds of every product experience, every user is lazy, vain and sense. selfish. They want everything to be done for them. They don't want to read something. They don't feel like their time should be spent on anything new. And you have to craft hooks that get people through that laziness, vanity, and selfishness. What are famous examples? Well, Stripe. They were like developers with only two lines of code. You can get payments into your product appealing to laziness to some degree.

Starting point is 00:09:13 And then vanity to some extent when they achieve payments in their product so quickly. And I think every product actually has some of that. Now, even though, the most cumbersome enterprise products, I believe, are successful when they make their users look good to their bosses. So some enterprise products, I advise to have an export function where you can export a spreadsheet that is editable, that looks beautiful, that is editable by its users so that he or she can then get it, make it look like it's theirs, save it as a PDF, and send it to their management team. And then suddenly it's like, oh my goodness, who did this level of diligent analysis. That's an example of how you make an enterprise product thrive through

Starting point is 00:09:53 that sense of ego analytics and making sure people know that they can look good through using the product. So I think it applies to social and to enterprise. On the social side, it actually means you have to think about dashboards and instant sources of feedback. And there's a debate about is this stuff a slippery slope and are we building products that then become addictive? And I think that is like the problem is that we know that these are mechanisms that work, especially on the consumer product development side. And we have to evolve them to some degree. I want to click even one level up in the customer journey, which is what I'll call like the attention phase. So user progress is obviously once they're engaged a little bit. Before that has to be like, they have to be aware

Starting point is 00:10:36 you exist and care and be interested. What have you learned about, I guess that's the very, very top of the journey, awareness and attention and interest? A good example. was the early days of Pinterest. Ben Silberman always had the vision of a discovery network where you could discover your interests. But the real reason people would actually try that product when they had never heard of it or even could barely pronounce it because it was so new was the utility of collecting stuff. At the time, Delicious, which was owned by Yahoo, and there were a few other bookmarking sites that weren't image-centric. And he talked about how everyone has like something they collect or want to keep track of. And so let's make sure that we come over the top with the utility for you before we try to get you convinced that there's future utility that you won't get now.

Starting point is 00:11:24 Back to the laziness, vanity, and selfishness. With Behance, my product, it was all about people showcasing their work to get jobs. And of course, we felt like creatives would want to see each other's work and get inspired by each other's work. But a lot of other competitors of ours were always focused on the inspiration side. And our team was like, well, the last thing creatives need more of is creativity. They don't need more inspiration. In fact, if you ask any creative, they'll oftentimes say that they have a hard time getting shit done because they have too many ideas and they've got too many things to try.

Starting point is 00:11:58 They need to actually focus and be more focused on execution. And so out of the gate, we decided we would never use the words creativity or inspiration in the Behance product. And we also focus on that top of funnel utility of, manage a portfolio site that also is broken down into projects so that people can discover them who don't know them. Because what we found from our audience was that they had these websites out there that no one other than their parents and people they knew would go to. And they wanted to get discovered for jobs. And so it was like, hey, we will help you get more job leads by breaking

Starting point is 00:12:33 your portfolio down into its parts and making it all searchable. And so that was our top of funnel value prop that you described. There's a kind of raw utility job to be done hook that's one version of of this. In the past, you and I have also talked about this concept of window dressing that sometimes what gets you in the store isn't the thing you actually need. Can you talk about this concept of window dressing as sort of a second side of the coin of utility? The window dressing has to appeal again to that laziness vanity and selfishness piece. It has to make sure that you're accounting for the thing that the customer would take that step because there's some immediacy to the value and discover the long-term value when they're ready. And actually, that is one of the

Starting point is 00:13:15 biggest mistakes we all make as founders and leaders of products because we become not only in love with our products, but we also fall in love with our power customers. And we see the value they get. And we're always like, oh, if we could just show the value that they're getting to new customers, they would try our product too. The problem is, is that the new customers see that as unachievable for the 32nd moment that they're in. And so you kind of have to have, in some ways, two value props for everything you're promising. And then whatever you put in the window

Starting point is 00:13:47 is the thing that brings someone in the door. And then once they're in the door, you show them other merchandise. Think about this with book titles and book graphics and stuff. I mean, it's so silly that whatever the illustrator that you're working with and the publisher thinks is clever

Starting point is 00:14:03 ends up being the representation of 300 pages worth of insights and research. And how sad is that? But at the same time, again, laziness, vanity, selfishness, and how do we get someone to crack open that book and read that first page? And it's a totally different art and science that we have to disconnect from our more like purposeful long-term visions for our product. So we've talked mostly about the customer side of this so far, getting their attention, getting them moving that first mile. I love the idea that that's just a way underconsidered. I'm guilty of it too. It's like the afterthought that you deal with at the end of building the actual product. I want to turn to the product itself. Both books that you've written

Starting point is 00:14:40 the messy middle and making ideas happen, I think are sort of an ode to hard work, cranking it out after the spark of inspiration, more about the 99% perspiration. So having built a lot of products yourself and been behind a lot of great product builders in your investing career, tell me what you've learned about that messy middle, about the process of taking something from an idea to an actual functioning long-term high-value product? The inspiration that I had for these books was really my frustration with the creative process in general. And, you know, as humans, we're not wired to embark on multi-year projects.

Starting point is 00:15:18 We're wired towards short-term rewards. If the average lifespan was 25 years back only 100 years ago, yet alone hundreds of years ago, then the idea of embarking on something without a foreseeable end is actually biologically not smart. And so how do we gear and short circuit our teams and ourselves with our products to achieve something great that does take years to bake? To me, that's like the funnest part of management for me is hacking those reward systems, coming up with fun things to do to keep a team engaged long enough, believing that the competitive advantage of startups is just sticking together long enough to figure it out if you have the right people. Even if you don't have the right

Starting point is 00:15:59 idea, you'll just keep iterating until you find it if you have the right people. So I think a lot of it comes down to rewards if I were to sum it all up. And with a product, how can you make sure you're getting the satisfaction of satisfying customers soon? I think that the unsung heroes of a lot of great companies out there are the early customers that for whatever reason were so willing and forgiving to lean in despite they didn't have any equity in the company. They weren't employees. They just for whatever reason were sitting in some enterprise or were some kid in high school who like wanted to play with something that wasn't really working yet because they were so fascinated by it. And then they shared feedback with the team. And then that was the

Starting point is 00:16:37 source of the early satisfaction that kept the team going. And so that's one reason why I always encourage teams to not try to get any customer in the beginning, but get those like willing and forgiving customers first. I'm curious, the reward circuitry itself. I'm sure you've tried this a lot of different ways. Breaking down, even if you kind of know where you're going over a multi-year period, the most effective ways of breaking down that reward circuitry to keep people motivated and the problems that you've seen and learned to overcome. I'll share like a couple of fun stories, you know, that I think eliminate what I'm talking about here. So in the hands, we were bootstrap for five years before raising our first round of capital from Scrabentures and folks like Jeff Bezos and Chris Dixon and a few others. But for five years, we were kind of hand to mouth.

Starting point is 00:17:23 And it was rough. It was also over the course of 2008, which was also a hard time. in the economy. And so I realized that all I had to do was keep this team together and keep cranking. I mean, we believed in this. We knew that the need was there. We had to survive and we had to kind of iterate with our customers. And so we started to have some fun with how we would feel like we were making progress when there was no official semblance of progress. We weren't making any money. And we weren't having volumes of people joined our site yet. The technology wasn't there yet. And so we started fun things. We had these thing called slap bets. I'm not sure. sure why we called them slapbats, but we would make these little games. I had been a vegetarian

Starting point is 00:18:02 since the age of seven, for whatever reason, our small engineering team was like, you know what, Scott, if we reach 100,000 members, like you're going to agree to eat any form of meat we want you to eat off of one of our forks. And I was like, whatever, you know, if that's ever going to happen, we'll see. So I said, sure. And, you know, lo and behold, like three years later at a Christmas dinner, I was doing that. But it was like one of those kind of fun, short-circuited rewards. It wasn't real, but it was actually pushing us in the right direction. I remember in 2007 when we came up with the name Behance. Every time you typed in Behance into Google, it said, do you mean Enhance?

Starting point is 00:18:38 And it was like really frustrating. And so another short-term kind of goal we had was, let's just get enough blog posts and enough link backs to portfolios that were a legitimate search result. And then six or eight months later, we came in and alas, finally, Google no longer thought that we were a mistake. And then I always like to tell the story that Beyonce became. super popular a year later and we lost it all over again, but then we regained it. So, you know, I think you have to do some of those fun things. And that's why I also, I think that the talent of merchandising the journey to your team is important. You are as a leader, you're driving this like cross-country road trip with your team with the windows blacked out in the backseat.

Starting point is 00:19:20 And unless you narrate the progress you're making, and I'll end with this. Like Teresa Mabelay, I write about this in the book, Professor Harvard Business School, did a research study on motivation and companies. She had people journal every day and talk about how motivated they felt and what they were getting accomplished. And through this whole study, her basic takeaway was that progress begets progress. You have to feel like you're making progress to make more progress. And that's what I mean by merchandising and being creative with what that progress actually is. So it's almost your job on the coast-to-coast road trip to pick the 15 pit stops, each of which is sort of celebrated in a milestone along the way. I love that concept. So you have this fascinating

Starting point is 00:19:57 dichotomy of being on top of one of the most, frankly, one of the most interesting company turnarounds, I'll call it, at Adobe, transitioning from a very old line software business to one of the leaders of the sort of cloud suite of services very successfully. You can look up a stock chart if you don't agree. And also investing quite a lot in some of the iconic companies, technology, software companies of the last decade. When you're looking at a company with your investment hat on, how does this learning about customer journey and product and window dressing and user progress, all these things we've talked about, leadership, how does that transfer into a unique lens for you to evaluate companies where you're not going to be involved?

Starting point is 00:20:41 It's why when I get on a Zoom or meet it with a founder, I just want to jump into his or her product quickly because I want to see how they unveil it to me. I want to see, I always use the word object model. I don't know if that's the right term, but I like to understand, like, when I look at the product, I really do believe that every product is sort of the DNA of its team. And so if someone explains to you the product by jumping into some part in the middle, as opposed to saying, well, here's how you add this. And then when you do that, it goes here.

Starting point is 00:21:16 And then if you step back, you'll see that that's where it all comes together. And then this is how people get oriented. That, to me, represents like the DNA of a product leader that will manifest itself in the product as something that is easy to navigate and a product that will care about its first mile. My little theory here is that if you can nail the first mile of any product, essentially, if you can have a window dress that gets everyone in the door, then if you're solving a good problem, you have the right team, you will do something once people are in your shop that will make them pay you.

Starting point is 00:21:46 But the problem we have in this world is that no one goes into doors because everyone's busy. So that's what I'm always trying to understand. And I go through the same thing when I hire people to work for me at Adobe. I also want people who can take a step back and understand the context of where a customer is in their journey. And for a long time, Adobe has had a legacy of products that were so indispensable and that people would feel it was a badge to overcome the learning curve of Photoshop or to understand the cockpit of After Effects. And in fact, now that there are lots of competitive products out there that have a very compelling front door and they're easy to get started and really easy for smiles, that keeps us on our toes. We have to reinvent our first mile.

Starting point is 00:22:30 That's why I love being a subscription business, because we can really think about getting people in the door and then adding value over time. Is there an example of this that stands out in memory of a company you've invested in where you had this magical first interaction with the founding team and them showing you the product? You're not supposed to pick favorite kids, but just one that pops to mind first as exceptional. When I first heard about Uber from Garrett Camp, he and I had a partnership because he was running Stumble upon at the time, which he had purchased back from eBay, and I was starting to be hints. And we were doing a lot of these cross-promotion things.

Starting point is 00:23:03 And he like whipped out a sketchpad of this idea of summoning a car. And I had previously, before being an entrepreneur going into the creative industry, I was working at Goldman Sachs of all places where whenever I needed a car to go home at night, I'd have to fill out this little form. and then I had to give it to the dispatcher and then give one to the driver and then one got back to me and I had to give it to an assistant, the file, and all this crap. When he kind of walked me through, and Garrett actually is a very like first mile product thinker. He does start from design first. He does think about, okay, well, a customer would just have to click this and let's remove all navigation and all. And that was actually one of the

Starting point is 00:23:41 first things that compelled me about what he was building. I also gave him the worst advice ever, which was, dude, like, you're running Sumble upon. You should be focused. Like, you can't start two things at once. I'm like, gosh, like, I'm so glad he didn't listen to me. But there are a bunch of enterprise products where I'm trying to think of one, a good example, but it starts with object model. Define object model. I want to make sure I understand that. The best way to describe it is I drop you somewhere. And do you know where you are? Do you know, A, how you got there, B, what you're supposed to do there, and see what you're supposed to do next. And it sounds so obvious, but actually, very few products get this right.

Starting point is 00:24:21 Because first of all, your friend Dave Marin always likes to say, the devil's in the default. Wherever you land and whatever is there is what 80% of all customers will always see. Someone once told me that the LinkedIn profile page back in the day always had this interstitial of like welcoming you with a little X at the top right-hand corner. and apparently no one would ever click that X. So you'd be on LinkedIn for years. You'd still have like the welcome interstitial. Devil's in the default. And then when you're there, is it clear how to go back if you make a mistake?

Starting point is 00:24:53 Is it clear when you go forward what the breadcrumbs were? So you kind of understand. And why is this stuff matter? Because it's making you familiar with the product so that you know how to use it so that you don't get lost. When your attention is diverted somewhere else and then you get discombobulated, I mean, when people say, oh, I'm a technophobe, maybe what they're really saying is that this design language and this object model of this product is not native to me. And that's also why I advise teams that get creative around their UI, you know, their user interface and how their product works.

Starting point is 00:25:26 I'm always telling teams, don't reinvent familiar things. Familiar patterns are your friend. They breed utilization. The only time you want to introduce an unfamiliar pattern to the product is when you're like truly innovating on something that's like never existed before. Otherwise, use the same familiar patterns of Facebook. Everyone knows how to use it. I love the one foot in the known, one foot in the unknown concept, respecting that user laziness. What other user psychology elements you've mentioned several do you find the most important to keep in mind? And I'm thinking here of like the seven deadly sins, which you hear about sometimes in product design. Are there other aspects of user psychology we haven't covered that you think are important to

Starting point is 00:26:08 respect. We talked about lazy, being selfish. I think another aspect of your psychology is really understanding the insecurity of a customer at every moment in time. So in an enterprise product, it's typically job security. It's not knowing what to do next. It's not having the time to spend on things and worrying that they're going to fall behind. And in a social product, it's oftentimes how people feel about their self-esteem. I think that maybe this goes to the empathy piece, But I do think that a lot of, even like a lot of note-taking products these days, you know, if they make you feel more organized by the way they're designed, then they address an insecurity that a lot of us have of feeling disorganized and overwhelmed.

Starting point is 00:26:49 I think a lot of great design makes people feel secure with whatever that is they're doing. Another example of that that's kind of funny is that a lot of these new products out there are AI-driven to find a solution for you. So, for example, a travel website where you're trying to find the best deal on something. And the funny thing is that obviously these are supercomputers running algorithms and stuff. It can tell you simultaneously what the best flight value is. But instead, as you've noticed in a lot of these sites, it gives you a little like thinking icon and it makes you wait for six seconds.

Starting point is 00:27:24 Why is it doing that? It's doing that not because it needs processing time. It's doing that because it's making you believe and feel secure in the result. Like you want to feel like the computer's thinking and doing and searching the globe and sorting and applying scientific algorithms and blah, blah, blah, blah. Oh, and then your best deal is this. And so I think that's another example of like a design pattern that instills security and confidence in a customer experience.

Starting point is 00:27:50 How do you ensure that all of these things are true when you're building a product? So what is the, this is all kind of qualitative things you want to respect. How do you know once you're building something that you are in fact? caring about the users' insecurity or acknowledging their laziness. How do you actually make this come to life? Yeah, well, it's easier to know when it's not coming to life because you start realizing that people are churning, that people aren't getting through the first mile. If 95% of people that come to a landing page and have certain behaviors that suggest that they're engaged enough to take the next step, are not taking the next step, there is a concrete reason. And then the question is,

Starting point is 00:28:30 as you optimize to make it better, are you asking the questions we're talking about? Is the copy helping them understand their immediate utility as opposed to the long-term value they'll gain from this product? Laisiness, vanity, and selfishness. Is this customer feeling secure with what we're offering? That's why I know we used to see all those labels on the internet about like verified, blah, blah, blah, blah, blah, and like better business bureau, blah, blah, and whatever, these badges. And I think they kind of stopped because everyone was just using them,

Starting point is 00:28:59 even though they weren't even going through certifications. It was like wasteful pixels. But what they were there for is to make you feel safe. So you would click that button and proceed, especially in the early days of commerce online. So I think it comes down to using data to understand that something's not working and then starting to ask the right questions around some of the principles we're discussing to make the right changes and test.

Starting point is 00:29:24 I'd love to turn now and talk about some of the things you've written that you're observing in the world that may take. turn into really interesting trends in software and just in commerce generally speaking. I always love people that are just insatiably curious about the present and try to see kernels or breadcrumbs for what the future might hold. The first one that really stood out when you wrote about this to me was what you call the era of edduployment and this interesting blurring line between the traditional system of learning and then going and doing something. Can you talk about what you mean by that concept and what you're seeing that makes you believe that that is coming? So what I,

Starting point is 00:29:59 refer to as eduploiment is a new trend I'm seeing where companies will basically solicit students for a trade to learn. Come and learn painting with me is a company called Main Street or come and learn how to repair every appliance you can imagine and get certified in each appliance. That's a company called Nana, as two examples. And then they train you up with certifications and online training. And then they say, hey, now that you're certified, this is the lead gen for you to then now practice your trade. In Nana's case, they actually go to all these manufacturers of Whirlpool and all these others. And these manufacturers get so much inbound from customers with problems. And then they're not in the business of service.

Starting point is 00:30:42 And so they're willing to just offset all of that volume of demand to people who can provide for it. And if Nana is like training people up for every specific appliance, then they can, in a very high quality, way, service any need of an end customer. And so what you're seeing is this vertically integrated stack of both education and employment that is fascinating. And it's actually really empowering for the next generation of small businesses. And people, it's like the next generation of leveraging some of the benefits of Uber, some of the benefits of great online education courses and stuff like that.

Starting point is 00:31:17 And then marketplaces, et cetera. And I think that also part of that is this notion of the reverse franchise model. you are an appliance repair person, but you don't have the ability to take payments. You don't have SEO. You don't even know what that means. All these other like aspects of your stack are missing. And so a company can kind of come to you and say, hey, in exchange for making it up, seven percent of your income going forward will like get you on the full latest stack of

Starting point is 00:31:43 everything and you can operate your small business, but actually like grow your business, you know, leveraging all of the latest technology. What do you think that means for the traditional education model, actually college, which I feel like you've been reading about the demise of, especially the longer tail, certainly not like top 20 universities, but everything else could be a bad deal, right? You come out with a ton of debt. It's sort of this weird general purpose education that's not tailored to any one real job to be done in the real world. Do you think that this trend might actually make that long tail start to go away? Well, I do because their education has been one of the most weird

Starting point is 00:32:18 ROI type of investments people ever make because they pay a fortune and go in debt for no guarantee of any return, at least not from a career perspective. I mean, yeah, we have a job department and we'll have a career fair and then good luck. And in this new world we live in, there will be new models that give you a higher guarantee than that. And so then the question will be, how will these compete? I can go to a small college and maybe get a job, or I can go to this company and get trained and get a guaranteed employment. And it's not just in painting and appliance repair. It's also in digital marketing analytics, you know, and other roles like that. You know, you saw the rise of companies like General Assembly and these schools are like trade schools.

Starting point is 00:33:03 You know, then there's the argument of O, but how about the classic liberal arts education and the types of things you learn to be well-rounded? Maybe those learnings come from other sources. We're all online these days. We have instantaneous access to things like masterclass and like all these other online sources of knowledge, like, why wouldn't we augment our development personally, as opposed to for a fortune? It's kind of related to one of my second favorite trends that you've written about, which is, and COVID obviously is a key part in all this. You see people that have been contributors to some media organization or whatever leaving, hanging up their own shingle, using a suite of tools, whether it's substack or something else, to sort of go direct to their

Starting point is 00:33:44 audience. What are you seeing beyond that just kind of obvious general high-level trend in the way that talent and their audience grows together, interacts, engages in commerce together. What do you think the future holds here? I think this is one of the most exciting things to me about the era we're living in right now, you know, this notion, this entire notion of the shingle, whether it was for an agency, a creative agency, a law firm, a venture capital firm, any of these entities, the reason they have names that are not the people's names, but the name of the business is because there was credibility that people needed to graft onto. And there were back office functions that people

Starting point is 00:34:27 had to share in order to be able to be competitive. And so you just take those two needs out. Now you build your reputation based on the knowledge that you share. You can really, and we've and I both seen examples of people who just go on a social media site like Twitter start sharing great insights into a particular vertical that they're in, and then suddenly amass a huge following, and no one's even met this person. People just emerge as thought leaders and experts. Some of them are even anonymous, and we follow them and, like, really learn from them, et cetera. So if that's any indication, there is, there's never true meritocracy. We've got lots of problems in society, but it is kind of exciting that individuals build a following now, and they don't need to associate themselves

Starting point is 00:35:12 with a shingle to be able to get opportunity. And then, of course, as you mentioned, the second part of that is the full stack of everything required to operate a state-of-the-art business these days that, as we both know, at this point, we can all get for maybe paying between 30 and 50 bucks a month from five to 10 different vendors. It's so exciting. What do you think are weird frontier aspects of this trend that may emerge? Are there ways that this gets even more extreme in terms of people not needing to be a part of a firm at all? Like, do you think that this starts to, you know, you've also written about decentralization, like with more and more pieces like the back office handled by some generic piece of technology,

Starting point is 00:35:54 could this get really strange where it's like basically companies of one all over the place? Well, if you think about it from a customer view, you always want to work in certain disciplines. It's all about the person. So I have a lawyer. It's really about him. If he said, I'm going to hand you off to so and so, I'd be like, no, I don't want to do that. My accountant is a person that I've gotten to know over the years. and I don't care where he or she works.

Starting point is 00:36:17 I just want to work with that person. And I think we're seeing it in spades in venture capital right now. Because at the end of the day, as a founder, you're bringing a person on your board. You're building a relationship with an individual. And who that individual is, what they're good at matters deeply to you. Historically, you've had to go to a shingle and pitch a bunch of people that you didn't know, and then you get one of them.

Starting point is 00:36:41 Now you can actually get enough money from individuals that you know and follow online or hear about or get to know whatever or who came from a great startup you admire, you know, you want to learn from. And you can have that specific person. And actually, when you tell people who's investing in you, you'd almost rather say it's that person as opposed to whatever legal entity they set up to operate. And so I think that we're seeing of people in firms, they're obviously, of course, all building a name for themselves. when they are in a firm that doesn't give them good economics, they leave because they realize that they're getting deals because of who they are, not because of who the firm is. And then you're also seeing individuals raise hundreds of millions on their own because that's what matters. So it's the market speaking and it's people capitalizing on this phenomenon that you and I are describing. So I actually

Starting point is 00:37:30 think we will, if you fast forward, I do believe that we're going to have a lot of individuals that we work with that have all of the benefits of a back office of being in a business, but are in fact soloists, as I like to call them. What does that mean for you as an investor? It almost makes me think, like, to use your messy middle term in a very different way, that this future then is about this long tail of individuals and maybe like a very concentrated set of mega, massive businesses, you know, the Microsoft's, the kind of infrastructure layer businesses that make all this long tail possible. And then the middle sort of falls away. The slight organization, the law partnership, the whatever it is that's in between those two things becomes less relevant.

Starting point is 00:38:10 And how do you interpret that as an investor? Does it then just mean you basically want to invest in the enablers in sort of the platform type plays, the Shopify's of the world? Well, as an investor, I have a very strong thesis around this empowerment of the soloist and how that will crack every vertical. You know, I am looking for businesses that allow people to operate independently and solve their problems. So, you know, if one problem is lead gen, or if one problem is CRM for the individual type business. When you looked at products like Substack and others, those are marketing tools for the soloist generation.

Starting point is 00:38:49 And so I do have that lens for things that I'm looking for. And I don't think big companies are going away. I actually think, though, that they're going to start to behave more as people. And what you're going to see is more leaders having a known relationship with their customer as opposed to standing behind their shingle. Maybe we'll be a lot more social media accounts for the people who work within companies and probably a lot more marketing campaigns

Starting point is 00:39:15 where it's more about the people that are at the company than it is about the company, perhaps. So you've got these two lenses of like, called back and front office. The back office, I think of another way of thinking about that is like productivity. You've also written about how so much software is just putting workflows into now web-based software

Starting point is 00:39:35 to make people more productive, just sort of standardized workflow processes, and that you believe that maybe this will begin to shift more towards enabling creativity. So as we cover off more and more of the productivity stuck into software, paper and pen and spreadsheet processes, that opens up people's time to be creative. What do you think that means? What does that represent in how the world will change if there's this move towards more creative tooling? This also connects, of course, with the conversation we had earlier about employment and trade schools and stuff like that, because let's take a step back for a second, it's very clear that much of the work that was done by people, of course, is being done by algorithms and software. We all know that that trend is locked and loaded and on its way

Starting point is 00:40:16 to happening. And so it's funny that we used to be measured in the workplace based on our productivity. And that's why companies like Microsoft and others that deployed productivity software across the enterprise were the rulers of the land and still are to some extent. And that's great. I mean, we're going to be able to achieve all productivity needs with computers. But then the question is, are we going to stand out and compete based on being more productive anymore? Or is there something else that we become measured by and stand out through? And I firmly believe that the most human thing that only we can do is to be creative, whether that means to visualize data in compelling ways to tell a great story,

Starting point is 00:40:55 whether that means to merchandise decisions more effectively in an organization to get alignment around them, whether it means everyone participating in building and critiquing a prototype. I just think that there is a moment where the creativity tool deployment across the enterprise will be much like the productivity tool deployment was in decades past. And I think that what are the implications of this? Number one, we're going to have to train people to be creative. It can't be art class on Fridays anymore. This has to permeate the curriculum.

Starting point is 00:41:27 When you're writing a history report, it shouldn't be a paper anymore. It should be a multimedia presentation where you're forced to learn video and audio tools. These are the skills that are going to help these kids have future-proof careers. And then in companies, it means that we can't rely on training everyone to use products like Photoshop and Illustrator. We have to have content first and collaboration first experiences via web as opposed to bulky desktop software. there's the next generation of creativity that we need to enable. It sounds like cheesy, but for the future of humanity, we kind of have to train people up to do stuff that's different and differentiating than computers. I mean, it's kind of obvious. What do you think it means to get

Starting point is 00:42:05 better or more creative, get better at creativity or become more creative? Is that something that I could send you a generic person and you could train them somehow or show them a toolkit to become more creative? Like, what have you learned about making that a thing in someone's life? Yeah, once people do become trained, they like a blank canvas. They like to just have their utensils and just start to work. But for the majority of us, we want to see things that we feel compelled by. And then we want to click remix and basically make it our own. That is that broader democratization of creativity opportunity. And so if you were to give me a handful of folks and say, make them creative, what I would do is expose them to a lot of templates that address, the problem they're trying to solve. And then when they clicked one, I would automatically sync with their company's brand or their past posts or whatever else so that they get the design consistency by default, as opposed to a creative professional's job is to like continue design consistency.

Starting point is 00:43:10 There's this whole notion of a design system in every organization where your fonts and your colors and like all these things are consistent. But if you can do that by default for this non-creative pro that we're just then they're off to the races because now they can actually churn out real-time assets on behalf of their product for all these different social media formats and everything without needing a design team to work for them. And you know, it's one cool thing. Remember the Super Bowl and the lights went out? Yes. And within 30 seconds, the Oreo social media accounts tweeted and posted, you can still dunk in the dark. Amazing. And I was like, that's a

Starting point is 00:43:50 But here's what's really cool about it. It's impossible that a creative professional design team in a product like Photoshop made that within 30 seconds and posted it on all social media accounts. Not possible. But some social media marketing folks were outfitted with the right templates, with the right brand elements, with the right fonts, with the right imagery. And they were able to turn this out and think and act in real time. And if you think about the social media world we're living in now, think and act in real time might be the future of marketing. And it's not going to be driven by big creative agencies and creative teams. It's going to be driven by social media marketers that have everything at their disposal

Starting point is 00:44:31 and can do it now. What do you think is that maybe we'll even get into like the sci-fi kind of realm, the future of interfaces? You mentioned earlier that you kind of don't want to do something new unless it's really unlocks a lot of potential that wasn't possible before. where do you see that being true where some sort of user interface is really new, innovative, and disruptive to our current interfaces? This is something I've been thinking about 2016 or so.

Starting point is 00:44:57 I wrote an article called the interface layer. And my argument was that design is going to commoditize everything underneath. And I got a lot of backlash from friends who are engineers and data scientists. They're like, Scott, dude, like, you know, I know you're all about design and stuff. and you've got like the bias of Behance and whatever, but come on, like, it's all about the technology. And my response is, well, customers don't love technology for the technology. They love technology for the user experience of the technology. I mean, you can have really incredible tech, but if the UI is like impossible to use, you're dead out of the gate.

Starting point is 00:45:35 So by logic, that means that the interface layer does actually determine the fate as much, if not more than whatever is underneath. And then fast forward in a world where we've got APIs for every service imaginable and tons of underlying services. We use all these like enterprise products and even consumer products that we use. If we could just bring them together in superior ways, we'll use the aggregating product. And you know, you just saw a new startup called text launch, which is trying to aggregate all of your messages into one interface, which is really hard to do because Apple, Google, and others are always competitive with their messaging products.

Starting point is 00:46:12 But with the mind on the interface layer, my view is that we are going to become agnostic to the underlying services themselves. If you need a ride, do you care if it's Lyft or Uber or whatever else? No, you just want to say, I don't know, to Alexa maybe, I need a ride or to Siri. Those are disruptive interfaces because they're audio. And if those interfaces, then send that request down to a layer that competes and finds you the closest and best price. car, you'll just take whatever car shows up. And so that's very disruptive. Now, will those companies release APIs that allow some company to, you know, have those compete underneath the surface? Maybe not now, but I think they're going to have to because the interface war is like a slap of

Starting point is 00:47:00 hand game, the better, more superior, more accessible interface. I'm actually surprised if I were running one of these big consumer electronics companies, I would offer to install screens in every kitchen for free. Because if you could own the indispensable real estate of a family, which is the screen, it's amazing how big of an industry there is around billboards and stuff to own this real estate when we're driving. But when we're in our kitchens, if every family in America gracefully accepted a free screen in their kitchen, that is an example of a disruptive interface because suddenly it's just there. And if you buy things or request things, you're agnostic often to the services underneath. And so that's fascinating to me.

Starting point is 00:47:41 It's sort of like a way of saying you just want to own the front door, the on rep, all the way through where we started, the first mile. You want to own from user intent or interest. You want to be the first place that the lowest friction place that they can go fulfill that intent. You do and it goes back to the power of designers. I just think that at the end of the day, designers are the ones who are influencing the decisions that we make. It's in the interface that we make every decision in our lives these days. Are there any principles of good design that you would leave people with that you've learned from working with so many over the years of what good design means? Well, I guess a few thoughts. One is I do think that rate design is ultimately manifested as small things that make a big difference. And whether it's the omission of something or the thoughtful indication of what's active versus inactive or are you on mute right now or are you unmuted?

Starting point is 00:48:38 And like, what does the button actually do? I mean, all these little nuances really address or either fuel or release our anxiety based on the decisions that are made. So I think also great designers are also grounded in some of the stuff we talked about earlier around object model. So, and I've worked with a lot of designers. And what I find is that there's some people that are so talented, but for whatever reason, they make things look beautiful, but the object model is not there.

Starting point is 00:49:04 In other words, when I look at the design, it's not clear how I got there. what I'm supposed to do and what I'm supposed to do next after that. But some designers really get that. And I think it has in part to do with empathy, in part to do with a sense of product sensibility, you know, how things are built and what the states should be. This notion of, I love the term when you're building a product of progressive disclosure. And what that means is that it only shows you what you need to know when you need to see it.

Starting point is 00:49:30 A B designer will like show everything you need and do it beautifully and thoughtfully. But an A designer, an A-level designer, will only show you the things when you need, when you need to see them. And we'll really work with the product team to understand the customer's needs because the less noise, the more signal, the more informed we are. Do you think that we're slated for a decade ahead that is explosive or is sort of regressive? Coming out of COVID, what is your sense for the way that the business and sort of economic world will go? do you think pent up demands a real thing? Are we in for the roaring 20s that everyone likes to talk about? Yeah, so I do believe we are.

Starting point is 00:50:12 And I think that it's going to be a really wild emergence. I think that we have no idea what the impact of our pent-up lives will be. But what I can say is that the world and experiences have never been more accessible to us. Products like Airbnb, products that allow you to take audio tours of every nook cranny of the world. I'm really excited about the next slate of augmented reality experiences. Think Pokemon Go, but think doing scavenger hunts to find hidden bitcoins and all kinds of fun, interactive, augmented reality experiences out in the world that technology has sort of teed up for us, but over the last year, all went kind of dormant and people were just heads down.

Starting point is 00:51:00 So I actually do think, you know, I was talking to my friend Jen Hyman, who wrote, rent the runway. And she was talking about her team's work planning the fashion collection for the next year for 2022 and 2023 and how they're really convinced alongside the fashion designers that they consult that there's almost like a culture bending aspect of the resurgence that we're all going to have of the roaring 20s, you know, where we're going to want to just not only get out there, but maybe be like a little bit more adventurous and self-expressive than maybe we were beforehand. So listen, I'm an eternal optimist. It's actually probably why I never saw myself as a classic venture capital investor because I think in some ways you have to be a, you have to see by default

Starting point is 00:51:45 what could go wrong as a great investor of a lot of money, whereas as a seed investor or a product person like me, you just have to see the potential of something to get excited. But that's my take. Well, this has been so much fun. I mean, such a great set of lessons on how to build great products and respect the user, I guess at the end of the day. Their needs, their laziness, their selfishness. I think it's a great set of lessons and also these fascinating trends about what the future might hold. I ask the same closing question of everybody that I talk to, which is to ask, what is the kindest thing that anyone's ever done for you? I think the kindest thing is really to make time when there's clearly nothing in it for them. We all now know, and you get

Starting point is 00:52:22 into a point in your career where you start getting a lot of inbound stuff, it just start, you start to filter it all out. And it's like, oh, you know, I just need a few. I need to say focus on my family and make sure that I do what's absolutely necessary at work and take the occasional opportunity when it comes from like a really great source. And then you start to close everything else out. But when I look back, you know, I remember certain people who were like really great leaders in their industry who made time for like a kid in high school in some cases or in business school. And so I now I realize just how kind that was, you know, how like kind of selfless it was. It was sort of a pay it forward motion, I guess. I challenged my,

Starting point is 00:53:01 myself to somehow prioritize that, even when it becomes a little less, like, you know, easy to do so. Well, Scott, there's been so much fun. The way I'm starting to mark these episodes is like, how many little portable ideas can I walk away with and go, you know, go be productive with? Thanks so much for your time. Been excited to do this. Thank you. Awesome, Patrick. Thank you. If you enjoyed this episode, you can sign up for a new email newsletter sent out each week called Inside the episode. Each week, I condensed that week's episode to my favorite big ideas, quotations, and more. I've been recommending books to members of this email list for years,

Starting point is 00:53:35 and we'll keep doing so in this weekly email. You can sign up at investorfieldguide.com forward slash book club.

Invest Like the Best with Patrick O'Shaughnessy - Scott Belsky - Focus on the First Mile – [Invest Like the Best, EP. 213]

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