Modern Wisdom - #461 - Julien Smith - Learning From Elon Musk's Twitter Takeover

Episode Date: April 16, 2022

Julien Smith is the CEO of Breathe, a startup founder, investor, and an author. Elon Musk is trying to buy Twitter so I wanted to ask someone with experience of the startup world to explain what this tells us about Silicon Valley's modern approach to business and their obsession with growth. Expect to learn what is unique about the startup mindset, why Elon might be poison pilled by Twitter's legislative documents, the difference between founders in startups and regular businesses, how not getting discouraged and just keeping going can count for a lot, why being first is a disadvantage as well as an opportunity and much more... Sponsors: Join the Modern Wisdom Community to connect with me & other listeners - https://modernwisdom.locals.com/ Get 83% discount & 3 months free from Surfshark VPN at https://surfshark.deals/MODERNWISDOM (use code MODERNWISDOM) Get 10% discount on your first month from BetterHelp at https://betterhelp.com/modernwisdom (discount automatically applied) Extra Stuff: Follow Julien on Twitter - https://twitter.com/Julien Check out Julien's website - http://juliensmith.com/  Get my free Reading List of 100 books to read before you die → https://chriswillx.com/books/ To support me on Patreon (thank you): https://www.patreon.com/modernwisdom - Get in touch. Instagram: https://www.instagram.com/chriswillx Twitter: https://www.twitter.com/chriswillx YouTube: https://www.youtube.com/modernwisdompodcast Email: https://chriswillx.com/contact/  Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello friends, welcome back to the show. My guest today is Julian Smith. He's the CEO of Breathe, a startup founder, investor and an author. Elon Musk is trying to buy Twitter, so I wanted to ask someone with experience of the startup world to explain what this tells us about Silicon Valley's modern approach to business and their obsession with growth. Expect to learn what is unique about the startup mindset, why Elon might be poisoned pilled by Twitter's legislative documents, the difference between founders in startups and regular businesses, how not getting discouraged and just keeping going can count for a lot, why being first is a disadvantage as well as an opportunity and much more.

Say what you want about Elon, it is significantly more interesting to live in a world where the guy who actually has the money and the ability to take over companies actually goes ahead and does it whilst everybody else just talks about the way that they would try to change things. It's nice to see someone that's got skin in the game, so I love him or hate him. I think there definitely is a lot to learn from the way that he's approaching this. But now, please welcome Julian Smith. I'm on the other side of what everyone else, everyone's like this is catastrophic because I of course I'm reading Twitter about this.

I think, you know, there's this weird, because it's not much, not the founder of Twitter, excuse me, of Tesla. He's not the founder of Tesla. But he did take Tesla to, from where it is, to where it is today. And, and, and so there is this, there is this stagnation. I'm a small Twitter shareholder. There's this stagnation inside a Twitter, where it's like everyone is wanted,

and the edit button is like the manifestation of this. Like no one wants an edit button, but they don't want to give an edit button. It's like a manifestation of a stagnation that occurs inside a company, when a kind of sometimes one of founder does run it properly. So I actually believe Twitter is one

of the greatest, most amazing things on this on this earth. And so I can't believe I'm going to say this, but I'm for it. I'm for it. I'm for who's against it? I want to do it. I want to do it. Everybody is against it. Yeah. Dude, your Twitter sphere is completely wrong. Look, let's give for the people that don't know what's going on. I'm going to give you the breakdown. Elon Musk has offered to buy Twitter to take it private. This is from the New York Times article. Elon Musk offers to buy Twitter live updates. His takeover bid at $54 and 20 cents a share comes just weeks after he became the company's largest shareholder.

Here's what you need to know. Twitter's stock price just at the market aren't convinced by Musk's bid. I don't think I agree with that. The New York Times is probably trying to spin it. So Elon Musk has launched a takeover bid for Twitter offering to buy it for $54.20 a share just weeks after he became the social media company's largest shareholder. Mr. Musk said that this was his best and final offer representing a 54% premium over the day before he began investing in the company in late January. In the filing, Mr. Musk said, I don't have confidence in management and that he couldn't

make the changes he wanted in the public market. So at that point, I mean, that's a pretty damning comment from somebody who's just arrived in the house, hasn't even taken their shoes off, and he's curled a big fat one out in the middle of the carpet in front of everybody. I don't like what can make him fit dinner. Let me take over. Yeah, precisely. We have a proper dinner this way,

otherwise I'm leaving. I didn't know, because he's actually posted the tweet that's gone super viral. I bet that this is the most accessed SEC document of all time. By far, so he's just tweeted a saying, I made an offer linking to an SEC filing

which presumably just that have to be made public. Is that the sort of, right? Okay, so this was out there in any case and rather than him just letting somebody find this, he's decided to get out ahead of it. But it's got in it, it's got some exhibits and I don't know how common it is for this sort of stuff to be shown there. In it, he says, this is him to Brett Taylor,

chairman of the board. I invested in Twitter as I believe in its potential to be the platform of free speech around the globe. And I believe free speech is a societal imperative for a functioning democracy. However, since making my investment and I realize the company will neither thrive nor serve this societal imperative in its current form, Twitter needs to be transformed as a private company. As a result, I'm offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium.

My offer is my best and final, and if it is not accepted, I would need to reconsider my position as shareholder. Twitter has extraordinary potential. I will unlock it. So presumably, you might be able to explain this better, but presumably what he's doing here is he's saying, all of the shareholders in Twitter, I'm going to offer you a 54% premium on where I started a 38% premium on the day before. However, if you don't do that, not only are you going to look like you've been cooked to your own shareholders, but I'm going to withdraw my, I'm going to dump 10% of my stock back into the market. All of my ownership. And then the stock will tank down again to wherever it was before the Elon Mustang in the first place.

And so it is, and by the way, you'll note that the 5420 number includes the number 420, which he also did, whenever he said he was going to bring Tesla private at $420, like maybe a couple of years ago back when it was worth much less than that. So he said, I've got a private buyer for Tesla at $420 a share, always this number for 20, right? Why is that? And why the number for 20? He's not meaming his way through.

Are you sure? Because. Are you kidding? Are you trying to suggest that Elon Musk is using 420 like blaze up day as I All that here's what I'm suggesting actually here's genuinely what I'm suggesting I'm actually not sure that he's not doing that But the reason that I think that this is so interesting is that is that

So much of of what you do as a founder as a CEO CEO, as all of these things, really in the public sphere. So much of what you do is about telling a story and people believing in you. And honestly, if I can be super clear, again, being back to being early on everything, when I bought Tesla stock really, really long time ago. And since it's like the one thing I wish I had put like all of my money into, but didn't. But what happens is you're looking at a company that effectively was in solvent and wasn't going to succeed unless he was able to get people to believe. And I'll tell you what he's really good at is getting people to believe in something. And then that allows kind of like

that story to write out and become dominant. And he's good at that, like over and over and over again. Surely if he's about to take this company private, his ability to make people believe from a value creation perspective now becomes irrelevant. People don't need to believe in Twitter as a platform, they already need it. The difference with him with Tesla is that his ability to garner belief actually then pays out dividends in terms of the share price.

Yeah, that's definitely true. It's a different story. The main thing that he's going to, I mean, let's assume this is even real, right, versus like it being some giant colossal choke, and he's going to be sued by the SEC again, which he was when he did the 420 thing in the first place. the SEC again, which he was when he did the 420 thing in the first place, is then I think that there's a huge percentage of employees there to be like, I don't want to work for this company anymore. And so you could see how it could completely tank the number of people that want to work at that company. But it's true that Twitter has a gigantic amount of the common square,

common would, common's value that is in fact not properly unlocked. Like, and I don't know why, it's like people, you know what, the Mark Zuckerberg used to call Twitter way back in the day when both companies were private, he called it a clown car that drove into a gold mine. A company filled with schmucks that nobody, like nobody knew what they were doing, barely keep it going. And it drove into the one of the most valuable

opportunities in the universe. That's hilarious. So there's a bit at the bottom. I don't know what this is. It looks like maybe a WhatsApp message or something. So this is again, this is in the SEC filing, right? SEC.gov slash archives, blah, blah, blah, blah, blah. And this must be Musk. As I indicated this weekend, I believe that the company should be private to go through the changes that need to be made.

So presumably he's teed this up at least over the weekend. After the past several days of thinking this over, I've decided I want to acquire the company and take it private, I'm going to make you send you an offer letter tonight. It will be public in the morning. Are you available to chat? And then there's a voice script.

And he says, best and final, A, I am not playing the back and forth game. B, I have moved straight to the end. C, it's a high share price and your shareholders will love it. D, if the deal doesn't work, given that I don't have confidence in management, nor do I believe that I can drive the necessary change in the public market, I would need to reconsider my position as shareholder.

This is not a threat, it's simply not a good investment without the changes that need to be made, and those changes won't happen without taking the company private. Finally, my advisors and my team are available after you get the letter to answer any questions, there will be more detail in our public filings. After you receive the letter review, the public filings, your team can call my family office with any questions. Can you imagine for a second that you are whoever it is that's received

this particular letter at Twitter? Last night, you night, it's a quiet, easy wednesday in the middle of April, and out of nowhere, like what's that message from Elon Musk and a voice note? And you go, all right, I wonder what, what, what, what, what, what, hold on a second. I wonder what this is.

Oh, Elon Musk. I know it's date night baby. I got it, I got to look at this. Yeah, just wait there. Oh, Elon Musk's offering $43 billion to take my company private. Like I said, I own like not a lot of Twitter, say, I was like, not, I don't know, 10k worth or some number, you know, and like, I just want to hold on to them. Just as a relic, I want to put them on my wall. You know, there's there's like a I mean I never got a certificate I don't think he gets a difficult anymore

I'm afraid it on my wall like wow. I knew that I knew about this when you know, okay So he said uh what happens next in musk's Twitter takeover offer? This is from the New York Times Elon Musk offered 43 billion dollars. Here is what will or or could happen next the board reviews the offer The board will work offer, the board will work with its advisors at Golden Sacks, through review Mr. Musk's offer. They will have to consider amongst other things whether the deal fairly values the company and whether Mr. Musk has the financing to cobble together a deal. The board cannot simply decide it does not like Mr. Musk

as a suitor, but they can come up with reasons why they don't like the bid. Like, for example, his ability to fund it, said Stephen Davidoff Solomon, a professor at the School of Law, blah, blah, the board announces its decision. The board will likely take up to a few days to review the offer. If it rejects the offer, it can go in one of several ways. It can put in a defense mechanism known as a poison pill. Yeah. What's that? Yeah. Okay. So the details of the poison pill is, well, the concept of it is, if you consume the poison pill, it will kill you. And so if I understand correctly, there's a huge amount of these in Twitter's bylaws

maybe, and by the way, I'm not super familiar with it, but there's, and Twitter's bylaws, there's a ton of poison pill provisions that effectively said, if A happens, if B happens, if C happens, I, this, this, I guess, software or this, this public good, so to speak, is protected. And so it's possible. And I don't remember what the poison pill provisions are, but they exist in a number of different companies' Biles. And at Twitter, my understanding is there's a huge amount of poison pill provisions. And at Twitter, my understanding is, there's a huge amount of poison pill provision. There's more than in most tech companies.

It's because they're trying to protect it. It's wild that that's what it's called, poison pill. It says the poison pill limits the ability of Mr. Musk and every other shareholder to buy up Twitter shares in the open market. Once it does, it can still decide to sell itself, but without the pressure of Mr. Musk, blah, blah, blah. There are reasons Twitter may opt to not do the poison pill, which

again, I can't believe that that's even a term. Maybe wary of potential criticism that a poison pill is deflecting the concerns of a highly vocal member of its community. Likewise, Mr. Musk, who's reported to stake incentive, blah, blah, blah. The board potentially looks for a white night. Twitter has been looking for a sale ever since it went public, says Howard Birken-Bilt, who leads the capital markets firm at Blah Blah. Mr. Musk's latest activity, most likely heightened interest in Twitter's immunability to a deal, some private equity firms may be put off by Twitter's limited cash flow, but a number of technology companies may take a look, given heightened interest in the social media giants power and

reach. Looks like the stock price has, it's bumped about 10% in the pre-market and then pulled back a little bit today. It's 15% higher than one Musk first revealed it, but is still down from a $77 high February 2021. Keep in mind, Snapchat went public, sorry, that my timeline's a little weird, but let's say six years ago or something like that. And it has, I believe it's even less users, but it's more profitable and is trading better. And by the way, I hate Snapchat

and I hate Evan Spiegel and all the people that are associated with Snapchat, just on principle. But it's somehow, despite the fact that it went public five years ago versus public a Twitter that went public that much longer over a much longer time frame, like Twitter still cannot get its act together. I like I don't know if you personally believe that this is I have I have always thought of this company by the way, there's a lot of people on Twitter's board that are probably aligned with this Elon Musk philosophy of the founder or someone with a great deal of value, a great deal of vision can take it over and make it better.

Brett Stevens, who's the co-CEO sales force, I think that's his name. Drew Hauston, who's the founder of Dropbox. I forget the founder of DoorDash's name, but another dude who's on the board of Twitter. And so along with others, Jack Dorsey, the current CEO of Twitter. So there's like a bunch of people probably aligned in the direction of like, okay,

but what's he gonna do? And there's another that would say, well, maybe this is good, we've been looking to do this. So who knows? I mean, the 21st this is good. We've been looking to do this. So who knows? I mean, the 21st century is weirder than we've ever, than any of us could possibly imagine. I think we could agree on that.

Twitter's board met on Wednesday, according to a person familiar with the situation who wasn't authorized to speak publicly, hours after Elon Musk's offer to buy the company. Mr. Musk turned down his seat on the board over the weekend, leaving board members who had recently welcomed him into their ranks to weigh a proposal in which Mr. Musk said he has no confidence in

their management of the company. But what I found out was that the reason he turned down a seat on the board is because he couldn't have put in a bid to take over the company at 100%. If you got one on the board. So that was one of the reasons, you know, Twitter a while ago. And then think about, you know, the other game that may have been played here, when Elon first purchased his 9% stake, and then Twitter goes, oh shit, Elon's probably got the wealth that he might try to take us over. Why don't we offer him a seat on the board? Because

if we offer him a seat on the board, he can't take us over. So they're playing the game because originally everyone was like, Elon's is whatever a silent partner. He's not contributing in the way that everybody wanted him to, which really isn't, no one gives a shit about what he does financially with Twitter. Everyone's bothered about what he does operationally, culturally, in terms of the branding and its policies and stuff like that. And um, yeah, man, I was talking to Dan from Drinking Brows about this literally a couple of minutes ago. I was like, it's so wild and kind of cool that we have somebody on the planet who has the resources and the motivation to do the things that everybody else daydreams about doing.

You know, everybody in tech has an idea about what they would do to fix Twitter, which is the platform of tech, in any case. Yeah, I definitely agree with that. has an idea about what they would do to fix Twitter, which is the platform of tech, in any case. Yeah, I definitely agree with that. And we have, it also like founders are younger than ever with more power than ever, right? Like keep in mind that that ascent is more and more rapid

than it ever has been, the acceleration. And so for me, the person who really exemplifies this or the pair that exemplify this the most is Patrick and John Collison who run and founded Stripe in I must be 10 years ago or something and it's since become a $100 billion company and it's still private and then they're like yeah We're going to try and solve carbon capture Which is like another obviously really meaningful problem for the earth and and so you have these people that still have their, still have a certain amount of optimism

and still have a certain amount of feeling like they can still contribute and they can still do something. 30 years ago, 40 years ago, and before that, it may be different to you, but like it felt like all the people who had this power were old and cynical and and we're just trying to do like, like hold onto their cash and get it to become more valuable and nothing else.

Well, how old is Elon Musk age? Literally 50 years old, bro. So I mean, Elon's not a young guy. You know, he's like slap bang in the middle of what you would expect from somebody that's doing this stuff. The difference is that he has quite a young spirit with him. You know, he's got that very sort of contrarian, heterodox, fuck you to the man, dog kind of the moon thing. And dude, I'm in for this. So, you know, moving beyond what's going on here, there's some stuff about Salesforce, tried to purchase Twitter and the sale went through

and some other bit. You know, everybody can go and read the New York Times article if they want to go and find out a little bit more about this. But I think, actually, first question, is this what's considered a hostile take over? That's a great question. I think the answer is, yes, what a hostile takeover is strictly like legally speaking, I'm not clear on, but the understanding is that it is a hostile takeover in the sense that it is being done without the permission of anyone else that's involved.

And it's effectively like backing all the shareholders and the board maybe into our corner. Interesting. So I'm looking at some of the biggest replies, some of the highest replies here. A man who's willing to spend $41 million for free speech is a good man that I can admire. Someone reply and said, if you're paying billions, you're buying speech, it's not free.

I don't know. What do you think? The thing that I don't get is people's aversion to Elon Musk. Oh, well. They have a very strong one. It's interesting because people often make those comparisons with Jeff Bezos too.

They're like, oh, how rich is he really? And they show like an ant and then a skyscraper. And they're like, this is you. And this is how rich he is. And they show these crazy comparisons of wealth accumulation that are admittedly like out of proportion with the past because of because of tech and again that acceleration that was able to happen. It happens faster than ever, but then there's this automatic assumption that all they're trying to do is accumulate like money is no longer valuable to these people. And so then you could think, well, what's the next thing? Oh, is it power that seems simplistic to me? It really feels like they want to make the world,

maybe the language is neutral, language is in their image, and that could be some good and some bad, but I don't know. Like space travel feels pretty good to me. And electric cars feel pretty good to me. Like know, and electric cars feel pretty good to me. Like admittedly, one of the stories of Elon Musk is he, I think he made some money from his previous company, Zip Something before PayPal or whatever.

And immediately when I bought it, one million dollar McLaren car and crashed it on his first ride out. So when I talk about a normal person, but we're still talking about somebody that has more vision than the average Twitter shareholder. I would say more vision, but the thing that's interesting is all of the, like, new world order accusations that get thrown at Bill Gates, Bill Gates doesn't have as much wealth as Elon Musk. But for some reason, more people seem to be happy with Elon, at least from, I guess, like the center right side of the fence Certainly seem to be a little bit more happy with him because he's kind of cool and young and hip and does like meme coin stuff, but

I I just don't know I just don't know what it I don't know what people's problem with Elon is overall that I don't think he's Said anything particularly egregious. I don't think he's got like a secret alt-right past. I might be wrong. Right. Yeah, I'm not sure that that's it. I don't think that's the case either, but there is this thing that happens and the general attitude in tech, right? And it's true everywhere. Mark and Jason, Elon Musk, like Jeff Bezos is more neutral. And by the way, people did feel this way about Bill Gates

in the 90s during the anti-trust lawsuits that were going on with the government. But it's sort of receded since then, and Bill Gates became this dude that is almost like John Rockefeller, senior. John Rockefeller, senior, his post-oil monopoly thing that he did is he went out and he spent a gigantic amount of money donating it towards mostly medical causes. And his father was a quack doctor. And so he was like, oh, okay, well medicine needs to be evolved and all these other

things, essentially what Bill Gates has done. But these people are too young for that, and they still have energy. And they're like, I can run another company. Because when you run one company, I haven't run a company as this big as that. But I have run a very small lot of money, and I've built companies that are meaningful size for startups.

You're still like, I think I can do it again. I think I could make it better and easier this time. So I bet he still has a lot of that energy in him. There's a bunch of replies from Gab. Are you familiar with Gab? Do you know what that is? I am familiar with the website, Gab. Yeah.

Okay. So there's one set of replies. Counter-offer. Sell your 9% Twitter stock. Invest $2 billion in Gab. Join Gab's board and let's take them down. You have to consider that bringing free speech to Twitter isn't as simple as buying it. Apple and Google do not allow free speech. So if you stop the censorship blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah,

dude, this is the equivalent of the guys on PornHub that comment, that comment things saying, if she, if I got my hands on her. If only I was in that room. Yeah, dude, she wouldn't know what we got. And all the people that comment on, you know, glamour models, Instagram pages, saying, looking so hot, sweetie. You go, look, dude, Elon's not bothered about buying Gab, you know? He's, he's,

This is the thing is like, is anything off the table at this point? But that's the part that really homeboys is shit out of me. Homeboys playing in a $50 billion hostile takeover of the largest town square platform on the world in the world. Yeah, for sure. You know, Gab is a free speech alternative might be fun or whatever, but it just seems

to me like a really poor move. I think Rumble did the same thing when Rogen got popped by Spotify about, is it going to take episodes down and do an apologies and things like that. And Rumble will like, oh, we'll offer you 100 million bucks to go from Spotify to us. And you think, I understand that when you're sat in a boardroom, that it kind of sounds cool, but when you're everybody else watching on Twitter, you sound like the guy on PornHub saying that you should come to, you should come over to my casting couch, you're supposed to, the one that you're on right now. Yeah. And because the platforms, like, nothing's gonna, they're gonna, become Spotify, like, no

matter how much, like, that's been one. And so that's the same thing with Twitter actually the common square It's just Twitter maybe I don't know about forever, but keep in mind like it is the one place where you can go say some shit Well, maybe not everything anymore. I don't even know about that But like where you basically go say some shit no matter how stupid or offensive it may become and It is public which by default on snapchat because we offensive it may become. And it is public, which by default on Snapchat, because we talked about other social channels before, it is not on Facebook, it is not on a medium that's behind paywalls now. So you're not even there on clubhouse.

I don't know if it is relevant or important. Instagram's got the equivalent amount of access, but you are right, I understand. I think that overall, dude, I'm so down for this. I'm down for everything, just burn it all to the ground, right, and let's start again. Let's go Mad Max, total scorched earth policy. But it'll be interesting to see what happens. I'm gonna be interested to see how this,

and if nothing else, dude, the thing that I've taken away so far is it's cool to have somebody that has the resources and the motivation to actually go after this sort of stuff. I enjoy the fact that we live in a world where someone at least can offer this out. You know, it's on Twitter whether or not they want to decide to take this thing, are there concerns about centralizing control and ownership underneath one person who, you know, let's say that Elon Musk gets a brain tumour in four years' time and decides to mean, say that,

you know, makes some ridiculous policies on Twitter and completely destroy the platform. You go, okay, yeah, maybe that's not good. But you also have centralized control currently at the moment with someone who's going through obvious dementia that's got the nuclear football under his arm. So, you know, the centralized control argument, I'm not convinced really, really works.

But I'm glad it's happening. I'm glad that he's there. And yeah, if he memes his way to owning Twitter, then that for 20. But you're right in as much as at least somebody, at least some drastic change is possible, whereas before, you know, I mean, the thing is that we say in tech,

is like as soon as like a professional CEO takes over, that company is like, there's nothing ever happening ever with that company ever. And so this is almost like a founder like move. And I'm excited to wake up to the news kind of. I'm more excited to wake up to that than like somebody punching somebody on a stage or whatever happened two weeks ago.

Yeah, I agree. Paul Graham's got this quote, I think that I learned from you that says, don't give up and don't get demoralized. Yes, yes. Advice to start is, do you think that there's anything else that's missing from that? So that's from a famous article called 13 phrases about startups. And the two, the two ones at the end are like, don't get demoralized.

And if you happen to get demoralized, don't give up, even if you are demoralized. And the reason that he says that is because startups are like not rocket science. Like so long as you keep going, and you even raise a little bit of money to keep going, you'll be able to deviate your way to success. And so that's actually like, that's why the clown car was able to drive into the gold mine from the conversation before,

because they were able to get enough money to just kind of deviate while the thing was skyrocketing. And so the number one thing that they say in startups and it's true for all companies is like get someone to love you. And if someone like I just do an on we serve coaches for people in the context of my that are just randomly listening to this, I run a company practice that serves coaches. Let's help them run their business. So I just on-boarded to dude and he's like, my God, you're just saved. You've just like solved so many of my problems,

and he's so excited. You just want to have one person like that. If you need a one person like that, there's probably two. If there's probably two, then there's probably 10. If there's probably 10, there's probably 100, you have a company. So it's really about, and I think even says it in the same article,

instead of making 10 people or 100 people ambivalent, get one person who's just like, I can't get enough of this to come out of the woodwork or find a person like them. What's the difference between a startup founder and a normal small business owner? Because I'm friends with a ton of small business owners. Most of my friends in the UK have businesses of some kind. You're familiar with Johnny and you, Seth from Propane. You know, they've been running a company nearly as long as I have. I've been in nightlife since I was 18 years old. Everybody there was running their own company and hustling on the side, doing social media, doing whatever it was. And yet there seems to be a step change between...

There's something fundamentally different about a startup founder, you know, someone that's raising capital that's... Is it simply the sector or the industry that they're in or is there something else going on that's the difference between those? so the main one is this like there was a period and actually maybe it's still true wherever every company can refer to themselves as a startup but strictly speaking. It's made probably there's capital in the bank and a capital in the bank allows an insane acceleration to occur and so there's like you you know, we can talk, we talk about an ecological, we can talk about anything. My fiance runs a pottery studio, okay. And so no matter how many people she gets to become, to try to become customers of her pottery studio, like there's only certain square feet, so there's only a certain number of seats. And so then you have to start another

place and that's going to be expensive too. So it's like there's these costs. And so from the perspective of finance, it's about the marginal cost for the next person is almost zero. So cost almost zero to bring the next user in. It's true for Twitter, it's true for Stripe, it's true for what's a GAB, it's true for all of them. And so the zero marginal cost for the next customer or user means that it can grow to infinity with relatively low costs, which means it is, there is a chance, a small chance that

it can become insanely successful, insanely quickly. So quickly, that it makes your fucking head spin, and that's true for Twitter and I've run companies like that where it's built like the wheels are falling off and it's growing so fast. So that's the for Twitter and I've run companies like that where it's felt like the wheels are falling off and it's growing so fast. So that's the essential difference. Speed. Scaleability. Speed and scalability, ideally. Okay. Yeah. Well, it's just, I find it very, very interesting because again, I wonder how many of the guys, I don't have that startup. I don't know whether

it's that I'm not in the right circles. I've definitely started to be around them since I've been in Austin. But some of the people that I've met that run startups are total droogues. Like, these people couldn't hold a candle to some of the operators that I've had that have either worked for me or worked with me. And you think like the shrewdness that the boys have got that I am, their executive function, their ability to be able to see and be agile and predict and charm people, all that stuff, right? And I really do wonder whether if we were able to switch roles for a little while and I could pick kind of a dream team of the people that I've worked with over the last 15 years and I could throw them into startups. And I'm sure that there's, you know, there's tons and tons of people who are unbelievably

shrewd operators when it comes to their small plumbing company, gardening company that they run, their dog grooming business, their online coaching, fitness coaching thing. And you go, okay, here's $100 million of seed capital and a pretty good idea. Let's see what you do. So it does seem to me a little bit like kind of first mover advantage, right place, right time, and then presumably as well, a little bit of people, having an existing reputation of being a person

that is a founder, that gets more opportunities because you're a founder or a startup or an investor or an angel or whatever. I agree with all of those things. The higher the margin of the customer, the more money, the less cost you have per incremental customer, the more you can fuck up. Basically straight up, that's basically the difference. So if you're running a business where you make a dollar and you have to pay 90 cents back for that dollar, you've got a tiny amount of money to make, which means you have to execute incredibly well. The most important example of that is a restaurant.

A restaurant is an incredibly difficult business to run. You make 5% margin, 10% margin maybe if you're placed full. There's a really hard business to run. If it's run improperly, you just die. So what happens to startups is giant amounts of capital become accessible, which gives you an opportunity to fuck up over and over and over again. You can become a good operator, but you just don't have the amount of discipline that you need in real industries. Oh, because you've got more degrees of freedom to mess up. That's right. And so the primary reason that you need that ability to fuck up at the very beginning

is because you actually don't know if you're serving typically like an online, you just have a good example, online coaching business, you know who the next trick or mental customer is, you know how to get the first one, you're like, okay, you know, the referral business, like maybe I'll get another referral after that, startups are filled with ambiguity,

we're gonna come up with this insane idea, it makes no sense, but randomly, some dude is gonna give you 500K to go for it. That brings me to the other element. Not only they're probably, they're probably a poor discipline. If they had real world experience, they would have had better discipline in the first place. Also, the other element is they have, typically, the CEOs have really good ability to to storytell. And so they are able to go to any random dude and I've learned this skill, right?

I had raised zero before in my last business and I learned that my book writing and my public speaking skills could be used to raise money. And I was able to raise $150 million in my last business in order to prove that out really. And so then you've got this incredible ability to try and build something that you just don't get in the real world. OK, so let's say we use the pottery example.

If you've got a pottery studio where you're coaching people to do that, because the scalability is so effortful, because for you to go from one studio to two studios, you're going to need to find another place, you're going to check with building regulations, you're going to have to staff it and stock it and do all of these things. Being a good storyteller to unlock more capital to you still has a bunch of headroom that you're bouncing off, or a bunch of ceiling that you're bouncing off, because it's still very effortful for you to scale the business

regardless of how much capital you have. So this is one of the, okay, interesting, because I have some people, you know, think about, again, going back to nightlife, my industry, some of the ways that are guys on the street that are doing PR ring. I'm sure you've walked down a busy nightlife street. I've broadway in Nashville or whatever, like, hi mate, where are you going tonight?

Do you want to come in? And they're trying to give you a wristband. Some of the narratives that they weave, they're very, very quickly able to work out. What is it that this person wants from the night out that they're going on tonight? Are they on a birthday party with the girls and they want to go somewhere that's girly and cute? Are they out with the lads and they really want to pull? Are they looking for a cheap night? Are they're going on tonight. Are they on a birthday party with the girls and they want to go somewhere that's girly and cute? Are they out with the lads and they really want to pull? Are they looking for a cheap night?

Are they looking for a fancy night? They're very, very quickly able to work out what it is that they want, and then we've a narrative that tells them exactly what they want to hear, offer them a deal that closes, and then do the CTA like, okay, so you're gonna go up there, you're gonna turn right, you're gonna blah, blah, blah,

show this to the guy in the front door. So again, like, it's just interesting how different industries unlock or enable different types of skill sets. And the only difference is that the guys that are working on the street are making a pound per entry or whatever. whereas the startup founder CEO is raising, you know, perhaps hundreds of thousands of dollars for every time that he sells his vision in the best way as well. And that brings us to maybe like another important thing that I actually, you know, I was brought up in a pretty working class way. My father was an executive coach, but it wasn't like a super lucrative business as far as he was concerned.

And my mother was a secretary. And so I grew up in the public's regular school system. What I mean is, the public in Britain I think means good. I grew up in a regular school system. And so I just didn't have the network around me of entrepreneurs and successful randos that a lot of these startups CEOs come from. And they come

from these worlds where it is possible to look left and look right at like a dinner party that your parents are having. And you're like, oh, wow, there's this successful like CFO of a public company that my friend that my parents are friends with. Dude on street, literally doesn't know anybody like that. And literally has no concept of an entrepreneur, which I basically didn't have till I was 25 either. Well, the other thing that you don't have, even if you're in that room, so a good example of this one, I was in New York.

I went to a couple of dinners that I was a new world, a bit of a new world for me. And I was sat certainly around people that have tons and tons of capital that they're prepared to invest in things. I've got nothing for them to invest in. That's not gonna give me, I mean, I don't need half a million pounds

to expand my nightlife business. Because again, we're limited by the number of people in each city, we're limited by the number of venues that we have and licensey. There are real world constraints that stop us from doing things. So there's sort of a two way street going on here, not only do you maybe not have access to the people,

but even if you did have access to the people, then money wouldn't be able to do anything for you. That's either. Yeah, that's, dude, it's a very interesting way to look at things. It almost makes me think that everybody that's some sort of entrepreneur or is in a good position to have access to people like that should have some sort of start up in their back pocket

just so that they can pull it out. Correctly, yeah, man, you know, you're sat at the right table and you go, well, yeah, actually, do you know what it is? I've had this thing and we've been taking over for a while and it's blah, blah, blah. We're about to go full time on it. I'll give you the whole pitch.

Yeah, we're about to go full time on it. I'll give you the whole pitch. Yeah. We're about to go full time on it. And actually, we really believe that there's this unconquered market for random thing. And we're actually just looking for somebody and a few people who will be able to give us the initial seed capital. And then my team will come together. And we believe we can get it to like a million users.

Or we believe we can get it to half a million users or we believe we can get it to half a million in AR. You got to know the code. Yeah, yeah, yeah, yeah, yeah, what's the lingo? But immediately if you have that what happens with and by the way, this is true for Elon Musk to sort of bring this thankful circle is people like Elon Musk but less busy than him and obviously less rich, but rich and not are are looking for and this is like maybe an insider or a weird thing for some people, but they have places, they're looking to put money and they don't know where to put it. They're literally sitting around with so much cash going like I did randomly, not one of them. They're like, uh, well, by Twitter stock is like what some rando dude will say,

but others have put all the money in the stock market that they want. I know they still have it and they're like, I got to give it to people and make it grow somehow. Well, think about that's where, right. Think about angel list, right? What is angel list? That angel list is basically a platform for people who need money to access people who have money that want to give it away. Exactly right. And then syndicates are some dude literally like yourself or like myself, who is like, I know a bunch of rich people that are on my list and then I've got these entrepreneurs and I met them once and we're going to give them 250k. That's, I mean, that is what angelist and the guitar. And the amount of money that flows through the ecosystem is sometimes,

by the way, I've been in this, I've been a CEO, startup CEO for like 10 years at this point. But even today, it baffles me. We had a really good lead investor for a last, we raised $10 million from a fund called Andreson Horowitz, which is a really good Andre Chen, Andre Chen's been on the show. Yeah, okay, Andre's been on the show.

Great, yeah, so Andrew is my lead investor at Andreessen Horowitz. And the moment that Andreessen Horowitz became the lead investor, literally I would get on the phone just like this, like a Skype or Google Hangout. And people would be like, well, you're in the driver's seat, how much do you want? And there would be no other conversation needed. Because this capital is just randomly sitting around. So actually, this brings me to the core thing about startups,

which is really what the startup world needs is more good ideas. It doesn't need more money. It needs people, little Elon musks. This is kind of, I mean, here we are talking about it. Little Elon musks that are willing to do crazy things. And by the way, this is why Adam Newman of WeWork was so successful. Is he just spoke to this crazy unbelievable industry, real estate, that nobody knows how to fuck with, but that every bun hates. And he's just like, yeah, he's like, you know what,

we have billion dollar companies. And he was like, you know, what doesn't exist? A trillion dollar company. I'm going to make a trillion dollar company. And people would look back at him and they'd be like, I fucking believe him. I believe him. And here's the problem that I have with it, man. Like, I understand that somebody like that can give a compelling narrative. You know, I had a guy who wrote the downfall of we work on about a year and a half ago, and that story about Adam Newman is crazy and compelling

and I understand that he was a great speaker. It makes me feel very, very sad. There are people out there who have that amount of capital, you know, hundreds of thousands, millions, tens of millions, or if you're SoftBank's case, like hundreds of millions of dollars, to be able to throw around. And they're so stupid that they're prepared to do it based on some guy's charm.

I understand. I mean, you've literally, you've brought it to essentially what it is. And the reason that that's the case is because out there in the world, a lot of these people, most of these people have seen some crazy thing happen that they were not ready to believe. And maybe the most relevant example,

it's one of them being Bitcoin. Like everyone is just like, it's called Bitcoin. You're like, okay, and it became what? Oh, it's like one of the leading currencies in the 21st century. This, and so you've got these stories, these unbelievable stories that are out there. And when people miss these investment opportunities, they then go, well, I've got to fucking throw my money

at the next one. Yeah. There seems to be kind of like a, um, this inherent ability, this sort of artistic ability to cleverly see talent in someone, right? You hear these stories about, you know, I heard the founder and I just knew that he was going to make it work. And you go, well, this is, and that's the bit that gets me. I think surely the business fundamentals are more important. Surely the potential size of the market, surely the overheads versus the gross GP that you can make on each transaction. Surely the liquid, it would pick anything,

right? Anything that isn't, whether or not Homeboy manages to keep eye contact with you during this conversation, like that, to me, should not be the main determinant. And it just surprises me that people who have so much capital do not use any more rationality than the rest of us. And you'll know Jim O'Shaunasey from O'Shaunasey asset management, very good friend met him in New York a couple of weeks ago. And he said to me, look me in the eyes and he's like, Chris, it's idiots all the way up. Although, I think it's exactly what I was going to say. It literally doesn't matter how high you go that people are still dumb and don't know

what the next thing is and they don't know what's coming. It's crazy. Man, it blows my mind. So we were talking before we got started about your perennial ability to be a first mover slash almost so early that it can be both an advantage and a disadvantage. Can you kind of lay that out? I mean, the examples, there's a lot of examples, but maybe the podcasting is now a gigantic thing. I've started one of the first podcasts in 2004, right? Many, many years ago. And I remember thinking, oh, the world's going to get transformed. Oh, my God, this is going to kill

radio. The same things that people say literally 18 years later, which is wild to think about. And so, I have a lot of examples like that in my life. And I've learned to, I've learned to, to push that, that characteristic of mine, and to be like, wait, wait, wait, okay, but what's actually going to happen in 12 months though? So that I'm not thinking that the future was so radically changed. I'm now conscious of probably one of the top qualities of humanity, which is it just wants things to not change that much. And it wants things to change like a tiny bit. So when we innovate, we try to innovate 10% or 20%

at my company is that I built versus 50% or 100%. You can innovate 50 or 100%, five, 10 years down the line, but you gotta give people a little bit. One step at a time. Yeah, it's huge. So I've got a friend, Sky, good buddy of mine out here in Austin, and he's trying to completely revamp the way

that the advertising model works by using polkadot on the blockchain. And what he's trying to do is he's got this complex plan, which I can't really explain or understand. But I understand he's trying to capture all of the area under the supply demand curve for potential advertisers, rather than it being at one particular price point, even if you have a dynamic buy on an ad on the backend, it only moves a little bit, right? You can't capture the entire area underneath the curve. And we've been

talking about this, and he's like, dude, and I really, really appreciate his vision. And I have other friends that got this super excitable and they're so positive about things. And it's really inspiring because I'm British. So like genetically, that's kind of contrary to how I'm programmed. But we had to chat a couple of weeks ago and he was like, man, I think I might be kind of trying to make

too much of a leap here. I'm trying to basically reimagine the way that advertising's done and the technology that I'm trying to do it on has only just been finished four months ago. I'm like, yeah. So that kind of speaks, I guess, in a similar way to what you were talking about, that people need to be led.

Cultural change, especially in the business world, especially with unproved product, especially with state changes and complete sort of shifts in the way that things operate. It has to be done one step at a time. People need to have proof of consent, which is strange because in other areas,

like give me some money, proof of concept doesn't necessarily need to be shown, but when it comes to adoption, it does. Yes. Yes. So the adoption needs to be, what do we do in the next three to six months? This is what the best entrepreneurs do.

They're like, what can I do in the next three to six months? And then, but how can I sell, and how can I raise money on the 10 year, the 20 year vision or thought, you know, some people, we're going to build a hundred year company. Everything is a sales pitch. Okay. We're going to build the first trillion dollar company, just maybe an atom new one on it. I don't remember. But those are like, those are the, this guy has a crazy vision. It's unbelievable. Even though it's just words, right? But words have an incredible power more than I ever thought.

When I wrote books, I was like, I was like, that storytelling, like, that's not a job. I would laugh at people that be like, I'm a storyteller, but I was like, oh my god, it's actually one of the most powerful jobs in the right space that exists. So if you're able to tell a story, that has incredible value in the right places. But then if you execute the way that a restaurant does, right?

Super innovative. Okay, what do we do? How do we do the next thing? Really quick. Everybody has a job. Every job is well managed. Everybody knows how to do it. Everybody, everything falls into place. Now you got a really well-oiled machine. And that's the job of a startup CEO actually is to take to that capital and then try to execute on de-risking that machine until it's incredibly well understood and you can put it in a spreadsheet. There's an extension on Google Chrome called Tweepy, I think it's called, and what it does is, whenever you go into somebody's profile, it gives you the highlights of their most liked tweets from all time. And one of the highlights that I pulled

up from yours is something very similar to something else I tweeted the other day. So easy to dunk so hard to build. Yeah. What do you mean by that? So I mean, this is for some reason, this is really, really popular or offensive tweet to some people, but basically it's like it's so easy to It's so easy to talk shit About other people's things. It's actually one of the reasons when you're so early to things, right? People are like that's fucking dumb and luckily for me I have friends There's funny things to say, but I have friends that are like that's fucking dumb Julian And and then they've been that way for so long that are otherwise otherwise really respectable people, but they will do that again and again.

I write a book, they're like, I'm not going to fucking read your book. So, it gives you this really good humility, but also it gives you this incredible perseverance that no matter when people say no to you, you're just like, I'm going to keep going. I believe, I believe. That internal belief is also like another element of making sure that the company works so that your vision comes true. You have to keep the internal belief is also like another element of making sure that the company works or that your vision comes true. You have to keep the internal belief while making sure you don't quite believe all of your own bullshit.

I know that you have worked with Seth Gordon in the past and he had a thing that he said in his most recent book where he's talking about a lot of the time you need reassurance from the world, especially the first time around. And I really, really love this insight because there's this sort of belief that we're supposed to have an unwavering, self-powered, gusto that's just going to carry us through whatever the problems are that we're going to encounter.

But the reality of this is that if you don't know that you're going to do something, having self-belief that you're going to encounter. But the reality of this is that if you don't know that you're going to do something, having self-belief that you're going to be able to get through it with no evidence yet, is kind of the same as delusion. And after a while, I have a concept called imposter adaptation, which is the reverse. It's when you continue to disprove your imposter syndrome in the real world. And yet it persists. So that's when it's been tooprove your imposter syndrome in the real world and yet it persists. So that's when it's been too chronic. But on the first side of it, let's say that you're new to the market or you've just taken a change in jobs or you've just pivoted to some other sort of pursuit. How do you know that you're going to do well? And with that in mind, it's a much more,

I really like the idea of, look, the first time around, try and get people near you that are going to say, yeah, dude, I think that you can do this. This is doing well, get some feedback from the market. Over time, what you can do is become as pig-headed as someone like Elon Musk that believes that he can go out and buy one of the biggest, probably these single most important social media company on the planet in terms of how the platforms used, because you have whatever 30 years of consistent daily interactions with people where you maybe won't sure how you're going to get on and come out the other side. But in the first instance, you need a little bit of backup.

I really like that. Yeah. And by the way, if you have that around you, like the younger you have it, the crazier you can become. Because then it's like, like if your mother thinks you were a little prince when you were young, you know, which I definitely have a little bit of that that that happens to me. It's like, oh my god, I'm invulnerable. Then all of a sudden you'd like to cut your hand. You're like, what? How is this possible? You know, and so you need to have some foundations. This is why executive coaches to tell you the truth for CEOs are so valuable.

It's because it's someone internally that's going to be like, I will give you the self-awareness that's needed. I will help keep you on track. One of the things that people often believe about Elon Musk and these others is that these people are invulnerable and they're solo climbers. Individuals climb. Yeah, they'll climb Mount Everest by themselves with no ecosystem to surround them.

But when you pan the camera out, what you actually see is a gigantic support system. It's just not visible when Elon is tweeting bullshit on the internet, but actually he's incredibly well-surrounded. And so, you need a combination of this raw, unvarnished pain from the market that really gives you a sense as to how reality is going, but at the same time, you need to be able to step away and do self-su-thing or co-su-thing, in order to keep the momentum alive. If you believe yourself too much, you might go on for a really long time about something

that's fundamentally worthless, and actually the more money you raise and the more run-way you have, so to speak, the more you might waste your time for years. The deeper the deeper you're going to dig the hole, yeah. Yeah. Famous example of Justin Conn, who shut down his second company, forget the name in the moment, a legal company, but because his first company, first famous company was Twitch, and he sold it to Amazon for a billion dollars.

People just threw a hundred million dollars at Justin, right? And he was like, yeah, I'm going to build a whole business. And there was like a hundred people and maybe even more. And then he was like, oh, actually, we never found anything that anyone liked. But he had spent $50 million and a crazy amount of money because people just let him do that. I'm just looking at the market valuation of Twitch now. It's got the users. What, how is it so hard to work out?

Oh, is Twitch, is Twitch private? It's private. It was bought by Amazon. Yeah, it was bought by Amazon for 970 million on August 25th 2014. And it's currently got in 2018 it had 62 million users so it's probably got it's going to have an absolutely insane number now. What does it say here? 2 million average concurrent viewers on Twitch in 2020. So that was two years ago. 2020. So that was two years ago. Two nearly two billion monthly watch hours.

How many all watching video games? Yeah, why can't you tell? Well, not all watching. I don't know how many. Oh, there it is. 15 billion dollars, current market valuation of Twitch, according to some estimates, and that was 2020 from QZ.com. So yeah, man, I mean, this whole world, I find very interesting.

I had Jason Calacanis on the show, maybe like two and a half, three years ago, and I really just, I really didn't get it then, and I can't still don't really get it now, but I'm starting to see at least a little bit of the framework of how everything gets pieced together. But look, dude, I appreciate you. I appreciate your time today.

Where should people go if they want to find out more about what you're up to? I mean, Twitter is the public square. So Twitter.com slash Julian, I was early to that too. And then my company, software company that is manages stuff for solar printers, especially coaches, practice.do. That's about it. You don't look me up. I got my mom all over the place.

So, I appreciate you, man. Great chatter. you