Something You Should Know - SYSK Choice: Surprising Unconscious Influences on Our Behavior & The Power of Blitzscaling

Starting point is 00:00:00 As a listener to Something You Should Know, I can only assume that you are someone who likes to learn about new and interesting things and bring more knowledge to work for you in your everyday life. I mean, that's kind of what Something You Should Know is all about. And so I want to invite you to listen to another podcast called TED Talks Daily. Now, you know about TED Talks, right? Many of the guests on Something You Should Know have done TED Talks. Well, you see, TED Talks Daily is a podcast that brings you a new TED Talk every weekday in less than 15 minutes. Join host Elise Hu. She goes beyond the headlines so you can hear about the big ideas shaping our future.

Starting point is 00:00:42 Learn about things like sustainable fashion, embracing your entrepreneurial spirit, the future of robotics, and so much more. Like I said, if you like this podcast, Something You Should Know, I'm pretty sure you're going to like TED Talks Daily. And you get TED Talks Daily wherever you get your podcasts. Today on Something You Should Know, We'll talk to you next pay attention to them. You'll naturally imitate and mimic what they do and they'll sense that at some unconscious level and actually like you more as a result.

Starting point is 00:01:33 It's a sort of a natural way that people bond. Plus, some expert solutions to problems in your kitchen you haven't heard before. And a fascinating phenomenon in business today called blitzscaling. So if you look at companies like Facebook or Google or Amazon, blitzscaling is the set of techniques that allowed them to become so big, so fast, and so important by prioritizing speed over efficiency in an environment of uncertainty. All this today on Something You Should Know. called Intelligence Squared. It's the podcast where great minds meet. Listen in for some great talks on science, tech, politics, creativity, wellness, and a lot more. A couple of recent examples,

Starting point is 00:02:34 Mustafa Suleiman, the CEO of Microsoft AI, discussing the future of technology. That's pretty cool. And writer, podcaster, and filmmaker, John Ronsonson discussing the rise of conspiracies and culture wars. Intelligence Squared is the kind of podcast that gets you thinking a little more openly about the important conversations going on today. Being curious, you're probably just the type of person Intelligence Squared is meant for. Check out Intelligence Squared wherever you get your podcasts. Something you should know. Fascinating intel. The world's top experts. And practical

Starting point is 00:03:14 advice you can use in your life. Today, Something You Should Know with Mike Carruthers. Hi, welcome. Here's a question probably everyone has asked themselves. Usually right around the time it's time to go in for your annual physical. And the question is, do I really need to get an annual physical? Well, actually, opinions are split on that question. In studies, people who have yearly physical exams saw no great benefit or increased longevity when compared to people who did not. Another problem is that there's no standard definition to what you get when you go for a physical. It's more likely dictated by what

Starting point is 00:03:59 your insurance pays for, not necessarily what's in your best interest. Other doctors disagree. A yearly exam allows for a point of contact for people who don't pay a lot of attention to their health and might otherwise go years without seeing a doctor. Done correctly, a physical exam can also reduce fear and anxiety in people who tend to worry about their health. Just about everybody does agree that if you're under 40 and in good health and don't have a family history of serious disease,

Starting point is 00:04:31 once every three years is probably fine. But if you are worried about it or think something might be wrong, you should always make that appointment and get that checkup. And that is something you should know. Have you ever stopped to think, what guides your thinking? Why do you think the way you do and then do the things you do based on that thinking? The science behind this is really fascinating,

Starting point is 00:04:59 and what's great is that when you understand why you think the way you do, you can use that knowledge to be a better thinker. John Barge, spelled B-A-R-G-H. John is a cognitive psychologist, and he's one of the leading experts on the unconscious mind. He's a professor of psychology at Yale University, and he is author of the book, Before You Know It, The Unconscious Reasons We Do What We Do. Hey, John, so let's start by talking about the difference between the very conscious and deliberate thinking that I like to think I do.

Starting point is 00:05:34 For example, I decide I'm going to go to the store, so I get in my car and go to the store. Compare that kind of thinking to the thought process that you're talking about. Well, it's certainly, there's much of the time we do know what we're doing, and it is a reasoned kind of process, and we do intend to move our hand and then move our hand, and that's certainly true. It's just not all the time, and there's a lot of it that we think we know what we're doing, but we're actually doing it for a different reason, or we think we like something and not realizing the underlying reason why. For example, our political attitudes can be moved around by feelings of fear, of anxiety, also feelings of safety. Politicians know that, and people become

Starting point is 00:06:18 more conservative in their attitudes if they're threatened or made to feel afraid, and they become more liberal if they are made to feel safe. And you can move these attitudes around just by making people feel temporarily safe or fearful. But does that apply to people who are very rooted in a political feeling, or people who are kind of 50-50, wishy-washy? It's a temporary state. So it's certainly not that you change a person's mind forever by having them feel afraid right now. But people who are afraid as four-year-olds,

Starting point is 00:06:52 you show more fear to startle and things like that, have more conservative attitudes when they're 23. So there's actually differences in the size of the fear center of the brain, the amygdala, in conservatives and liberals. So a lot of this is hardwired, and a lot of this is based on your early experience and carries over the rest of your life. So this is a very basic dimension on which people differ in their political views, but it's not something we're aware of. I didn't know about it until I read these studies and then did these kinds of studies myself. I was surprised to find that out. But basically what it shows is we've got these deep motivations and needs for survival and safety, for reproduction, for cooperation, these kinds of things. And they're underlying what we do. And we think we're doing it for one reason when it actually is for a different reason.

Starting point is 00:07:39 I had a guest on the podcast a while ago who talked about this idea that before you consciously decide to do something and then do it, your brain had decided before then already that you were going to do it. And I have a hard time getting my head around that. How can you have decided to do something before you decided to do it? Yeah, that's also surprising. And that has been replicated in lots of different ways now. I think there's a way to understand it that makes it less mysterious, though, and that is our conscious choices and decisions come from somewhere. They're not out of the blue, and they're not out of a vacuum.

Starting point is 00:08:20 They're not metaphysical. They actually are caused by our unconscious thinking. So, and our conscious experiences often cause unconscious processes and effects to happen later on. So, it's sort of a dynamic cycle. It's not really one or the other. It's that we have reasons for our conscious choices. The key is we actually do have mind control and I actually do believe in free will in the sense that our conscious thinking and reasoning is causal. It does change things. So when we have a scary, bad experience and we try to control our emotions by talking ourselves, say, well, you know, it could have been worse and other people have it worse often. We do.

Starting point is 00:09:04 So it's not so bad after all. You know, that has an effect. It actually does make us feel better and calm us down. And we can mentally transform situations like for a movie, a slasher movie, a scary Friday the 13th movie and tell ourselves, you know, it's only a movie, it's only a movie. And actually that works. It detaches ourselves and it dampens our emotions. And that's definitely conscious. And so it's our conscious thoughts and things we try to do consciously actually do work and they have an effect on us. So that is free will. So it sounds almost like there's two different things going on here. There's the debate between whether we have free will or we don't, but assuming that we do have free will, it isn't always conscious free will.

Starting point is 00:09:49 It's sometimes you think you're doing something for some reason, but you really don't know why you're doing it. Absolutely. As an example of something that can pop in your mind that you didn't even realize, I'm making a shopping list. I'm in the kitchen. I'm looking around to things I want to, that we need, I have to get at the store. And as I'm walking out the door, I smell something and, oh yeah, we need cat litter. And that kind of thing pops into my mind because I've got a goal of buying things we need for, for a home and something relevant comes in, catches, you know, that goal catches it, it catches the opportunity. And it affects me, and it affects, you know, what I'm going to do

Starting point is 00:10:30 next. And that's an instance where I've got a motive or a goal operating, and things that are relevant to it pop into my mind and say, Oh, yeah. So I often tell them, this is when I was writing this book, I wrote it a lot of it, like six months, and I was really into is when I was writing this book. I wrote a lot of it, like six months, and I was really into it. I was writing a chapter almost every 10 days when I really finally got down to writing. And what I would do is to when I finished one, I wouldn't just say, hey, great, I can take the rest of the day off and relax for a while. I did that. But before I did it, I got the next chapter material out. What am I going to be doing tomorrow? What am I going to be thinking about tomorrow? And trying to get that goal operating so that it would work on it, I got the next chapter material out. What am I going to be doing tomorrow? What am I going to be thinking about tomorrow? And trying to get that goal operating so that it would work on it,

Starting point is 00:11:09 you know, while I was relaxing or doing something else. But also, if I had ideas, you know, things that happened around me that I could use, you know, they would, I'd catch those and I'd write those down and that kind of thing. So you would finish a chapter and start thinking about the next chapter for the purpose of what, just getting a head start? I mean, I didn't quite understand what the point of that was. Yeah, sure. Well, you know, this comes from a book I read by Norman Mailer, where he talked about how, in his words, he used his unconscious to prepare the material for the next day. And what he would do is to sort of give his mind an assignment saying, you know, when I come down to work in the morning, to write in the morning,

Starting point is 00:11:50 tomorrow morning, I want this material prepared for me. And it was like this kind of, you know, issues about characters or plot or whatever it was. And he said it worked great. As long as he held up his end of the bargain and showed up on time and didn't just take the day off, you know, he actually had work done. He actually had stuff that was prepared. And I found that out too. I would load up and get the ideas of here's the sort of general ideas and content I wanted to work with tomorrow. And it would work in the background. You know, it's sort of like that eureka experience where you're not thinking about something or trying to remember somebody's name

Starting point is 00:12:23 and you don't. And later on it popped into your mind, you know, out of the blue. And it's because it was working in the background trying to help you solve that problem, even though you might not have been consciously aware of it. It was important and it was still working. And I had that same experience. I'd come down and be really charged and ready and get on and really would get going on that next chapter right away as if, you know, some of the work had been prepared for me in advance. I want to go back and talk about, because you mentioned at the beginning of our conversation, how, for example, feelings of

Starting point is 00:12:54 fear and safety can affect your political beliefs, that if you're feeling particularly fearful, that might make you lean more conservative. And you also talked about how, like, for example, getting a flu shot can affect your feelings about immigration. So talk about that. Sure. For one thing, the flu shot works because there's a very deep analogy that our physical experiences and our physical motivations, like to be safe and to be healthy, avoid disease, actually affects things like our moral judgments and our political attitudes. People who are in an actually dirty room condemn immoral behavior more strongly than people in a clean room.

Starting point is 00:13:34 The flu shot works because there's an analogy of immigrants into our country being sort of like germs or bacteria into a human body. Because that analogy is so basic and deep, that actually having a flu shot changes people's attitudes towards immigration. If you remind them about the threat of the flu and they've had a flu shot, their attitude actually becomes more positive towards immigration. If they haven't had the flu shot yet, their attitude actually becomes more negative if you remind them about the flu, their attitude towards immigration. So that's one example. Another example is basically how we form impressions of people.

Starting point is 00:14:09 When we are meeting people for the first time, there's sort of a natural tendency that we have to imitate them, to mimic their body posture, their tone of voice, their facial expressions. And that's a very natural thing when you meet somebody for the first time. Actually, it increases bonding and liking. When two people do that, they actually like each other more. And so one little life hack or trick that I tell people about, it's so easy. If you want to make a good first impression or when you meet somebody like your new neighbor, your new roommate, your new colleague at work, whatever that is, all you have to do is pay attention to them. Just look at them. Because this mechanism is very natural that you'll naturally imitate and mimic what they do. And they'll sense that at some unconscious level and actually like you more as a result. It's a

Starting point is 00:14:56 sort of a natural way that people bond. And all you have to do is look at the person and pay attention to them and all this nice stuff happens. John Barge is my guest. He is a professor of psychology at Yale. And the book is Before You Know It, The Unconscious Reasons We Do What We Do. Contained herein are the heresies of Rudolf Buntwine, erstwhile monk turned traveling medical investigator join me as i study the secrets of the divine plagues and uncover the blasphemous truth that ours is not a loving god and we are not its favored children the heresies of red off punt wine wherever podcasts are available Since I host a podcast, it's pretty common for me to be asked to recommend a podcast.

Starting point is 00:15:51 And I tell people, if you like something you should know, you're going to like The Jordan Harbinger Show. Every episode is a conversation with a fascinating guest. Of course, a lot of podcasts are conversations with guests, but Jordan does it better than most. Recently, he had a fascinating conversation with a British woman who was recruited and radicalized by ISIS and went to prison for three years. She now works to raise awareness on this issue. It's a great conversation. And he spoke with Dr. Sarah Hill about how taking birth control not only prevents pregnancy, it can influence a woman's partner preferences, career choices, and overall behavior due to the hormonal changes it causes. Apple named The Jordan Harbinger Show one of the best podcasts a few years back, and in a nutshell, the show is aimed at making you a better, more informed critical thinker.

Starting point is 00:16:45 Check out The Jordan Harbinger Show. There's so much for you in this podcast. The Jordan Harbinger Show on Apple Podcasts, Spotify, or wherever you get your podcasts. So, John, when you talk about the flu shot and changing people's minds about immigration or that feelings of fear make people more conservative. How much more? I mean, is this like just enough to move the needle in the laboratory?

Starting point is 00:17:12 Or are you making profound changes in the way people think? It's actually profound in the sense that it's certainly temporary. So it's not at all like this attitude might be changed forever. We would not be ethical if we did that to people. We don't change people. We want to have them leave our study in the same way they came in. We don't want to have any permanent changes. These usually are weaker effects that you might find in the real world.

Starting point is 00:17:36 However, you ask people what their attitudes on social issues are, for example, and this is same-sex marriage or marijuana legalization or abortion, whatever the ones that are hot topics in the political world of the day. And you get the classic difference between conservatives and liberals, right? So conservatives are more conservative and liberals more liberal in a control condition. But those same people randomly assigned to a condition where they are made to feel physically safe through a very nice imagination exercise where the genie gives you a superpower that makes you immune from any kind to a condition where they are made to feel physically safe through a very nice imagination exercise where the genie gives you a superpower that makes you immune from any kind of physical harm, like Superman with bullets bouncing off of you. Those conservatives now are identical to

Starting point is 00:18:15 liberals. It moves the difference to they're equal now. So that's a pretty big difference. In other words, if you want to say it in a catchy way, you've turned conservatives temporarily into liberals. It's temporary, but it's that big of an effect. Now, in the past, there's lots of research that had turned liberals into conservatives. We were the first ones to do the opposite. But there's lots of research in the past that had taken liberals and made them conservatives in their political and their social attitudes. And that's by threatening them, by making them feel afraid. Are there ways to harness the unconscious mind to use it better?

Starting point is 00:18:55 Or is that's why it's unconscious and it's pretty hard to do that? I can come up easily with 15, 20 life hacks based on this stuff. If you know how this stuff works, you can use it. But just looking at the other person, increasing bonding and friendship between people is a very easy one that comes right out of the research on this natural imitation that we do and how it affects people liking for us. But another one is the natural bond that can form between parent and child and parent and the infant. And it's totally based on the fact that infants equate the warmth they feel physically with trusting the person who's giving them that warmth. Hugging, holding your child next to you as mothers do during breastfeeding, that tells the little tiny infant who doesn't know anything else that they can trust you. And it's a very easy way to use that primitive link that's in the child's mind between sensations and feelings of physical warmth and social warmth in the sense of trusting. You've got my back. You're my caretaker. I can trust you. And that is an easy thing to exploit. It's a very easy thing to keep hugging and holding and keeping warm your little infant because studies have shown that the attachment and bonding between an infant and

Starting point is 00:20:11 their mother, this is stuff done in the 70s, they do it now with fathers too, but to the extent that you're attached and securely attached to your mother age one predicts all sorts of life outcomes in grade school, high school, and you have less breakups when you're in your 20s. All these things pay off the rest of the child's life. And all you need to do is hug and keep that child and let them experience the physical warmth next to your body. Does that also work hugging other adults in adulthood? It's sort of already set by then, but I think it would. I mean, we did studies with just physical warmth in the sense of holding briefly a cup of hot coffee versus a cup of iced coffee, and people feel more warmly towards another person afterwards if they've just briefly held the hot coffee instead of the iced coffee. There's therapies now that they've developed based on that link between physical and social warmth. They use it in hospitals with clinically depressed people, giving them a 15-minute heat lamp treatment, right? And these

Starting point is 00:21:10 are very, very depressed people in the hospital. It significantly improves their symptoms for up to two weeks later. In fact, maybe longer. They only looked at two weeks later. Neuroscience has shown that the same little part of the brain, it's called insula, becomes active both when you hold something warm, like a cup of coffee, and also when you're texting your family friends on your smartphone. So it's been confirmed and shown that it's basically human nature, that we have this hardwired link between physical warmth and social warmth. So you said you could come up with 15 or so hacks. Can I have a couple more? Another one is the one I talked about with when you have some kind of thing that you have to do in the future, get going on it early. I tell my students this, you know, they have some grant proposal or some paper to write in a month.

Starting point is 00:21:56 Get their mind going on it early because what will happen is it will run in the background and you'll notice things that are relevant. Maybe an idea will pop into your head or you'll see something on the news or something like that. And since that goal is running in the background, it'll catch opportunities and things relevant to it that you wouldn't have caught otherwise. And it's just free. It's free and it'll work while you're doing other things in the background. The warmth thing is fantastic for parents and the idea of increasing bonding and all that.

Starting point is 00:22:26 Be careful. Basically, what happens to your goals when you have power over somebody, when you're in powerful situations, power activates your important goals. And if you do have power, you have to be careful what you wish for because that might affect your behavior, might do things that you normally wouldn't do. And so oftentimes, a person can be in a position of power over somebody else and do things, you know, as we've seen so many cases, the Matt Lowers and the Harvey Weinsteins and so forth, you know, where their power over somebody influences their behavior. In our normal life, often, you know, we might be in a situation where we have this kind of power, and we just have to be a little more careful about using it wisely and using it for the other person's best interest, not just our own. It sort of tends to make us more selfish and focused on our own goals at the expense of the

Starting point is 00:23:13 other person. It's just a sort of a general effect of power on us. I want to give one more life hack because it's the basic one at the end of the book and it works so well. I've had readers write me and tell me they've been using this and it's just fantastic. And this is the idea of implementation intentions. And all that means is when you really want to get something done, you specify to yourself the when, where, and how you're going to do it. Like this is exactly when I'm, so I want to tell my dad, I love him. Okay. And you're a college and say, I want to tell my dad I love him, okay, and you're at college, and say, I want to tell my dad I love him. But I keep forgetting to. I keep missing my opportunities. Say, look, when I go home for the holidays and he picks me up at the airport, as soon as I get in the car and I sit down in the front seat, I will tell him I love him.

Starting point is 00:23:58 So you are specifying a reliable future event and tying what you want, your intention to that. So for example, I want to exercise. Well, I'd never get around to it. I keep forgetting. Look, when I get home and I'm upstairs changing out of my suit, I will immediately put on my running shorts and my running shoes. And it works. If you tie your intention to some actual thing that's going to happen in the future, make it very concrete. It really increases the chance that you'll actually do what you want to do. I was giving some advice to a doctor at St. Luke's Roosevelt Hospital in New York. These guys are going to die if they don't exercise. They're 45. They're going to have a heart attack. They know they need to exercise.'t remember to do it. And I said, look, here's what you do. Tell them they drive home that are in their driveway. And as soon as their foot hits the pavement, when they get out of the car, they go for a, I'm going to go for a walk around the neighborhood. I'm going to go for a 10 block walk around the neighborhood before I even go inside my house. And by the fact that they always open that door and they always step on their driveway when they get home, that is going

Starting point is 00:25:02 to happen. They start, they find themselves starting for a walk. But this is actually using the old behaviorist trick of the stimulus creates the response. And that's true of our mind to some extent. Well, it's certainly interesting to hear how complicated the mind, the human mind is, but also how you can use what we know to your advantage when you understand how it all works. Dr. John Barge has been my guest. He is a professor of psychology at Yale University and author of the book, Before You Know It, The Unconscious Reasons We Do What We Do. There's a link to his book in the

Starting point is 00:25:38 show notes. Thank you, John. Okay, thanks, Mike. Hey, everyone. Join me, Megan Rinks. And me, Melissa Demonts, for Don't Blame Me, But Am I Wrong? Each week, we deliver four fun-filled shows. In Don't Blame Me, we tackle our listeners' dilemmas with hilariously honest advice. Then we have But Am I Wrong?, which is for the listeners that didn't take our advice. Plus, we share our hot takes on current events. Then tune in to see you next Tuesday for our Lister poll results from But Am I Wrong? And finally, wrap up your week with Fisting Friday,

Starting point is 00:26:09 where we catch up and talk all things pop culture. Listen to Don't Blame Me, But Am I Wrong? on Apple Podcasts, Spotify, or wherever you get your podcasts. New episodes every Monday, Tuesday, Thursday, and Friday. Do you love Disney? Then you are going to love our hit podcast, Disney Countdown. I'm Megan, the Magical Millennial. And I'm the Dapper Danielle.

Starting point is 00:26:30 On every episode of our fun and family-friendly show, we count down our top 10 lists of all things Disney. There is nothing we don't cover. We are famous for rabbit holes, Disney-themed games, and fun facts you didn't know you needed, but you definitely need in your life. So if you're looking for a healthy dose of Disney magic, check out Disney Countdown wherever you get your podcasts. Perhaps you've noticed something really interesting in business today. A lot of companies that you're very familiar with have gotten very big and dominant very quickly. Facebook is a good example.

Starting point is 00:27:08 Google. Netflix. This phenomenon has been identified and given a name by two guys, Reed Hoffman and Chris Yeh. Reed is co-founder of LinkedIn, and his co-author, Chris, is also an entrepreneur. And Chris joins me to talk about this phenomenon. It's called blitzscaling and why it's so important to understand. And blitzscaling is also the name of his book. Hey Chris, welcome to Something You Should Know.

Starting point is 00:27:37 It's great to be here, Michael. Thank you so much. So what in a nutshell, to start off here, what in a nutshell is blitzscaling? The simple definition of blitzscaling is it's the pursuit of rapid growth by prioritizing speed over efficiency in an environment of uncertainty. I think pretty much every business person is interested in rapid growth. There's very few people who say, you know what, I want to stagnate and go out of business. But it's the other part that really gets people's attention because the notion of prioritizing speed over efficiency, especially in an environment of

Starting point is 00:28:11 uncertainty, goes against conventional business wisdom. But the reason we believe blitzscaling is important is we believe that blitzscaling is the technique that allows modern companies to rise and achieve market-defining size quicker, faster, and more enduringly than ever before. So if you look at companies like a Facebook or a Google or an Amazon, blitzscaling is the set of techniques that allowed them to become so big, so fast, and so important. Because they did what? What did they do differently than a more traditional company did that makes it blitzscaling? So what's happened in today's world is we're all hyper-connected. We can use our phone to connect with any other person in the world. That's unprecedented. And

Starting point is 00:28:59 what that's done is that's made more and more markets global. And it means that more and more markets are what we call Glen Gary, Glen Ross global. And it means that more and more markets are what we call Glen Gary, Glen Ross markets. Do you remember that old movie from, I think, the 1980s? Jack Lemmon, Alec Baldwin, Al Pacino. Amazing, amazing movie. And in it, Alec Baldwin gives a very famous speech. And it's a speech that wasn't in the original play. And it's a speech that he gives to the salesman and he tells them first prize do you remember what first prize was in that speech it was a Cadillac Eldorado and second prize was a set of steak knives and third prize was

Starting point is 00:29:35 you're fired if you look at consumer social networking which company has won the first prize there man Facebook so So who would be second prize? Who would be the steak knives? Maybe Twitter, maybe LinkedIn. Well, obviously Facebook is this enormously valuable $500 billion company. And being first prize is just so radically different from being second prize or third prize that it's worth almost any risk, worth almost any price to win it. And so when we think about blitzscaling, people say, wow, blitzscaling sounds really risky. Our answer is, you know, sometimes the greatest risk is not taking enough, because the entire objective is to be the winner in a Glenn Gary, Glenn Ross market.

Starting point is 00:30:20 Okay. But still, what did they do? What did Google do and Amazon do and Facebook and Netflix? What is it that they Google was still a privately traded, a privately held startup, and they did a deal that they announced with AOL in May of 2002. Google had just started its AdWords product, so selling the little text ads next to its search results, And they did a deal with AOL to power AOL search engine and to sell ads against that search inventory. Now, here were the terms of the deal. Google was going to take 15% of the revenues and AOL was going to take 85%. So this was very inefficient because if you looked at the online advertising market at that point in time, most of the time, the advertising network, the people selling the ads, would take 30, maybe 40 percent of the revenue. And Google wasn't just selling the ads. They were actually powering the search results as well. So they're giving AOL a very good deal. In addition, the deal guaranteed AOL $150 million a year. Now, at that point in time, Google had about $15 million

Starting point is 00:31:50 in the bank, so about one-tenth of that. And their revenues the previous year, 2001, were just $19 million. Now, picture this. You've just come off a year of great growth. You generated $19 million in revenues. You have 15 million in the bank. And you go to your board of directors and you say, guess what? We've got this great deal. We're committing $150 million a year and it's going to be fantastic. You've been a business person. How do you think people would react to that? It makes no sense because it's relying on so much hope. Exactly.

Starting point is 00:32:27 It's insane. It's inefficient. It's risky. It's uncertain. And of course, that ended up being one of the deals that helped make Google what it is today. In fact, they did do that deal. And the year after that, Google's revenues exceeded 300 million. Now, remember, that was the 15%. So they were paying AOL a billion dollars a year in revenue share.

Starting point is 00:32:52 And Google rode that deal to much greater volumes, which allowed them to improve their AdWords product. It's a two-sided marketplace of advertisers and publishers. So it generated network effects that made their monetization more effective than anyone else. And of course, today, as we all know, Google and Facebook completely dominate the online advertising market. And all the growth in the online advertising market comes from those two companies. And Google's share of that can all be traced back to that one completely insane deal with AOL in 2002. Okay, and so that's an example of something. That's an example of a strategy. But what's the strategy? What made them come to that conclusion that this would be a good deal for Google?

Starting point is 00:33:39 So the key question you ask yourself is, how can I possibly go faster and get bigger and whatever it takes to go faster or get bigger I need to do that because the most important thing is be the first player to scale in this market and in the case of Google that was doing this deal with AOL that's extremely aggressive and risky in the case of some of these other companies it meant doing something very different so for example in the case of some of these other companies, it meant doing something very different. So for example, in the case of PayPal, which is one of the successful companies that my co-author Reid Hoffman helped start, he was a founding board member and employee of the company. What PayPal did is they went ahead and they created this concept of viral marketing.

Starting point is 00:34:23 So I don't know if you remember PayPal back in the early days, but you would be able to send money to people via email. And they had this big incentive, which was if you signed up for PayPal and then you refer to a friend, you'd get $10 and your friend would get $10. Well, that's the sort of thing when people are like, well, wait a minute, what's going on here? You've got a service where you don't have a revenue model yet, and yet you're paying people $20 a pop to acquire new users. What's going on here? And yes, they weren't sure when those new users were going to turn profitable, when they were going to be able to pay back the cost of that customer acquisition. But the critical thing about a payment system is getting a lot of

Starting point is 00:35:05 people onto the network. And so if you tried to grow slowly and you had like 100,000 people on the network, you'd not be worth anything. You have to get to millions of users in order to be worth anything. And in that situation, paying those kinds of incentives makes sense. But I can imagine people listening to this or reading the book and thinking, well, this is kind of a license to go nuts, to just do anything and everything that might work because you never know. It could be another Google AOL, but there's got to be some rules. There's got to be some filter that you push this through. Absolutely. So part of what we do with blitzscaling is to emphasize how can you

Starting point is 00:35:48 tell whether this is working or not. So blitzscaling is not just about mash the pedal to the metal. It's about learning and iterating as quickly as possible. And that means that as you go through and do this, you need to be watching your metrics like a hawk. You need to be seeing, okay, it's not just about taking risks. Are those risks allowing us to move faster? Are those risks getting us to critical scale the way we want them to be? One of the examples we use in the book is the video game company Zynga. And Zynga is a company which has had its ups and downs, but which has been enormously successful and went public.

Starting point is 00:36:31 And one of the things that Zynga did along the way is to invest very heavily in data analytics. So a lot of their competitors were using Google's analytics product, which is a great product. It's a free product, so it doesn't take a lot of resources. But it wasn't, at that time, a live product. In other words, its data came in after the fact and couldn't be used to make live decisions. So Zynga invested the money in building their own data analytics suite, which would allow them to make live decisions where the data was coming in and being accounted for immediately. And that gave them an advantage over their competitors in terms of being able to tweak their games as quickly as possible to maximize their appeal to the gamers. And it worked. And that seems so much more logical than the Google AOL thing, which seems so illogical. Well, there were elements to the Google AOL deal that meant that it was an intelligent risk instead of just a reckless risk. Like what?

Starting point is 00:37:26 So the reason why it made sense for Google to do this deal and to offer a better deal to AOL than anyone else is that Google had discovered a way to monetize their advertisements better than other people. Google had their PageRank algorithm, which allowed them to deliver relevant search results. But the innovation on the business side was to apply that PageRank algorithm to the advertisements themselves. So prior to Google, there was a company called Overture, which started off as GoTo.com. And they created the business model of allowing advertisers to bid on text ads next to search results. And this was a model that Google didn't create.

Starting point is 00:38:06 It's a model that already existed. What Google did was to take their technology and make that model much, much more effective. Overture simply allowed people to bid, and whoever was the highest bidder, their ads would be shown. Google allowed people to bid as well, but Google also took into account

Starting point is 00:38:24 the relevance of the advertisement to the particular user who was looking at the advertisement. And so they were able to not just award the advertising slot to the highest bidder, but to the person who would generate the most revenue for Google. And the more ads that they would show to the individual users, the more ads they would show against the keywords, the better they would refine those algorithms. So as all that volume was being pumped through the Google system, they were getting better and better and better at selling those ads for larger amounts of money and getting people to click on them. And that meant that very quickly, thanks to that volume that AOL supplied, Google had built an insurmountable lead in monetization over their competitors. Do you think this blitzscaling idea is only teachable by looking back? In other words, you've given some great examples of Google and AOL and the other things you've said,

Starting point is 00:39:20 because you're looking back at what happened. But can you use what you know and look ahead and predict this is going to work? Probably. And this isn't. As a matter of fact, we do make a number of predictions. So for example, one of the main predictions we make, and it remains to be seen whether we're correct or not, is that food delivery services like DoorDash are not actually blitz scalable, that there aren't enough network effects or long-term competitive advantages, because every restaurant will work with anyone else and users have no particular loyalty to one app or another. And yet, investors have invested hundreds of millions of dollars into these applications. Who's right? Are those investors

Starting point is 00:40:05 right? Or are we right? Well, you know what, we're going to look back on this in five years, and hopefully we'll know the answer. Well, wouldn't couldn't you say the same thing about Uber and Lyft? I mean, I don't care who picks me up. As long as I get there, I don't have any particular loyalty to either one. Yes, this is one of the interesting things about Uber and Lyft, and it gets into a nuance around network effects. So what is absolutely true is that there are strong network effects around a ride-hailing service because you need to have liquidity. When you or I are at the airport, we want that car to come right away. And so the most liquid player, the one who has the most drivers available is going to have a significant advantage. And for a long time, Uber had that

Starting point is 00:40:51 advantage. However, at some point, the delta between the two is small enough that it doesn't make a difference. So if Uber can get me a car in two minutes and Lyft is smaller and it takes them three minutes to get me a car, I really don't care that much, especially if I feel like I'm better off supporting Lyft than Uber. And so I think that ride hailing is actually a space in which blitzscaling is very important to become one of the players, but it's not actually a truly Glenn Gary, Glenn Ross market in the sense that the winner takes most i think it's going to end up being a bit of an oligopoly with multiple players having potential effects in each market and so uber and lyft are going to split up the united states and over in other

Starting point is 00:41:39 parts of the world there will be dd versus o versus Grab, and so on and so forth. And where these empires meet, there will be geographies where there are multiple players. Kind of like rental cars. Exactly. So take no offense to this question, but why are we listening to this from you? What is it that you and

Starting point is 00:42:00 Reid Hoffman, your co-author, bring to the table here that makes this message so valuable? Part of it is that both Reid and I have lived through multiple business cycles, through the dot-com boom, through the Web 2.0 boom, and through our current boom as well. But part of it is I really feel like when it comes to Reid Hoffman, he's one of the few people in the world who have the direct personal experience to really relate to this. So he's one of the few people in the world who have the direct personal experience to really relate to this. So he was part of the founding board and team at PayPal, which is a company that

Starting point is 00:42:31 blitzscaled and was acquired by eBay for multiple billions of dollars. He co-founded LinkedIn, which of course went on to become the dominant player in business social networking. He was the first angel investor in Facebook. He was one of the first venture investors at Airbnb. So he has direct exposure to all these things. In addition, thanks to Reed's position as one of the most well-connected people in Silicon Valley, we had direct access to so many of the people who are practitioners. We taught a class at Stanford where we had Eric Schmidt, the former CEO of Google, come in and talk. Brian Chesky, the founder of Airbnb, coming and talk. And Reid also has his own podcast, Masters of Scale, where we talk with people like Barry Diller and Howard Schultz from different industries. So I feel like we've really done our homework to get as much information as we can. Again, we can't guarantee that this is a

Starting point is 00:43:21 technique that's going to work for everyone. It is risky. But when you have those Glenn Gary, Glenn Ross markets, when you have an opportunity that is just absolutely enormous, this may be the best way to fully take advantage of it. Great. Well, the book is called Blitzscaling, The Lightning-Fast Path to Building Massively Valuable Companies. And Chris Yeh is one of the authors, along with Reid Hoffman. Thanks for being here, Chris. My pleasure. A lot goes on in your kitchen, I suspect, which means a lot of things get messy.

Starting point is 00:43:56 So here are some solutions to common, stubborn kitchen cleaning problems from the website food52.com that you probably haven't heard before. If you want to banish lingering smells like bacon and you want your kitchen to smell like nothing at all, what you do is simmer white vinegar on the stovetop for a while, then turn it off and just let it sit there. You know that oily, dusty kitchen grime, that stuff that collects on surfaces around the stove

Starting point is 00:44:25 and it's so hard to get it off? Try a microfiber cloth dipped in very hot water. The heat melts the oil and it comes right off. Frequent re-dipping is necessary. If you have burnt-on spills around oven burners, use Easy Off Oven Cleaner. It works really well. If you have a fruit fly problem in your kitchen, put two lemon halves in your oven and leave the door slightly open. After a few hours or overnight, close the door, turn on the broiler, then let everything cool, toss out the lemons, and wipe out all the dead fruit flies off the bottom of the oven. If you want to get your white sink white again, sprinkle baking soda around the sink

Starting point is 00:45:09 and then rub it with half a lemon. And that is something you should know. We are on Facebook and Twitter. I'm on LinkedIn and we post things on social media that are not in the show that I think you'll like, so check us out on social media and like and or follow us there. I'm Micah Ruthers. Thanks for listening today to Something You Should

Starting point is 00:45:30 Know. Welcome to the small town of Chinook, where faith runs deep and secrets run deeper. In this new thriller, religion and crime collide when a gruesome murder rocks the isolated Montana community. Everyone is quick to point their fingers at a drug-addicted teenager, but local deputy Ruth Vogel isn't convinced. She suspects connections to a powerful religious group. Enter federal agent V.B. Loro, who has been investigating a local church for possible criminal activity. The pair form an unlikely partnership to catch the killer,

Starting point is 00:46:03 unearthing secrets that leave Ruth torn between her duty to the law, her religious convictions, and her very own family. But something more sinister than murder is afoot, and someone is watching Ruth. Chinook. Starring Kelly Marie Tran and Sanaa Lathan. Listen to Chinook wherever you get your podcasts. Hi, this is Rob Benedict.

Starting point is 00:46:28 And I am Richard Spate. We were both on a little show you might know called Supernatural. It had a pretty good run, 15 seasons, 327 episodes. And though we have seen, of course, every episode many times, we figured, hey, now that we're wrapped, let's watch it all again. And we can't do that alone. So we're inviting the cast and crew that made the show along for the ride.

Starting point is 00:46:51 We've got writers, producers, composers, directors, and we'll of course have some actors on as well, including some certain guys that played some certain pretty iconic brothers. It was kind of a little bit of a left field choice in the best way possible. The note from Kripke was, he's great, we love him, but we're looking for like a really intelligent Duchovny type. With 15 seasons to explore, it's going to be the road trip of several lifetimes.

Starting point is 00:47:18 So please join us and subscribe to Supernatural then and now.

Something You Should Know - SYSK Choice: Surprising Unconscious Influences on Our Behavior & The Power of Blitzscaling

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