The Tim Ferriss Show - #550: Andrew Chen — Metaverse, Metrics, and Meerkats

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Starting point is 00:05:34 Hello, boys and girls, ladies and germs. This is Tim Ferriss, and welcome to another episode of The Tim Ferriss Show. My guest today, an old friend, Andrew Chen. You can find him on Twitter at AndrewChen, C-H-E-N. He is a general partner at Andreessen Horowitz, where he invests in consumer technology, including social, marketplace, entertainment, and gaming experiences. We have known each other a long time. We'll probably get into some of the backstory. It involves kettlebells. Today, Andrew serves on the boards of All Day Kitchens, Clubhouse, Envoy, Hip, Maven, Reforge, Sandbox VR, Singularity 6, Sleeper,

Starting point is 00:06:07 SnackPass, and Substack. Andrew is a prolific writer, and I'm going to emphasize prolific, and leading voice on mobile metrics and user growth. For the past decade, God, we're old, aren't we? He's covered the topic on andrewchen.com. He is the author of The Cold Start Problem, a book exploring how new startups are launched. He's also a board member and instructor at Reforge, which offers selective growth-focused programs for experienced professionals in marketing, product, data, and engineering. Andrew, welcome to the show. Thank you for having me. And yes, we have known each other for way too long, so this is great to finally be on the podcast.

Starting point is 00:06:46 And we're trying to trace it. I think all good things go back to Noah Kagan. He's sort of the Kevin Bacon of Silicon Valley circa 2005 to 2010. So thanks to Noah for that. Yeah, I met him in that era and he quickly fled to Austin where you are, Tim, before it was cool. He paddled for the wave before I even saw it coming. So Noah is certainly a trendsetter and he's current day. I want to go back in time because in the course of doing research for this conversation, I found that you often recommend a book called My Life in Advertising. This is not a new book. I recognized a name, Claude C. Hopkins, and I recognized it in part because I remember having,

Starting point is 00:07:35 I think it was Scientific Advertising, which was published a few years before this book, recommended to me. And it was, I want to say public domain. And I found it incredibly helpful. So I want to hear the story of how and why my life in advertising entered your life. Yeah. Well, the reason why it's public domain is because it's so old that it's just gone out of copyright. Because it was written in, I think, 1900 or something like that. It's right around that age. And this guy is such an interesting dude because he actually invented the mainstream use of coupons. He did a ton around basically what we'd call direct marketing today at a point where everything was very brand-driven. And so he wrote both scientific and advertising. And then in his book, My Life in Advertising was

Starting point is 00:08:24 sort of the supplemental. you can get them together. And it's his autobiography of how he went and invented a bunch of this stuff, which is wild. One of my favorite stories in the book is actually when he talks about inventing coupons. And the reason at the time was, back then, obviously there was no Amazon. And so the only way to actually get your products, if you were a CPG company, if you had a new toothpaste

Starting point is 00:08:48 or a new kind of milk or something like that, and you wanted to get it into grocery stores, you had to actually go to each of the grocery stores. And you had this chicken and egg problem. Actually, you had a cold start problem, which we'll talk about. You had a cold start problem where basically the grocery stores

Starting point is 00:09:03 wouldn't actually want to carry any of your goods because the customers weren't asking for them. And then you couldn't also prove to them that the customers wanted your stuff because nobody stocked it. And so he created this thing where he would go to all the local newspapers and he would tell them, I'm going to buy an ad in your newspaper. It's going to have a coupon in it. And it's going to tell you that you should watch the space because there's going to be a coupon for, I think this was for a condensed milk brand that he was working on. And then he'd go to all the grocery stores in that city and just start to tell them like, hey, I'm about to buy this huge coupon and I'm going to put it in all the newspapers. All your customers are going to show up and try to redeem this coupon. And they're going to be pissed because

Starting point is 00:09:48 you're not carrying it. And so ahead of this campaign, you better start stocking this stuff. And so the coupon, even though we think of it now as this weird cheapskate thing that you clip out of newspapers, was really meant to solve this really fascinating problem. And so he has a story about that. He has stories about stunt marketing and building a massive cake in malls to get people to come and do that. I mean, he just has all these wild stories from an era where all this stuff was just getting invented. I love this guy, and it's over 100 years ago now. These old books on advertising and copywriting, I just love. I remember, I want to say Capels was another copywriter, really old copywriter who I found fascinating.

Starting point is 00:10:33 And in the beginning, when I first moved to Silicon Valley, I mean, direct response was about as close to current day tracking as you could get in a state-of-the-art infomercial media efficiency ratios and direct mail through Capital One or whoever it might be. And a lot of the principles are the same. They persist. Certainly a lot has changed, and we're going to talk about that. That's right. Yeah, the consumer behavior is the underlying thing.

Starting point is 00:11:04 I did a presentation a little while ago where I talked about the Michelin Guide, which we know is this restaurant guide and everything. And if you go back, and again, this is one of these things from 100 years ago, it turns out there was 300 cars in France. And if you're Michelin, your tire company, you want people to drive around. Well, how do you get people to drive around? You start the Michelin Guide and you list all the restaurants. Conveniently, the restaurants are spread all over the country. And so you're going to have to drive and collect them all, collect Michelin stars. And it's just great. And it's like, oh, that's content marketing. And that's from 100 years ago. It's wild how the stuff persists.

Starting point is 00:11:39 Not only persists, but I suppose literally persists. There's an incredible amount of durability with some of these examples, right? Like the Michelin guides, the Michelin stars. Let's talk about another author for a second. This is Jeffrey Moore. You shared an office with Jeffrey Moore? And could you explain for people who he is? Yes.

Starting point is 00:12:01 And then confirm or deny this office rumor. I love it. We're going old school on everything. I love this. I moved to the Bay Area in 2007, and I was 25 years old. And my first job was I was an entrepreneur in residence at a VC firm that's called Moore David Al Ventures. And they had Jeffrey Moore as one of their venture partners, and he and I would just share an office. And I was such a huge fan of his because of Crossing the Chasm.

Starting point is 00:12:30 And so he had written this book, which before Lean Startup and before Innovator's Dilemma and all that kind of stuff, he was really the guy that built the core framework for how to think about bringing, especially those days, kind of an enterprise product to market. And so his whole thought was, you have this technology adoption curve, you have the early adopters. You have early adopters and you have the early majority and the late majority. And between the early adopters and the early majority, you have this chasm where all the nerds love you, but the mainstream market has no clue what it is that you do. And so he has all these frameworks and everything. So it was an amazing experience just to share an office with a guy.

Starting point is 00:13:08 And so I feel like, Tim, I've basically been surrounded by authors for quite a while. And so it's been fun to see that journey. Yeah, for sure. And I just have to say, because this is a trip down memory lane for me, because we haven't reconnected in a long time. Eric Ries, great guy, famous for the lean startup. I remember going to a 12-person seminar, which was effectively a workshop developing the material that would later go into the lean startup. And it's just so fun to think about all of the things that came out of that vintage in Silicon Valley from, say, 2007 to 2010, 2012.

Starting point is 00:13:53 That's right. It's so fun to look back. Some of the best years, yeah, for sure. Yeah. So let's actually jump to, I don't want to say present day, but I'm going to try to segue here and it might seem like a strange way to do it. Who is Sean Ellis? Sean Ellis is such an interesting guy.

Starting point is 00:14:13 I met him a couple years into being in the Bay Area. And what he told me, which was so fascinating, was he was working with Dropbox and Eventbrite and a bunch of companies, a bunch of startups. And he would try to talk to these amazing entrepreneurs and they would ask him, oh, so Sean, what do you do? What can you do for us? And he would tell them, oh, well, I can lead your marketing. And his background was he had worked on a bunch of freemium companies like LogMeIn and he's a very successful tech marketing executive. And whenever he said marketing,

Starting point is 00:14:46 what he found was these 20-something-year-old founders were just like, immediately would flip the Bozo bit. They would be like, okay, you want to buy Super Bowl ads? You want to do all this crazy stuff? And so he eventually had to just come up with a new term in order to describe what he was doing. And so what I thought was super funny was he basically just thought, well, that's the opposite of what I do. I don't do crazy brand stuff. What I want to do is really work with founders and be extremely quantitative.

Starting point is 00:15:18 And so I'll give you an example. When he was working with Dropbox, Dropbox was growing really fast. Drew Houston and those guys had announced on Hacker News and people were just downloading it because it was a really good product. And he started by buying a bunch of ads and it just turned out none of that worked. And so one of the things they started to work on was, well, what if you gave people storage space and then you got storage space? And it was sort of like a give space, get space kind of a thing. And it was very creative at the time. And these referral programs were, of course,

Starting point is 00:15:49 you can probably find examples from 100 years ago. But for tech at the time, it was less common. And he really put that all together. And so because of all this, he began to describe himself as a growth hacker rather than thinking about it like, oh, he works in marketing. That term just took off like crazy as soon as he described it, because I think it really just was the start of a new age of marketing online, which was very much about products, very much about numbers, and much less about what was in traditional marketing over the years. And so these days, if you look inside of an Uber or Dropbox or a Slack or whatever, they all have growth teams. Now, they may not describe themselves as growth hackers,

Starting point is 00:16:26 but the core concept is definitely still there with interdisciplinary people thinking about growing your users, not through big campaigns, but through what are the cool creative features that you're going to build. Sean's a bright guy and really enjoyed meeting him

Starting point is 00:16:43 probably around the same period. Yeah. And he's done really well for a lot of companies. And let's jump to writing because it seems to me that this is connective tissue for you across so many different domains. When did you start writing? Because the impression I have is that all good things were this font coming from writing that you put out for free. I don't know how accurate that is, but could you just maybe describe a bit your writing background, and especially when you moved to Silicon Valley, how you decided to start writing. It was 100% an accident. And it's now

Starting point is 00:17:32 one of the most important decisions I ever made in my life, which is crazy how things like that happen. And I'm sure for you too, Tim, we can talk a little bit about that too, how we met, because there's a funny backstory about writing in there as well. But yeah, my blog was completely an accident. I mean, I grew up in Seattle and felt like I was one of those people where early on I would love writing journals and I would kind of write in a diary and use it to collect my thoughts, but I would never share it with anybody. And what happened was when I was 25 and it was time for me to move to the Bay Area to find the secret of Silicon Valley, what was really there? I was like, you know what I'm going to do? I am going to write a blog and I'm just going to write down everything that I learned along the way

Starting point is 00:18:15 in my journey. And so my first year was actually really funny. I think I imported my list of, I forcibly subscribed my mom and my sister and all of my friends to my blog. And I think I imported my list of, you know, I forcibly subscribed my mom and my sister and like all of my friends to my blog. And I think maybe the first six months or something, like maybe 50 people read it. It was just like one of those. I had it on Blogger originally, Ev Williams' old company, of course. And I started just writing everything I knew. And I really treated myself almost like I was like a journalist. I started just writing everything I knew, and I really was kind of like a weird new idea. People would just talk about how many signups they had, how many registered users they have. And that was it. And I was like, I got 100,000 registered users. You didn't care about engagement.

Starting point is 00:19:14 You didn't care about whether people were using it or not. And that was it. And so I might have an opinion there that I would say, that's horrible. And we need to think about pretension and engagement. And I would start digging into that. I would throw up a post about it. Or when I met Sean Ellis, when he would talk about what he was doing with this whole growth hacking term, I wrote a post that was called Growth Hacking is the New VP Marketing. And that was a way that I tried to introduce that into the world. But amazingly enough, I think in that first year, I eventually had a bunch of folks posting it online. And so the way that I met Mark Andreessen actually was he was reading my blog, and he was working on Ning at the time. And he emailed me and was like, hey, I'm Mark,

Starting point is 00:19:55 and we should have lunch. And I Googled him. And I was like, is this who I think it is? And I was half expecting this is going to transition into a phishing scam. I was going to have to send a wire somewhere in the Bermudas. But no, he actually was in town and just wanted to hang out. And so that's a great example of someone that I met because of writing. And I met a lot of great people and a bunch of the PayPal mafia, a bunch of the founders that I've come to be able to work with these days through my writing, which is just fantastic. Let's dig a little deeper on that. Because I think back to 2007, 2008. I started my blog in 2005, I want to say. WordPress, still WordPress. OG. And at the time, people may not remember this, but blogging was a big deal. And blogging is still a big deal on some levels, but there are many other shiny toys in the toy store now.

Starting point is 00:20:54 Tim, we just make memes now? We're in the post-literate world, so we should just make memes and just put them on Twitter. More interested in cat videos with extremely high-voiced narration. But the fact of the matter is, it was even then hard to cut through the clutter. So I would love to hear more about your approach, why you think it cut through. And if it's helpful,

Starting point is 00:21:20 you could give an example of a piece. Like you mentioned one, Growth Hacker is the new VP marketing. I don't know if that was your breakout piece or if any breakout pieces come to mind. Because for instance, I can think back to the first post that hit the front page of Dig at the time on my blog, which was on muscle gain. and it crashed my site, which precipitated all sorts of FOMO and panic before FOMO was a term. What helped you cut through the clutter and do any pieces jump out that kind of really allowed you to step function up in the attention that you were getting? I think there were two things that I started to see.

Starting point is 00:22:03 One was just how much of the audience, my audience especially, they don't want to read explainers. It's just boring. They want to read opinions. And so what I found was, I'll give an example, which is I have an essay that's called 80% of your mobile users leave, and that's normal. And that's the truth.

Starting point is 00:22:28 That is what the data says, is that most apps just lose all their users. Even the very good ones still only retain maybe 20% or 30% of it. And what I'll do is I will often get on social media and I'll just drop little nuggets like that, little factoids that I see. I'll end up writing kind of opinions, spicy B2B opinions about, I always joke that I'm a B2B influencer and that's, or B2B content creator. That's what my life is now. And so I'll write these things

Starting point is 00:22:57 and I'll say like, okay, well, you know, for example, that predominantly products are just poor at retaining users. That's just a reality. And what I'll see is that people will just engage with that tweet like crazy. They'll just retweet it or they'll like it a bunch of times. What I'll end up doing is I end up learning that those types of titles are the things that end up becoming amazing topics for the subsequent blog that I'll end up writing. And so I think of it as, cool, I already know that

Starting point is 00:23:25 this particular thing, I validated from a demand side. And then I can end up writing it as a full article. And it's so valuable, I think. Writing is so valuable, I think, because it's just the most scalable professional activity. Back before the pandemic, when we went to conferences and people did a bunch of networking, I used to just hate all that stuff. And so I just thought, instead of going to a conference for two hours or something, what if I just spent the two hours and just wrote down all the things that I might learn or say there? And then isn't that a better use of time? And so I think, to go back to your original question, I think my journey was actually very, very gradual. And I found that after writing a couple of these key articles,

Starting point is 00:24:09 I would find terminology and jargon that people were interested in, like viral loops is maybe one. There's a lot that's obviously happening in intersection of Web3 and consumer and growth, and I might write about that now. But what I would do is I would just try to write the definitive piece around that and then just send it out to my mailing list. And that seems to work really well and break through the noise. How long do your pieces tend to be? Do you have a range typically on pieces you publish? Yeah. So my creative process is a little bit funny because what I end up doing is I end up starting with that unit of opinions. And I basically collect in a notes file all sorts of random little opinions that I'll have through the course of a day.

Starting point is 00:24:52 Could you give me an example of an opinion? Is it a value judgment versus a literal explainer? Would you mind just elaborating on that a little bit? What makes a good opinion? Yeah, I think that one of the nice things about being in tech is you just get exposed to a lot of new ideas every day. And so through the course of the day, you might learn about camping and then pets. And then you might hear about productivity tools. And then you might hear about podcasting and you might work on something else entirely. And through that course of the day, what you end up learning about is you try to generalize and try to figure out, okay, how do I feel about each one of these ideas and strategies and everything? And so, for example, you might see a new approach where a new social app is using TikTok to drive a lot of new users.

Starting point is 00:25:44 But on the other hand, you also see that, wow, a lot of those new users, is using TikTok to drive a lot of new users. But on the other hand, you also see that, wow, a lot of those new users, they all seem to follow a certain shape. They all seem to get a big spike of users, and then the next day, they all seem to leave. And so over time, you're kind of like, okay, well, how good of a customer acquisition channel is TikTok anyway? And what should you watch out for? So I might, for example, try to take that observation and go on Twitter and then write a tweet about it, the perils of using TikTok as the way to grow your product and what are good ways and what are bad ways.

Starting point is 00:26:18 And then if that ends up catching on, then I'll basically develop a whole article about it and go from there. So Twitter really is your MVP, not to get too jargony. But you're taking the very minimal, viable concept and then seeing if it sticks. And if it sticks, if it really sticks, then you consider developing that into a longer piece. That's right. Yeah. And I think what ends up happening is, if I'm organized about it, I will actually schedule blocks of time in my calendar to say, this is writing time, and I'll build my whole schedule around it. And when I was writing my book, I actually went even further than that. I was like, I actually need five plus hours of writing time each day in order to make progress on all this. And so the only way to do that was,

Starting point is 00:27:10 how do I write for five hours when there's Twitter and TikTok and there's Netflix and there's all these wonderful things in the world? And I just completely organized my workflow where I would have a desk where I can just sit by myself with a computer that only has writing apps installed on it. I would lock away my phone. There's a great product called the K-Safe. I don't know if you've seen one of these, Tim. Yeah, I have. I haven't used one yet, but the TimeSafe, right? Yeah, the TimeSafe, yeah. So I have one in, I think I have three or four of them now, and I have them all over the place in my house. And you basically, so the way it works is you put your phone in and then you say, hey,

Starting point is 00:27:51 I'm not going to get my phone out for five hours. And you just stick it in and you set it and you just lock it away from yourself. I also turn on all the kids safe tools on your computer. You can block individual websites and then you have a unique password. And so I'll just make up a password and then write it on a piece of paper and then just hide it somewhere for myself and I'll turn off Reddit, I'll turn off all my favorite websites.

Starting point is 00:28:12 Are you doing that through general settings? Or is there... Yeah, it's just through the Apple settings. Parental settings? Yes, I'm self-parenting. That's when you know you have too low of an attention span is when you have to embrace all of this tooling to manage your time. That's basically been my life for the last two years or so. Let's dig into some of the examples. And we're going to bounce around a lot, of course, but could you give an example of what

Starting point is 00:28:47 the title refers to? Why write the book? And then if you could give a real world example that is not condensed milk, but something more recent. More recent, slightly more recent. That would be outstanding. Yeah. When I started to write my blog for many years, what I found was I found, I basically wrote all these one-off articles and they were great and it was a fun way to engage people. But if you recall, the original reason why I started in the first place was,

Starting point is 00:29:15 I'm going to find the secret of Silicon Valley. I'm going to figure out what it is that makes the kinds of companies that are built in the Bay Area as huge as they are. And in particular, I ended up actually spending a lot of time with a bunch of folks in the PayPal mafia who had built Yelp and YouTube and LinkedIn and all these amazing companies. For those who don't know, could you just describe, briefly define what that is, the PayPal mafia?

Starting point is 00:29:41 I mean, it's such an interesting phenomenon, right? But basically, PayPal was built at a time where eBay was also trying to build a competitor called Billpoint. And what happened was they were all competing against each other. And eBay, as you guys know, in the earliest days, there was no way for the buyers and sellers to pay each other. They literally needed these badges that were like the, we accept PayPal badges to put into all the eBay listings so that the buyers and sellers, I mean, this is like web 1.0 kind of stuff. And so funny enough, this whole group, including Peter Thiel and Max Levchin and Reid Hoffman and Keith Raboy and some

Starting point is 00:30:15 of the greats in the technology industry, they were all together at the same time at PayPal. And they took the company public. And eventually eBay bought PayPal. In one of the great traditions and life cycles of the Bay Area, all the amazing people all left at the same time to go start other companies. And so this group went on to start all these iconic companies like YouTube and Yelp and LinkedIn and so on. And I remember reading about all these guys and I was like, what do they know that no one else knows? And a bunch of them obviously got involved with Facebook and other mega companies.

Starting point is 00:30:49 So when I came to the Bay Area, that was one of my express goals was I was like, I am going to meet all the PayPal people and I'm going to try and figure out what it is that they know that I don't. And so I think in a broader way, it sort of ties, Tim, to a lot of topics we've touched on, which is they had a very quantitative view of growth. They had a critical mass of technology skillset and how you scale these things over time. But one of the things that I think is also in particular really fascinating is that these companies that were getting built by the PayPal mafia and also just more broadly, including Airbnb and Uber and Pinterest and all these companies that we love, are at their core about connecting people with one another. And sometimes you're being connected over commerce, like an Airbnb or an Uber or an eBay or whatnot. And there's a bunch of companies that are more like marketplaces.

Starting point is 00:31:39 Sometimes you're connecting people because of work. Slack and Zoom and Dropbox and all these other tools are really about collaboration. Games also have this aspect where there's really network effects at the heart of these companies. And so this term that I'd heard a million billion times while being in tech, which is like, oh, of course it's successful. It has network effects. Or, hey, XYZ company, the Apple ecosystem, the app ecosystem is amazing because it has network effects or, hey, XYZ company, the Apple ecosystem, the app ecosystem is amazing because it has network effects. And I was kind of like, wow, that's kind of crazy that you have this something that's really this central and really, in my mind, the secret to why the technology sector in the Bay Area is so incredible. And there isn't really a really definitive unpacking of all of it. So that's what I set out to do. I set out to do that three years ago. And the cold start problem refers to the fact that if we look at a product like Slack, if you open up Slack and none of your coworkers are on it, and you're typing things in and

Starting point is 00:32:39 no one's replying to you, that's not useful as a product. That's not a thing. And in the same way, if you use Tinder and you open up Tinder and in your city, no one else is using Tinder or the people that you're not attracted to are using Tinder, then your types on Tinder, then that's also a cold start problem because, okay, how are you going to match who you want? Yeah. Or if you're unattractive to all the people who you want to date, also a problem. That's a different problem.

Starting point is 00:33:03 That's a different... Well, matching is at the heart of a lot of this. So yeah, I mean, that is certainly true. And so we could go on and use a bunch of different examples, but they all kind of have this core concept of you need other users in order to make a product work. And so you have this problem where you're just like, well, how do I get enough people into the product at the same time so that we can all use it together? And I'll describe one of the

Starting point is 00:33:30 solutions that I just love because it's so spot on. So when you study all these consumer startups, one of the first things you realize is that so many of them start at colleges. And you're just like, why? That's crazy. Well, the reason is because Facebook started at a college, Snap was more high school. And then the example I'm going to use is Tinder, which started at USC. And the reason why it's so interesting is because, so Sean Rad and Justin Mateen and Jonathan Badin and some of the early people, when they originally started Tinder, first of all, it didn't even have the right swipe, left swipe thing. That was added later. It was just like a checkmark, like a green checkmark and a red X. And John, who was the iOS developer there, he actually kept a deck of cards with him.

Starting point is 00:34:16 And he would just play with the deck of cards while he was coding. And he just added it in last minute. And it's so iconic now, but it's funny that that's how it really came about. It was really an accident. But in the early days, they built Tinder and it looked plus or minus the way it was. And what ended up happening was they just invited all their friends. Now, in those days, it was kind of like an insult to tell one of your friends, you're single, you need to use an online dating app. So the invitation strategy was not really going to work for them. But they tried. They tried to invite a bunch of friends off their address book. It didn't work. And so

Starting point is 00:34:49 what they realized was, well, maybe we just need a bunch of people. How do we get a lot of people, hundreds of people onto the app at the same time? One of the co-founders had a friend on the USC campus that was a very popular, very social person and said, what if we just did this birthday party for this girl? And it'll be like this really amazing, really sick, just birthday party to be sponsored. We'll just go all out, but we're going to put a bouncer in front of the door and we're going to make it so that you have to install Tinder in order for it to happen. And so the way that Sean and John and all these guys tell it, this was like the party. Because what happened was they got a couple hundred people all to go to the party. They all installed Tinder. And they didn't use the app that day. But the next morning, they woke up and they had this app.

Starting point is 00:35:35 And they were like, oh, there's all these cute people that I hadn't talked to last night. Now I can swipe through them and I can message them. Holy shit, that's amazing. And then from that, they were able to take over the rest of USC. And once you figure out how to build, so I have this concept in the book that I call an atomic network, which is like, what is the smallest network that you need that can retain and be engaged and be functional? And they figured out that it's 500, or maybe they could even go with a smaller party and would have worked a couple hundred. And you could basically just, if you could build one atomic network you can then build a second one and a third one and so their whole early early days was just about just throwing these parties and of course the product itself was just also really well done back in the day

Starting point is 00:36:19 before tinder this will make you laugh tim if you if recall, this was like the match.com days and plenty of fish and all of these, right? Where basically you would post your profile and then anyone who wanted to message you could message you. And so the way that Sean describes it, he's like, back in the day, if you were like an attractive person and you used one of these apps, you would go to work and do email all day. And then you'd go home and for your dating life, you'd also do email all day. And it just wasn't fun. And just making it visual and interesting and everything was, you know, for what it's worth, if you're unattractive, you're also doing email all day because you're just sending messages and not getting replied to. Right. So either way, it's a problem. That's right. That's right. And I think that's one of the things that you find in all of these stories is there's

Starting point is 00:37:07 some good ones in there about Zoom and Slack and Dropbox and all these is that, especially during the cold start in the really early days, the approach to solving it ends up being usually pretty idiosyncratic. You know, in some cases, it's college parties. In other cases, it's putting something on Hacker News and having it take off. In other days, it's going on Discord and trying to grow these communities. And so you have a lot of different approaches. I would imagine also, I believe you coined this term, tell me if I'm misattributing, but the law of shitty click-throughs. That is to say, once something is used

Starting point is 00:37:41 for the 10,000th time, let's say the give one, get one, in the case of, say, a Dropbox or something, that at some point it starts to lose its leverage. Its novelty begins to affect the results. I would love to hear you discuss some of your lessons learned or just share any stories from your time at Uber because that's quite different in terms of product, quite different in terms of the issues at play. Or maybe not.

Starting point is 00:38:14 Maybe there's more overlap than I would imagine. You were an early advisor to the company. I was, a long time ago. Yeah, exactly. We both have a little bit of an inside track. Back when it was Uber Cab LLC, before long time ago. Yeah, exactly. So no, we both have a little bit of an inside track. Back when it was Uber Cab LLC before it was Uber. That was a good time to be an advisor. For sure.

Starting point is 00:38:33 Yeah, Uber was such an interesting experience. So I ended up there because I was working at a startup at the time. And this was back when people were building apps on the Facebook platform. There was an era where people thought that you could build apps on iOS and Facebook was going to give you a way to build apps also. And so I actually started the company. I was a founder. My co-founder was an early YC guy named Matt Rubens. And we ended up getting funded by Mark Andreessen and Ben Horowitz, who led the seed round and then subsequently raised VC and so on. And so what ended up happening was when that didn't work out, I ended up talking with Ed Baker and Emil at Uber and ended up getting acquired into the company

Starting point is 00:39:16 to work on growth. And at the time, just to tell you how unique this place was, we had the main floor of the company when you walked in. It was very like Star Wars. It was all LEDs and everything was black. And then in the middle of the floor, there was a room that was built. It was a special room that was often, there was security guards next to it. And it was like a private conference room. And it was literally just named the war room. And as you know, Tim, a lot of startups have war rooms. A lot of times, you commandeer a conference room and you just make it your war room to do a project.

Starting point is 00:39:54 But this was like permanent war room. It was like the setup. And this was also at a point where the company had just gotten into China. And I think we were losing like a billion dollars a year. But we were also growing like many billions of dollars per year. We had just been doing self-driving. And I remember visiting and sitting in one of the trucks that we were building with all the LiDAR stuff on it. When I joined the company, it was adding 3% of the world's population into the app each year. And all those users ended up seeing all these product experiences that my

Starting point is 00:40:25 team's built there because I was running all the rider growth side of things. And so I would say, just going back to your original question, I mean, I think the difference between solving the cold start problem and throwing college parties and all that stuff becomes very, very different when you're kind of at this escape velocity phase where you're just, we have billions of dollars and how do we scale it more? And the reason is because when you look at marketing and you look at growth, there ends up only being a couple of things that can scale to be really, really big. I mean, it's basically paid marketing, forms of viral growth, including referrals, and also things

Starting point is 00:41:00 like SEO, sometimes the smattering of partnerships. And I would say that this was a period in Uber where we were trying to do all of it and spending billions of dollars each way and trying to get there. But I think these lessons are interesting mainly because when you look at Uber, you look at Slack now, or you look at Instacart, or you look at any of these companies, people tend to think that viral growth and network effects are this weird... There's this silver bullet that once your product has it, you just are on this amazing trajectory. And what you find instead when you look inside is you see thousands of people working their asses off.

Starting point is 00:41:36 And they're doing all these little tests and they're doing all these things just to stay above the growth goal. And I think that's what you really see is the hard work that actually goes into these companies is just an incredible amount of work. after the 2008 crisis, you would have missed out on 50%, 5-0% of your returns. Don't miss out on the best days in the market. Stay invested in a long-term automated investment portfolio. Wealthfront pioneered the automated investing movement, sometimes referred to as robo-advising, and they currently oversee $20 billion of assets for their clients. Wealthfront can help you diversify your portfolio, minimize fees, and lower your taxes. It takes about three minutes to sign up, and then Wealthfront will build you a globally

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Starting point is 00:43:03 a Wealthfront investment account today, and you'll get your first $5,000 managed for free for life. That's wealthfront.com slash Tim. Wealthfront will automate your investments for the long term, and you can get started today at wealthfront.com slash Tim. Let's talk about, if you're open to it, that there's this idiosyncratic, eccentric founder or set of co-founders. They create this product and then they scale it up to millions of users. And perhaps it doesn't change very much along the way. Now, there are cases of that, where if you look at, say, the Uber app is actually a good example of something that I remember seeing mock-ups before there were even cars on the street in San Francisco, the initial two or three cars. Before there were even cars out there, I saw a mock-up for what Holland would look like. And I thought to myself,

Starting point is 00:44:15 wow, that's ambitious. And it was true to form for several years. Yes. That was a case where the product kind of out of the box, even though it evolved and changed, and that war room got a lot of use, right? I mean, imagine any other company where you know you're going to get sued every city you go into, you know you're going to get attacked by unions, you're going to have to deal with

Starting point is 00:44:38 every possible vector of attack. So an unusual company in that respect. But could you talk about the origin stories of Slack or Twitch, whichever you want to grab? They're both great. And maybe I'll do the Twitch one because I like that. But I was just going to go back to the Uber thing for one second.

Starting point is 00:44:57 One of my favorite things, by the way, is to go find the original pitch decks of these great companies and just read them. I mean, online you can find, if you search for like Coinbase original pitch decks of these great companies and just read them. I mean, online you can find, if you search for like Coinbase original pitch deck, there's an amazing deck that was put together by Brian Armstrong that's worth looking at. And same for Uber, Garrett Camp actually ended up posting his original deck. And at the time it was like, he wasn't sure if it was going to be a thing.

Starting point is 00:45:21 And they had, I think, three different CEOs in the first year or two. All that stuff. It was definitely one that broke all the rules. But yeah, let's go to Twitch really quick. So Twitch is such a funny story because Justin Kahn, who's himself now this B2B content creator person

Starting point is 00:45:40 and has stayed very true to his roots. He was... Sweet guy. Super sweet guy also. Amazing guy, yeah. And I've gotten to work with him in a couple of different capacities. But if you go back in time, this was like early Y Combinator.

Starting point is 00:45:54 And Y Combinator at the time was sort of viewed as kind of this weird, why would you even do that? And it's like all these kids in it. And it's sort of maybe for people that aren't legit. Obviously they've completely proven that what an amazing idea it was at the time. And so Justin's project at that point was called Justin TV.

Starting point is 00:46:11 And he basically would just go and wear this backpack that had a laptop connected to all the cellular networks. And it was kind of like all multiplexed together. So you get maximum bandwidth. And then that laptop then connected into a hat, like a camera that sat on his hat. And he would just live stream his entire life 24-7. I think this went on for months and months and months. And the funny thing about Justin doing that is, if you were working in tech at the time,

Starting point is 00:46:45 and you were like, what's Justin up to? You would pull up Justin TV and you would say, he's doing the exact same thing that I'm doing, which is just staring at a monitor, coding or whatever. It was like a little bit of a critique of your own life, actually, is what it turned into. But he just did that for many months. And he ended up basically realizing, okay, you could build a much more interesting company by allowing anybody to stream, not just Justin, obviously. But you can think of going back to that Atomic Network concept. The Atomic Network was Justin and his nerdy viewers, including myself there. And so he said, okay, well, let's build that out. And so him and his co-founders,

Starting point is 00:47:23 which include Kyle, who eventually started Cruise, very amazing guy. Michael Seibel, who eventually is president at Y Combinator. His whole crew, all really impressive people, basically started to work on a platform where anybody could stream anything. And the thing is, it kind of worked, but not really. I remember using the product during that period. And when interviewing them, they were basically saying, yeah, people would just stream pirated NFL games. And that was one of the major cases. And then other people would try to stream other kinds of weird things like people are cooking or they're just doing random stuff.

Starting point is 00:47:57 And that went on for several years. And they got to a point where it was just kind of growing and they were feeling weird about it. And should they go and work on another company or should they start a new company? And they ended up working on a couple of new ideas at once. And one of them ended up being to take the really, really narrow set of streamers that were part of Justin.TV that were focused on games. And they just decided, okay, well, why don't we make a bunch of changes all at once? Let's, first of all, make all the streams just about games. At that point, they said that gaming was maybe only 5% of Justin.TV, so it wasn't an obvious thing to do. The second thing they did was, rather than making it about the viewers, because streaming is so much

Starting point is 00:48:41 about viewing, instead, let's make it all about creators. What's the creator's incentive in doing all of this? And so they ended up basically making it about monetization. And one of the interviews that I had with Emmett, who's now CEO of Twitch, he talked about this, which is it's amazing what happens when you are able to give any creator, someone on the internet, 50 bucks. For us, you may think, oh, well, what's 50 bucks?

Starting point is 00:49:06 But for them, it's just like a huge aha moment to go from creating content just purely for follows and likes and views to being able to monetize it at all, 50 bucks, to a point where maybe every time you log in, you know that you're going to make a bunch of money. And then being able to go professional is kind of like the next level up from there. And so they ended up basically spinning this off as its own separate property. And amazingly, it was a very interesting journey because it became all about League of Legends for a long time. It was just watching people run that tournament. And then eventually, Amazon bought them. I mean, it was, I think, a steal for just under a billion dollars. I forget which year it was of the company, but it was probably year five or six or something of the company. And I think everyone thinks of

Starting point is 00:49:53 Twitch as this weird overnight success, when in reality, you see all the stops and starts along the way for it to become the success that it is. Do you have any insight into how they made the decision to focus on gaming? There must have been some rationale behind it. Do you know why? Yeah, I think they were just seeing, and I think this is true of a lot of these network effect-driven companies, that it's not just one network. It's actually a lot of different networks kind of all under one roof.

Starting point is 00:50:22 So if you think about what Twitch or what Justin.tv was at the time, it was gaming, but it was also sports, and it was also creative stuff, and it was also all these other things. And the most interesting part of the early data was that they saw that there was just so much more engagement in this narrow niche. And so even though it wasn't clear that this was going to be a big idea, and this is for a long time, people just didn't understand Twitch, they could see that there was a small group of people that were just fanatical about it. And so if you chase that, often then you can kind of expand that goodness, and maybe there's a whole product that's just about that. And I think that's often very counterintuitive, because especially when you're at a bigger company, you end up being very oriented around, can this be big enough? Can this move the needle enough? You end up not chasing these little things,

Starting point is 00:51:09 which is one of the amazing parts that a startup can actually do, is they can just focus very much on that and expand from there. Well, the other aspect of this that hops to mind for me, and please feel free to dismantle this if this is not a plausible observation, but it seems consistently underestimated how much a good company slash service can expand the market. So in the case of Twitch, it's by virtue of creating these tools and catering to creators, they increase the number of people drawn to create. So in other words, if you were to look at the market analysis of what that could become prior to them creating all of these tools, it would be somewhat misleading in the same way that a lot of people, I mean, hundreds of people said no to funding Uber on AngelList because they said, well, how big is the current total addressable market of black sedans, really? existence of the technology and enabling everyone to become, or many people to become drivers,

Starting point is 00:52:27 automatically multiplies the size of that pie over and over and over and over again. If you really look at it, Twitch unlocked the ability. I mean, I think Twitch and Patreon and Substack, and there's a couple of these companies that are now part of the creator economy, really made it so that people could think, wow, instead of starting a small business, doing the kinds of things that people did back in the day, you open a small coffee shop or you do whatever, you can make millions of dollars a year being a content creator on the internet. And it really solves, I think, something that has been called the original sin of the internet, which is that we have an advertising-based system. How much of the privacy issues that people talk about and the targeting, all the stuff that's been happening is really because we decided to go with banner ads instead of having people pay each other online. And we're kind of in this really interesting point of the ecosystem where we're able to kind of unlock that. Because there was a really funny

Starting point is 00:53:29 poll that Lego actually ran, where they surveyed a bunch of kids. It was like 3,000 kids and asked them what are the professions that they wanted to do. And if you look at the results, it's both funny and maybe dystopian that very high up on the list, the first thing on the list is being a YouTuber is actually the top job. And it was above teacher, athlete, musician. And then the last one on the list was being an astronaut. So no one wants to be an astronaut. They want to be YouTubers. This might be bad, but it is really interesting. And I think Twitch actually was so early in all this because they built all these tools, exactly what you're saying. They basically became a way for people to earn a new kind of living, which is amazing because not everyone wants to drive a car, not everyone wants to deliver food or sell Beanie Babies on the internet, but there are new kinds of work that are forming. And if these kinds of work are more compelling, you get paid more,

Starting point is 00:54:29 they're more interesting than a lot of the hourly work that we have in America. Well, what's going to happen is a lot of people are going to try to be these things. And this whole technology layer is going to support this new type of work that's going to emerge. And so we often think of the information age as very much like a white collar, you sit at a desk and you're writing documents or whatever. But I think that actually a lot of this will probably lead to a ton of jobs being created and a lot of work being created that's of ultimately a creative nature. And then that may be really what people are more excited about than doing the hourly work that's available. Yeah. I mean, there's going to be such a broad spectrum of work available, right? I mean, just to ask

Starting point is 00:55:06 Axie Infinity and their player population in the Philippines is one example, right? That's right. It's really just incredible. And I wanted to ask you, I know very little about gaming. The extent of my gaming knowledge pretty much ends at advanced D&D,

Starting point is 00:55:22 which I know pretty well. I still have my Dungeon Master's Manual. I still have Fiendfolio. But sadly, that's about the extent of it. I wanted to ask you about social networks and gaming for a second. And specifically, I was wondering how well you know Roblox. Is that how you say this? Yeah, Roblox. Yeah. Because I'd never heard of Roblox until a few months ago when a friend was telling me that during at least the last portion of, say, the last year that all his kids wanted to do was spend time on Roblox. And I had never heard of it before. For people who don't know what it is, could you describe what it is? So it's very much targeted at, or it's very popular in 12-year-olds and

Starting point is 00:56:10 younger. And the idea is you go into the Roblox product. There are a ton of apps that all these games that you can play. And so if you wanted to play, and it's a very kind of blocky, fun, colorful, think of it kind very Lego-y format. And if you want to play a pet simulation game, there's one of those. If you want to play a very friendly, funny, Grand Theft Auto-type open-world experience, those exist.

Starting point is 00:56:37 There's tons and tons of games in there. And the thing that's really fascinating about it is the company itself does not build the games. And so what's happened is there's all these developers that have been using the Roblox platform to build games that are targeted at millions of kids. And so some of these individuals, they end up starting out with, I think there's an example of a 16-year-old kid that just learns how to code, starts building one of these games. It gets super popular, gets turned into a company. It's making millions, tens of millions of dollars, and off you go. And it's this entire ecosystem

Starting point is 00:57:09 that's been built that way. And the CEO, Dave, is super interesting because this company, he started out actually on the education side of all this. And he was building it for 10 plus years, very slowly growing the ecosystem into this product. Roblox is just, I think, a really fascinating example of a broader phenomenon that's happening, which is that, first, games are often the canary in the coal mine for a lot of new computing platforms. And so when we talk about Web3 and Axie Infinity, there's a great example of that. And I think people are going to figure out that it's a natural way to onboard new casual people into crypto is by exposing them to these games. Same with VRAR. I mean, there's a lot of different applications you can imagine with VRAR. You can explore maps, you can explore planets. I mean, well, the things that people are playing,

Starting point is 00:57:57 though, they're playing Beat Saber, they're playing VRChat. That's the thing that's getting a lot of screen time. Same for Angry Birds and iOS originally, etc. And the problem from an investing standpoint with these companies has always been that they felt for a long time like they were movies. Grand Theft Auto is a game, I think it costs $100 million, it might even be $200 million to actually build Grand Theft Auto.

Starting point is 00:58:22 And at the same time, it's also amazing because they have an opening weekend and Grand Theft Auto. And at the same time, it's also amazing because they have an opening weekend and Grand Theft Auto, I think in the first 24 hours, made 800 million bucks of revenue instantly. It's like incredible entertainment. But that's sort of like the original model because you have these game publishers like Activision and Microsoft and EA

Starting point is 00:58:41 and they actually own the IP and so you can't really develop a startup there. And so I think what's interesting about Roblox, and I would say Riot Games, which makes League of Legends and Fortnite and Minecraft, and there's a bunch of these that are like this, that they actually end up being a next generation of social network is what's really happening. It's like I have this observation that every generation seems to have their own social network. And so if you came into tech in the 90s, then as a kid, maybe you were all about AOL Instant Messenger and that was your thing. And then if you were a little bit later, it was like

Starting point is 00:59:13 Zynga and LiveJournal and those things. And then Facebook was like a real thing. And then now people are on Instagram and Discord and all that. And so when you go back and you look at what a lot of the kids are playing, they end up basically playing these inherently multiplayer, very long-lived, persistent kind of games. And because they're multiplayer and they play it with their friends, you end up with these deep network effects, the same ones that will make a social network really successful over time. And so I think it's one of these categories where we've seen a number of these $10 billion outcomes as a result.

Starting point is 00:59:51 And I think the whole space now, Tim, I think what's interesting, just it's very timely, is that it's getting elevated where I think we all thought of this as, okay, we're in this games world and maybe there's going to be a lot of startups. But now there's this sort of concept of metaverse, which is this much broader encompassing term that's really kind of seems like it's actually a mashup of four different

Starting point is 01:00:11 things. You have the actual games experience, which is kind of a 3D experience that makes you feel like you're immersed. But then there's also this whole concept of the fact that the metaverse actually gives you a bit of like a double life, where you can actually work in the metaverse, you can organize in the metaverse. And again, these are not new ideas because World of Warcraft, which has been around for a decade, people would organize as guild leaders and people would buy and sell characters and you could do all these other things. And so there's that piece of it. It's also kind of bringing in VR and AR, which if you look at the VR units, I think it's kind of under the radar that there's something like 10 million units that are going to be sold of the various

Starting point is 01:00:51 new modern VR units, which is approximately the same install base as the PlayStation 5. And so I think you're seeing all these- That's a wild stat. I know, isn't that a wild stat? I think people have kind of written it off a little bit, but it's like, actually, wow, it's actually coming back and there's a lot of usage. And then of course, I think Web3 kind of intersects with one of the core pillars of the metaverse because when you have a persistent world that you're spending all of your time in, well, naturally, you want to be rewarded for it somehow, right? And ideally rewarded not using what we were saying

Starting point is 01:01:24 earlier, like a lot of the earlier social networks are all about just likes and follows. And then now there's ways that you can make money using Twitch and so on. You can actually just generate revenue. But the next phase of this, I think, really is ownership. And if you're really early to a new metaverse property and you're able to make it a success, what do the creators get for it beyond just having large followings in this thing? And maybe ownership is going to be the next big trend and maybe Web3 and the underlying technologies will be what powers it. And so I think everyone's very excited about this, but it's sort of a mashup of a couple of new technologies all together at the same time.

Starting point is 01:02:02 Since you mentioned metaverse, I have to ask you, so what do you think the metaverse might look like in, say, three to five years' time? You can pick. Actually, two to five years. You can pick the timeframe. But it seems like the term is being used in a very ubiquitous fashion. You have Facebook's move to meta. For those who have seen Ready Player One, you've got the kind of Darth Vader character who's the CEO of this corporation that is effectively rigging the game and determining how much real estate they can allocate to advertising before people stop playing, et cetera. And as much as NFTs could give one the ability to transfer ownership from, say, one platform to another, one game to another, there are a lot of counter incentives for companies to make it harder to do that. The easier the switching cost, the higher the potential churn rate of users. And at least some of the game developers, large development houses have been hesitant to make any type of jump into NFTs.

Starting point is 01:03:21 What do you think the metaverse looks like? Is it a gazillion splintered independent properties? Is it Facebook who effectively says, hey, if you want to play with Oculus, do you want to play in our metaverse? Here are the rules of engagement, and that's it. End of story. What do you foresee if you look into your crystal ball, recognizing this is just guesswork? Yes. Well, the nice part about working as a startup investor is we're funding all these companies that will eventually announce their products in two or three years. And so I feel like I have a little glimpse of what it is that the founders want to do,

Starting point is 01:04:01 and certainly something that we're trying to support. There's a couple of things going on that I think are just fascinating. I think the first is that I think you're totally right that if you are one of these really big games companies, and I think, for example, Tim Sweeney at Epic has said this, you really don't have an incentive to play around with Web3 because you have an existing player base where you sell virtual items to them. In one of these games, literally just custom decorated skins or outfits will generate hundreds of millions of dollars and it's just all pure margin.

Starting point is 01:04:34 There's no cost to that. I guess an artist had to make it in the first place, but there's no cost to it beyond that. And so what happens is, why would you want to turn it into something where people can trade it and you're limited? The second part is you have an existing player base that's really happy. Well, what happens if you release a bunch of NFTs and there's a whole hype cycle and it goes up and down as we all know it will? There's going to be cycles to this thing. Are you going to end up with a bunch of pissed off players? So I think the conservative thing to do for them is to just

Starting point is 01:05:01 sit back and see what happens. At the same time, this is just an incredible opportunity, I think, for anybody that wants to make a new virtual world or new game experience, new game studio right now. Because you can go and take all these ideas and try to combine it in new fresh ways that sort of blend together economic gameplay with classic game design in ways that the world has never seen. And you can get that out to the world in a really interesting, fresh take. For example, we funded a company called Mainframe, where a lot of the co-founders worked on a game called EVE Online for many years ago, which is this amazing game where you fly around in these

Starting point is 01:05:45 spaceships. But really, it's an economic game where you're building corporations and you're trading. And it's a very trading-oriented, capitalist type of game. And that's the perfect kind of thing where if you had a fresh take on it, you could build a whole new type of experience involving Web3. And so at this point, and I think actually Chris Dixon mentioned this in a previous podcast, him and Naval, that something like 100% of the game developers that we talk to have some plan for Web3 at this point. So I think people are very, very excited. So I think that's one thing that's happening is it's getting embedded, whether people want to or not. We're just going to see it all over the place. Ready Player One is such a captivating view of what the metaverse could be. But in some ways, it also seems a little bit

Starting point is 01:06:29 dystopian for it to be one company. I think we would all hope for it to actually be really, really more like what the browser was, more like what the internet is. And you could make the argument that this is actually a historical aberration. Because if you go back in time and you look at computing platforms, you see that all the older platforms, Unix was owned by AT&T slash Bell Labs. Then Microsoft, of course, owned Windows, and Intel owned the hardware layer.

Starting point is 01:06:56 The internet, obviously, open, amazing. And then the last decade or so, it's been very much about this Apple-Google duopoly and all the ramifications that we've had to deal with over the fact that they have control in such a stark way. And so I'm hopeful that the metaverse actually is a little bit more simultaneously fragmented and disjointed, but then also makes it very, very easy for anyone to basically get started and go. And I think a lot of the new games that people are building, whether we call them metaverse games or not, I think people will just view them potentially just as games with these NFT features. It'll almost be a genre of games because it'll be sort of this contract that you're making with your players by telling

Starting point is 01:07:34 them, hey, you're not going to make too many of the amazing sword that kills all your enemies, but is very, very valuable because you literally can't because it's literally an NFT. Those are some of the interesting parts there. I was going to mention one last thing is there's actually a funny story. I just read about this the other day where Vitalik, who of course built Ethereum, one of the core reasons was he used to play World of Warcraft all the time. And so this was like 2007. And what ended up happening was he ended up basically figuring out... I actually have this quote here. So Blizzard one day actually just nerfed... He had a warlock and his warlock had a siphon life spell that would create a lot of damage.

Starting point is 01:08:14 And Blizzard one day just removed it. And he literally has a funny quote. He says, I cried myself to sleep. And on that day, I realized what horrors centralized services can bring. And then he quit World of Warcraft later. And then a little bit later down the line, started Ethereum. So anyway, I kind of love that as like poetic justice of how it all fits together. Man, thank God they fucked up his warlock.

Starting point is 01:08:38 For him too. Sometimes you need life to save you from what you want, I guess. Good Lord. That's a hell of a story. What a great story. You know, it also makes me wonder, as these economies are built within these games, how that will affect continuity and succession planning

Starting point is 01:08:58 for company management, right? Because presumably there are going to be people who are like, I don't want to do this anymore. But to shut down a game, now understanding that when we're talking Web3, we have decentralized options and so on. But at the end of the day, you also have people working on keeping the electricity on, so to speak. I wonder how that will affect corporate governance and succession planning and so on.

Starting point is 01:09:26 Because if you suddenly have millions of people who are depending on a game for their livelihood, to just flip the switch and power it down doesn't seem like a very viable option. You could have a physical uprising on your hands. Right, right. You know what? That'll probably happen now that you talk about it. It wasn't just the San Francisco office, it was all the Uber offices. And it would always be just pissed off drivers who were complaining about whatever policies that were enacted in that, often to balance the rider side and the driver side. Because they all have different needs, the company has to balance the needs.

Starting point is 01:10:15 But sometimes the drivers would get upset. But no, I definitely agree that that's an example of a digital phenomenon that then causes this physical situation. But yeah, I think the whole governance thing will be, the closest metaphor I have probably is open source. Because it sort of seems like open source really changed the way that you could work as a software engineer. Because now with all of your nights and weekend time,

Starting point is 01:10:40 you could contribute to all these projects and you would then earn this kind of broader ecosystem kudos from other software engineers. And sometimes you could eventually then monetize that by starting a company or by getting hired into people, etc. But I think what's so fascinating about Web3 is, of course, it's all interlinked. I think what we'll find is a bunch of these quote-unquote companies will actually just be an extended ecosystem of developers that are contributing to it. And then they're benefiting economically through the tokens. And so I think we're potentially on the cusp of new ways to organize companies in the future. And my colleague, Chris Dixon, and also Katie Hahn,

Starting point is 01:11:15 they keep needing to figure out, okay, do you invest in equity for startups? Or do you buy tokens? And how do you structure it? And all this stuff, anticipating all of these future changes that are going to happen in the economy. Yeah, things are going to get pretty cuckoo bananas in the next two or three years, man. Once all those firms get their RIA certs in order, good lord, there's going to be a hell of a flood. It's going to be very exciting. Yeah, that's right. And I think for the founders, it's just the perfect time to do this. Because

Starting point is 01:11:50 when you look at what's happened in the traditional mobile app world, I think one of the challenges right now is when you were building apps just as the App Store came alive, your apps would just compete with waiting in line and you're sitting on the toilet or whatever. Those are good forms of competition because, of course, whatever app you built is going to be better than those experiences. And then now you don't compete against waiting in line. You're competing against the most engaging, most addictive products ever built that are on your phone. And it feels like it's so hard to break out these days. And so I think having the new Web3 angle and everything is a breath of fresh air in the whole ecosystem

Starting point is 01:12:29 because of that. Yeah, it's going to be, the Wild West is going to be an exciting frontier for the foreseeable future. I'd love to ask you a question about questions. And that is, so I have in front of me a question, how would you 10x the growth of product X, right? Whatever that product might be. So I've read that that is one of your go-to questions when talking to growth teams. So you could confirm or deny that. What I'd love to ask you, broadly speaking, and it could include this, is what types of

Starting point is 01:12:58 questions do you find helpful to ask entrepreneurs when you're trying to assess how they think about growth? So I love these questions you can ask that are basically in infinite depth in nature, where somebody who really, really knows their shit can just go incredibly, incredibly deep. And somebody who's just very shallow will just stop after five minutes.

Starting point is 01:13:22 One really good one that you can ask technical people is, if you type in andrewchen.com and you hit enter, explain in as much detail as you can about what actually happens that causes the webpage to render at that point. If you're talking to somebody who really knows what they're doing, they'll go into as much detail as you want.

Starting point is 01:13:43 You hit enter, and how does the keyboard actually interface with the device drivers on your operating system? And how does DNS work? And you just go really, really deep in all of this. And I love that. And it gives you a sense for how people are strong or weak in different areas. And so what I'll often do with founders is to ask these big, broad questions like that, and just see how deep the rabbit hole goes for it. And one of those is to ask them, how do you 10x TikTok? Or how do you 10x Axie Infinity? Or how do you 10x Clubhouse or something like that? And what you're really looking for there is the people that immediately jump to some kind of a specific tactic tactic where they're just like,

Starting point is 01:14:26 oh, well, you need a better invite mechanism or you really need to fix XYZ feature. Those tend to be all tactics and all tips and no organizing principle for how you can then generate 10 more ideas like that. And it doesn't indicate where you want to go. So what you want instead is you want something that looks more like a model of the world that you're describing, hopefully succinctly. And using that model, you can generate many, many ideas. So if you ask the question about Clubhouse, for instance, you need to, first of all, I think what I'm looking for ideally is a theory for how it is that a user maybe gets invited to Clubhouse from one of their friends, and then they end up being activated because they connect with a certain number of

Starting point is 01:15:09 rooms that they really like. And then as a result of that, do they then share one of those events to another set of friends? And then there's a loop that then you can kind of describe within that. You can call that a viral loop, or there's kind of various forms where you call it an engagement loop. But you want something that sort of feels like it's a theory that you can repeat over and over and over again. And with that, then you can start to dissect, first of all, how do you measure it? How do you measure whether or not that loop is actually working or not? Because in a world of viral loops, for example, if you have 100 users using your app and they invite more than 100 users,

Starting point is 01:15:46 then that group will then invite even more users and on and on. And then that becomes exponential versus if those 100 users invites 50 users, then that'll drop off to 25 in the next one, and then 12 in the next one, and then your loop will eventually die. And so I'm looking for that type of a theory about how it all fits together. And then I think once you set all of that scaffolding up, then I'm very interested in the exact details of what does the screen look like? Where does the button go? What does it say on the title page? And really get down into the nitty gritty. And I think that sort of encompasses everything from strategy all the way down to kind of measurement and into the tactics. But I love those kinds of questions

Starting point is 01:16:28 when you get into it, because when you're with somebody that is as equally nerdy as you are about a topic, you can just go on and on and on. It's like me asking you what makes a good podcast. You probably could talk about that for a year. Turtles all the way down. Turtles all the way down. Okay, Andrew, I have to ask you a very important question. And this relates to metrics. Mr. Metrics, how do you suggest startups, companies, people go about picking the right metrics? Because there are vanity metrics. There are useful metrics.

Starting point is 01:17:04 There are meaningless metrics. There are useful metrics, there are meaningless metrics, there are misapplied metrics. You can really mess it up every which way from Sunday. So how do you walk someone through the process or interrogate someone when you're trying to figure out if they're using the right metrics? However you want to answer that. Yeah. Maybe I'll give a short story about how that maps into your strategy. Because I think it is such a fascinating interplay between the two. I've been an advisor to Dropbox off and on over the years. Always on growth and things that they're trying to do to continue adding new products and continuing to monetize. And one of the things they did in the early days

Starting point is 01:17:43 that I thought was so interesting was, for many years, Dropbox actually saw themselves as a consumer company. And the reason for that was, when you would look inside of a Dropbox folder, what you find is tons and tons of photos. Because that was by far the most numerous thing that was in all the Dropbox folders. And so it was before that reason that they ended up building a bunch of photo apps, including Carousel, and they had a bunch of other projects over the years was because they thought they had a chance

Starting point is 01:18:12 to build another form of social network around sharing photos. And as part of that, they ended up measuring, so going to the metrics point, they were thinking a lot about monthly active users. They were thinking a lot about all the standard things that we might associate with a social network. And what happened though was, well, if you're going for monthly active users, what does

Starting point is 01:18:34 that lead you to? Well, it leads you to potentially giving away your product for free to as wide of an audience as possible. And so, for example, if you find a Dropbox folder that's just full of music or movies, that's good Dropbox usage because maybe a lot of people will download from that. And that's great. But what the company found over time was they basically started to really analyze, okay, what are people actually using Dropbox for? And for the people especially who pay for Dropbox, what do they use it for?

Starting point is 01:19:06 And we found that even though there was a lot of photos and a lot of movies and a lot of other things being shared, the files that actually got a lot of repeat usage and actually retained people tended to be documents, tended to be spreadsheets, tended to be things that people were using for work. And what that led them to understand was that if you did an analysis of all the people who converted to becoming high-value

Starting point is 01:19:31 users, you could actually define it. And so they created an internal metric that they called HVA versus an LVA, so high-value active versus a low-value active. And a high-value active was somebody that was sharing folders with other people, had Dropbox installed on multiple computers, and were syncing files across it. Versus an LVA was somebody who maybe was just backing up their computer, maybe was sharing files, but not the right type, et cetera, et cetera. And so I think that this is an important example of how much your strategy and your metrics actually interplay. People tend to pick a metric, like a really simple one, and tend to say, okay, well, let's make that one bigger, but then not understand what are the actually downstream ramifications of what are actually

Starting point is 01:20:16 going on. Registered users, right? Coming back to early in the conversation. That's right. That's right. Exactly. And so I think instead, what you really want to do is you want to actually pick your strategy first. What's your vision for the product? Are you going for a certain target audience? What is the unique value prop that you're trying to go for? And really tie that up, especially with what actually retains and generates business value for you. And then you set your metrics in a way to validate that your strategy is actually working. And I think some of the biggest blowups in all of tech history, whether you're looking at products that are, I'll leave the individual product names out, but ones where you spent

Starting point is 01:20:57 way too much money trying to grow too many users, and then it just turned out that they would never be unprofitable and it would kind of implode from there. Or actually an example that I have in the book is Google Plus was a product that Google had released in order to compete against Facebook with the idea that more users is better. They ended up linking the Google Plus product from the Google homepage and from Google Maps and from YouTube.

Starting point is 01:21:21 And of course, it looked like it had hundreds of millions of users very fast. But the question is, well, were people really using it with each other? And the answer is no. But if you define it by just active users, that's the kind of result that you get. And so I think that's an example of where the strategy wasn't sound and then the metrics that were picked kind of overwhelmed what you ended up being there. So I think our founders have to be very careful about that and really start with the fundamentals there. What are some other common mistakes that you see people making when they're trying to improve growth within a startup? Could be just a small business of any type, but what are some common errors that you see among founders? One of my favorite ones to debate people on Twitter about

Starting point is 01:22:09 is the use of brand marketing in order to power your customer acquisition. It's just such a tough thing because there's sort of a brand marketing industrial complex that exists out there that's just full of agencies and all these creative people. And it is what the big companies do. Because when you're doing brand marketing, you're working on a multi-decade timeframe if you're a bigger company to be able to recoup a bunch of those costs. But when you're a startup, I think the reality is that the world that you work in has to be very concrete. It has to be very much about how you use your very scarce resources to acquire your next batch of 100 users or 500 users. Paul Graham has a great essay about

Starting point is 01:22:56 doing things that don't scale. And one of the things he talks about is how founders are very, very reluctant to individually onboard customers into their product because it just feels like such a waste of time and just way too much work. But I think in reality, what you find is that you learn so much from doing that, and then you find new ways to scale. And then once you've proven that you've built your atomic network and you can go from there, then that's when you start to think about paid marketing and referral programs and all that good stuff. start to think about paid marketing and referral programs and all that good stuff. The whole brand and paid marketing thing is definitely one that I think

Starting point is 01:23:30 startups should just completely avoid if they can. I'm so glad you brought up the doing things that don't scale. I would also highly recommend people check out, it was an early episode of Masters of Scale with Reid Hoffman featuring Brian Chesky. And they were talking about doing things that didn't scale in the beginning of creating Airbnb. And it's just a phenomenal episode. And it shows you how fluent they became in all of the touch points for users of their service by being really hands-on in the beginning. And I find it to be very inspiring also because it means that you don't necessarily have to have an infrastructure ready for billions of users on day zero.

Starting point is 01:24:20 That's right. And I think that that's why every startup that is getting created today has the advantage of looking at all the other companies that have been founded in the past and seeing all the idiosyncratic new growth hacks and techniques that they use. But also, they get to use all of these new ones that are just emerging in the market. I mean, I think one of the big areas has definitely been the creator economy getting to scale. 10 years ago, being a creator was not a thing that a lot of people could do. And then now all of a sudden, you have all these people with millions of followers, and they want to work with startups. They want to work with communities. A lot of what we saw in the Clubhouse journey so far is how many folks from the entertainment world are so interested in tech and want to invest

Starting point is 01:25:06 in the companies and want to build ownership in these companies. And it's something where if you're a brand new startup, you can find that edge and go for it in a way where if you're a larger company, while engaging one or two YouTube influencers, it's not going to be as interesting and move the needle as much as if you closely partner with another. So I think one of the things I'm always looking for is, what is that next big edge, the new computing platform, the new technique that a startup can use to get a couple hundred users that the big companies are not going to be able to take advantage of? That's a large subset.

Starting point is 01:25:42 Big companies are handicapped in a lot of respects. In the same way that individual investors can outperform some of these Fund or something, you have to follow a certain set of rules that Joe Mainstreet instead of Mr. Wallstreet doesn't have to follow. So there are a lot of options. Let me take a hard left turn here and ask just a handful of additional I have Meerkat written down here. Could you please talk to me about Meerkats? Yes, yeah, talk to me about Meerkats. Well, so one of the really interesting parts of the network effects literature, if you go back and read about it, there's this concept of Metcalfe's Law, which has sort of been this framework that justified it.

Starting point is 01:26:49 It basically says, the more users that use a network, its value exponentially grows. It's very simple. It's what was used, especially in the original dot-com era, to justify these enormous valuations for all these companies and really is the heart of first-mover advantage or these ideas like winner take all. And the more you stare at that, if you've been in the tech industry, the more you realize, oh my god, this really classic law is actually wrong.

Starting point is 01:27:18 And it's really obvious why it's wrong. Because first of all, as we've been talking about today, Tim, it isn't just that more nodes on a network is better. You actually need a critical mass of people, and there's a certain number that you need in order for it to work. And so if you talk to the Slack folks, and I interviewed Stuart for the book, one of the things he talks about is you need at least three people in a company using Slack together in order for it to work. And so Metcalfe's law just doesn't capture any of that at all. And then the other thing is, on the other side of it, which I think is really fascinating,

Starting point is 01:27:50 is that very large networks end up having all these problems because there's just too much stuff. You get these overcrowding effects where now it's just really hard to find good content on a YouTube, or it's really hard to find... Craigslist has so much stuff in there where just the navigation and the fact that there's fraud and scams and all that other stuff

Starting point is 01:28:10 is really a core part of it. And I think this is something that you just see across all of these platforms, which is that not only do you get the cold start problem at the beginning, but then as it gets too big, you end up needing to deal with trolls and spammers and overcrowding and all these other things. And so at the heart of it, what big, you end up needing to deal with trolls and spammers and overcrowding and all these other things. And so at the heart of it, what that tells you is, well,

Starting point is 01:28:29 Metcalfe has to be wrong because the value doesn't just go off into infinity. Otherwise, we would never ever use any new products. We would just stick with the five big marketplace. We would all just use eBay for everything. We would all just use AOL instead of Messenger for everything. We wouldn't use anything else. And so the framework that I actually came to in trying to understand this is actually borrowing a theory that comes out of the world of ecology, which is that you have meerkats, which are, if you remember, this is one of the characters from The Lion King. There's Timon, who's the meerkat, and Pumbaa, who's the warthog. And what happens with meerkats that's super interesting is that basically, if you look at all the academic research on it, when you model them or flocks of birds or

Starting point is 01:29:16 goldfish or whatever it is that you want to model, what you find is that you have to model them in such a way where there's a certain size of a meerkat grouping that you need in order for them to be able to warn each other for predators and so on. And if you bring them way far down, if you lose too many meerkats, then what ends up happening is the whole grouping becomes much less effective. And on the other hand, if you have too many meerkats, then you end up with overpopulation because there's just too many in a given area, and then the population will also tail off. And so that S-curve is actually really at the heart of a theory that then you can apply to all of these social apps and marketplace companies and collaboration tools because the dynamics are

Starting point is 01:30:03 really the same. And so when I was writing The Cold Star Problem, I remembered this class that I had taken at the University of Washington on the study of animal populations. And I was like, yes, that's the curve, that's the math behind it. And so I was excited to be able to actually put that into the book. One of my other favorite things to do in the Bay Area is to go to the Monterey Bay Aquarium. And if you go to the Monterey, it's such a great aquarium. And one of the funny things, if you, it's like funny and sad, is that there's all these sardines that they used to fish for. And they basically fish for them every year with more and more and more. And they were fishing several dozen tons of these fish. And then one year, they just all disappeared. And again, the math is the same kind of idea, which is that you need a critical mass of sardines. And if you overfish, then the whole population will collapse. And so those ideas are

Starting point is 01:30:55 so fascinating how they sort of weave across nature and then also a lot of the different products that I was studying for the book. Yeah, that's right. What is it? Cannery Row? Is that the name of that road? Yes. Where the Monterey Aquarium is. I haven't been there in so long. Man, that brings back the memories. I thought you were going to mention the sea otters as a distant aquatic cousin of the meerkat.

Starting point is 01:31:18 I'm sure there's got to be some type of surveillance system among the sea otters that has some similarity. Who knows? Definitely plenty of sharks in those waters. Yes. You don't have to go to the Farallons to find those. Yeah. I was going to mention the other place where I've been very fascinated about network effects

Starting point is 01:31:37 is actually the network effects of work in these cities that we live in. Because when I first moved to the Bay Area, I lived in Palo Alto. It did not take that long for... There was a period where basically everyone said all the serious startups are in Palo Alto. I think there was one building,

Starting point is 01:31:57 165 University Avenue, where Google and PayPal and a bunch of other companies had all been built in one building. University Avenue is just one street and had all the companies were in one street. And I think it took four or five years before all the startups moved to San Francisco, moved to the city, which is an hour away.

Starting point is 01:32:16 And I remember it was because one of my friends was saying, it's easier to get funded than it is to get Palo Alto office space. And Pinterest actually started in Palo Alto and moved to the city. It's been fascinating to watch also just thinking about some of these ideas in the context of cities because obviously having Zoom and having remote first as an option really weakens the network effects of all of these different cities because you can actually work from anywhere. And having seen the whole tech industry move from Palo Alto to San Francisco makes me actually

Starting point is 01:32:49 wonder how likely it is that huge chunks of SF, the tech industry, might actually decamp and move to New York and LA and some of these other places. Austin. Half of the city has moved. Yes, yeah, exactly. That's right. That's right. Well, I was telling you that during COVID, I drove around in a van for four or five months and then I ended up actually staying in Austin for four or five months as well. And one of the things I put together was like the WhatsApp group of, I went on Twitter and just asked who in SF is in Austin, DM me and I'll put together a WhatsApp group. And I think I still have like 200, 300 people in this WhatsApp group of the SF expats that are visiting there. But I think it's very real that the same things that

Starting point is 01:33:29 keep people all in these top cities are going to fundamentally change because of the way that we're working. Oh, for sure. I've been excited about it. I've been excited about the sort of geographic redistribution. And I'm sure there will be some regression to the mean in the sense that I knew that New York was going to recover quickly. For instance, people are like, New York's dead. I'm like, no, it's not. It's definitely not. And lo and behold, you know, six months later, it's alive and well, not to worry. What else are you looking at over the horizon, say in the near term, and you can define that however you like, but are there any particular changes that you are excited about, worried about, thinking about,

Starting point is 01:34:14 or trends that you're paying a lot of attention to? Yeah, one of the trends that I've been following that I think is just incredibly fascinating is how much startup investing has become part of the overall vernacular of Twitter and just everyone who's an employee in tech also, everyone wants to invest. This crystallized for me recently where you guys may know Austin Allred from Lambda School, who's one of my favorite people. He said he basically thought, maybe I should start a rolling people, he said he basically thought, maybe I should start a rolling fund. And he just tweeted out, I think it was him and Sahil who put a couple of tweets together. And they immediately just instantaneously put together a $30 million rolling fund, which he's now off investing. And it's a really interesting place

Starting point is 01:35:02 because of both, obviously, Robinhoodhood as well as OpenSea. And I'm involved in a couple of companies, one's called Stonks, which is a product that aims to be Robinhood for the private markets. There's just so many ways to angel invest now. I mean, you can be an angel, of course, you can be one of these solo GPs. What do you mean by solo GPs? Yeah, so there's a bunch of folks like Ryan Hoover and Jeff Morse Jr. and these folks that are running around basically where they start a venture capital fund, but it's just one person at the top of it.

Starting point is 01:35:34 And they're investing other people's money, but oftentimes these are folks that have really interesting social media followings and have really unique insights about their particular markets. And so because of that, they go off and they raise $5 or $10 million funds. It's fascinating because we went from this world where we have been giving $1 or $2 million to every credible entrepreneur. And now it seems like what we're doing is we're going to give $5 or $10 million to every credible person to now go and invest in their friends. And I think we've been happy with the former part of this experiment with all the innovation that it's been creating. And I think just generally making it so much easier

Starting point is 01:36:09 for founders to get started is a huge deal. What's been happening now is as people get into the market and are starting to invest more, what I always tell them is, first of all, if you're going to get into investing in startups, number one, you really have to think about it like you're building a portfolio. And if you look at the venture capital data out there, there's one of our LPs, Horsley Bridge, went and released a ton of data about how for the top tier venture capital funds, about half of your investments will actually lose money. And then you'll get another slice that basically where you get your money back. And then it's one out of 10, one out of 20 that makes money and pays for everything

Starting point is 01:36:50 else. And so what that really tells you is that if you're not in a world where you're actually getting to 20 plus investments, then you're not doing it right, first of all. Yeah. I was just going to say, it's like reading Bringing Down the House and playing blackjack. You need to have enough bankroll to survive a string of bad luck. That's right.

Starting point is 01:37:15 You can't just have enough for one hand. You need to actually plan for larger numbers. Not to interrupt. That's right. Yeah, exactly. And I think you need to scale down your check size to be small enough where you can put money into 20, 30, 40 companies. And so sometimes what that means is

Starting point is 01:37:34 you're DMing founders and you're individually investing 5,000 bucks or 10,000 bucks or something into their company. And you're trying to spread it out across many of these. And then counterintuitively, I think a lot of folks are getting into startup investing, and they're thinking about it as where they want to do advising first. And on one hand, those can work out, as you and I both know, especially if you do quite a few of them.

Starting point is 01:37:57 But in a lot of cases, you're advising companies, and you end up in a situation where they're adversely selected. These are companies that need your help. And so when a company needs your help, it ends up being a sign that maybe, okay, where is this going to go? Are they actually going to be mature enough to be able to be successful on their own? And then the final thing I wanted to mention is, I think that writing and tweeting and social media has become such a big part of it because in a world where there's so much capital and so many new ways for people to do investing, that you end up needing to really show your unique expertise. And social media and writing and all that has become the way to do that for a very founder-oriented, founder-leaning ecosystem at this point. Yeah, you were mentioning advising

Starting point is 01:38:46 and the more help a company needs, maybe acting as an adverse selection criterion, right? And it seems to me in Web3 also, as companies get, in some respects, leaner and leaner and leaner, and they get to tokens faster and faster and faster, at least in certain forms, Web3 companies that need a lot of capital, that could also act as an adverse selection indicator.

Starting point is 01:39:15 If something's really cash-hungry, it's like, well, wait a second. Let me make sure they're making good decisions before we plow a huge check into this. Yes. Back in the day, you were pretty prolific. Have you gotten back into investing or advising at all? I haven't done any advising in a really long time, just because my time doesn't scale these days. And also in the beginning, I did advising in part because I didn't have enough

Starting point is 01:39:48 chips to spread it around. And I understood, but I understood the portfolio theory for angel investing well enough to know that I couldn't just have one. I'd have to be batting a thousand to only place a few bets. And I think importantly for me, at least, I also committed to doing it for a long time. I knew that I would put money out, learn, and then place more bets as I made more money. And to view it almost, I mean, the way I really did view it was my own Stanford GSB, right? So rather than going to business school, I was like, all right, I'm going to spend this money over two years, like tuition, and I'm going to assume I'm going to lose it all.

Starting point is 01:40:32 So I'm going to optimize for developing relationships and learning new skills, and then we'll see where things land, right? Right. So I did the advising early on and had some good choices and a lot of luck and really good timing, which I can't take credit for in most cases. So that worked out. But stopped investing from, I'd say, almost entirely stopped investing from 2015 to 2019, 2020. and then really started investing aggressively beginning of 2020 and have become very, very fascinated by Web3. So I've invested in some companies, but I'm also treading carefully because there's so much noise and so much volume and so much excitement that

Starting point is 01:41:27 it's become a little difficult for me to read the room, if that makes any sense. And I think it's really important, at least for me, I try to identify, we're all playing games, right? So I try to identify the games that I'm playing. And then once you've identified that, am I actually well-suited to do well at this game? And so in 2015, there was all this money coming in from China and other places, and these term sheets were getting so weird. And I thought to myself, well, I'm playing with my own money here. So I don't have fund economics. So if you have, and there's nothing wrong with this, I think it's genius. It's a great way to get a lot of leverage. And if you can do it intelligently, it's awesome.

Starting point is 01:42:09 But if you have, say, management fees and carry and so on, it's a very different thought process than if you're using all your own savings, at least on some level. There are similarities, but the return profile is a little different. So I stopped and have been getting back into it. But I've also recognized for myself, at least, that I get, I think, addicted to the adrenaline of the sport. And I like competing in competition, not necessarily against other investors, because I don't really think about it that way, but I like backing players and seeing them kill it. Right.

Starting point is 01:42:55 And I don't know if I want to optimize for competition over the next chapters of my life. I'm good at it. I enjoy it. But it also, it does create a fair amount of cortisol, as you know. If these startups actually turn out the way you want them to,

Starting point is 01:43:13 which is like they have a tiger by the tail and they're exploding, bursting at the seams, that just means they have a whole different set of problems. It doesn't mean that problems go away. I think that I'm in the process of doing some self-assessment, but I am enjoying the investment that I've done in the last year, I will say has been really fun and has largely reminded me of that kind of 2007 to 2010 period in a lot of ways. So that's been cool. That's been a lot of

Starting point is 01:43:48 fun. Yeah, I know our mutual friend Naval says how angel investing is somewhere between a hobby and a business, probably closer to a hobby. And so you have to be careful about it. I was going to ask you one other question, which is, for you as a creator, I imagine you must be pitched all sorts of stuff in kind of, quote unquote, creator economy. And I'm curious what's been resonating with you and what you like and don't like in the market as all the trends have been going. It's kind of like a golden era, right? Who would have thought that these kinds of contracts and these kinds of deals would be getting thrown around? It's really exciting. It's also, I think, seductive for a lot of folks who are relatively new entrants.

Starting point is 01:44:35 So the walled gardens and say the world of podcasting, right? There are some very lucrative deals that are offered by some of these services. And the numbers can be pretty astonishing. So it depends on where you are in your, I think, career. I'll speak to my personal feelings too. But I think it depends a lot on where you are in your career and what you're trying to create for yourself and what type of opportunity cost you think there might be? So I do see people taking deals that reduce their total listenership by say 50%, 60%. And they get paid a premium for that over a period of time. And I am not currently in a place where that is interesting, just because I've been fortunate with the startup game and with other forays,

Starting point is 01:45:27 like my publishing chapters and so on. And I don't have too many expensive habits, so I just don't need to automatically look for a corporate overlord to tell me what to do. For a huge check size, that sounds really unpleasant. Now, there are more and more creative deals coming into the space, say for podcasting, as there are more well-funded entrants beginning to throw muscle into the space. And we're seeing that with Amazon, who it's always a mistake to underestimate amazon i think and from a content perspective otherwise you know i do find it really interesting to see how new iterations of older technologies or approaches can still strike such a chord like substack so i have I have a newsletter. I do manage it. My team manages all of it. I do the writing. And it's been really exciting to see how many top-tier journalists have

Starting point is 01:46:38 made the jump to independently self-sufficient through something like a sub stack. For me, a lot of the stuff I have been pitched just doesn't make a lot of sense financially or energetically because I really enjoy doing the podcast. The podcast does very, very well. For the amount of work that goes into it. It is a fantastic business model. And I get to offer it for free to my listeners. Now, they do get to pay the tax, which is listening to advertising. But when I tried a very brief- There's a fast forward button.

Starting point is 01:47:19 There's a fast forward button. It's a great trade. Yeah, I vet all of my sponsors really carefully, turn down like 80% plus of them, which may immediately make it impossible for me to do any type of deal with a larger company because there would be minimal approval ratings for sponsors and things like this.

Starting point is 01:47:37 Right. But that's okay. So what is currently getting my attention right now is the NFT space. Not because of the cash grab. Of course, there's a lot of that going on. But if I were just trying to capitalize on striking while the iron's hot, I would have done something already. in particular is the prospect of, say, funding scientific research through my foundation with projects that then deliver an annuity back to the foundation in the form of, say,

Starting point is 01:48:14 10% of secondary sales or something like that. So to have a regenerative philanthropic approach that is fueled in part by NFTs is really exciting to me. So that's something that I'll be looking at. The business models are so interesting because I think what we're figuring out in this era is that creative work has probably been wildly undervalued because it's the thing that so many consumers actually want and experience. But then you have this whole generation of middlemen, whether those are music labels or publishers or whatever, that have artificially been constraining some of the economics in order for their businesses

Starting point is 01:48:53 to be interesting. And being able to go direct in this way, first through things like Substack, where it's now part of the playbook of the company as well as many other companies like it, to basically have a creator fund and to be able to write advances of huge numbers. I mean, you can Google some of the rumored numbers out there,

Starting point is 01:49:13 but big numbers, I think just really fundamentally changes the way that the creators can then own their work. They don't have to be intermediated, et cetera. And then I completely agree. I think the whole NFT thing is fascinating in how it provides ownership at the next level. So that's cool to hear that you're so engaged in the Web3 stuff.

Starting point is 01:49:32 Yeah, I'm very fascinated by it. A number of my friends who are brilliant artists of different types have, from my perspective, finally been paid. They've had a balloon payment in the form of NFTs or in the form of Ethereum for NFTs that have just lagged for years, in a sense, with the value they've offered to their fans because the economic models have been so lopsided. And that's okay. People get something from participating in these structures. But now that there are new options, I anticipate

Starting point is 01:50:12 that the self-designation of creator is going to become, this is not a controversial prediction, but it is going to become much more common. As you mentioned, kids looking to become YouTube stars. I think that that will kind of expand in multiple directions to encapsulate a lot more as ownership becomes more and more of an option and technologies exist to facilitate that. And I remember talking to somebody who had a massive, massive business built on a number of Facebook pages. And I asked him what it felt like. And he said,

Starting point is 01:50:53 it feels like I have the most profitable McDonald's in the world built on top of an active volcano. Because with one algorithm change, with any number of platform changes that he has no control over you know his organic reach could be ratcheted down by god knows how much right right and that's why quite a few years ago i decided to focus on five bullet friday in the newsletter which has also become this sort of joy for me to do. I enjoy doing it.

Starting point is 01:51:26 It's like my diary of the coolest things I've discovered each week. Because you have some sovereignty. And that email list is like, I mean, in a sense, it is an NFT, right? It's sort of a non-fungible token in the form of a unique database that can travel with me if I become unhappy with a given email service provider or whatever it might be. So I'm really, really, really interested to see where this all goes.

Starting point is 01:51:59 I feel the same way about my email list, by the way. If I could convert my Twitter followers into more email subscribers, I would, if I could do that across. I mean, it's the one thing that you really control. As you were talking about that, I was just thinking, you know how there's the concept of like thousand true fans? Oh yeah, Kevin Kelly.

Starting point is 01:52:18 Yeah, in the Kevin Kelly world. I wonder if there needs to be a new rule created now in NFT world where it's like, actually, instead of having a thousand true fans, you maybe just need a hundred investors or you need, you know. Yeah, that's true. It's true. As a new form of patronage.

Starting point is 01:52:38 Yeah, I'm really excited to see what emerges out of the rapid experimentation and the high volume experimentation that I'm seeing now in Web3. I've never seen quite a few cycles now and the the sheer volume of experimentation is something i've never seen yeah in such a compressed way it's it's really incredible so can't wait to see what it does to film to tv to people who want to direct to creators of all different types. And it's also going to become a curation mess in even more of a mess in so many respects. So I'm very interested to see how,

Starting point is 01:53:38 and it's already happening, but how sort of tastemakers and cultural shapers emerge from this primordial soup of Web3. Yeah. There's been several cycles of crypto now, but it definitely feels like this is the one where this particular cycle, where because of games and crypto, and then also kind of NFTs and kind of creators and all of that where it's really burst into the mainstream of what a normal average consumer would actually be

Starting point is 01:54:12 excited about. For them, as much as the nerds were excited about new versions of different protocols and so on, that wasn't as appealing as now. It's a little abstract. Yeah, it's a little abstract. Yeah, exactly. That's right. I think it's going to be one where

Starting point is 01:54:27 hopefully in a couple years it's like any game that you download off of Steam or off the internet or whatever is going to have a bunch of crypto functionality and a wallet embedded and all that stuff. It'll just be transparent to the user. It'll just seem like it works.

Starting point is 01:54:42 A lot of what we're talking about now is just the underlying technologies will feel more like when people used to talk about megahertz and how many gigabytes of memory does your thing have, etc. It'll just become fully just a natural part of every product

Starting point is 01:54:58 experience we have. It'd be like explaining to little kids now who use iPads what a touch screen is. They'll be like, a touch what? It's just like, that is what a computer is, is this thing that I touch. You know, it's sort of like the David Foster Wallace, this is water, or what is water? The two young fish going by the older fish, and the older fish says, how's the water, boys? And they go by, and one turns to the other and says, what's water?

Starting point is 01:55:23 You know, that kind of situation. I'm sure that a lot of what we're talking about now will just be ubiquitous in a handful of years. Andrew, we've covered a hell of a lot of ground. I really appreciate you taking the time. It's fun to reconnect. It's been a long, long time. People can find you on Twitter at Andrew Chen on your website, of course, at andrewchen.com. You have a very popular newsletter, I'm sure that people can find there. The new book is The Cold Start Problem, which people can find wherever books are sold. Reforge, would you like to say anything about Reforge or anything else before we bring this to a close? I'll just also just add that one of the things I've been doing

Starting point is 01:56:03 over the years has been to take a lot of my lessons and ideas, especially around metrics and growth and marketing, and packaging them into multi-week programs under a company called Reforge, which you can check out. And the whole idea there is basically the whole concept of a business school needs to just be completely reinvented. I actually lived in a Stanford GSB pass-down house where it was basically a bunch of the MBA students, and I just found it

Starting point is 01:56:30 on Craigslist when I first moved to the Bay Area. And it was always one of those things where you ask them, oh, how's school? And it's like, we didn't learn anything, but you meet amazing people, the parties are really fun. And that's kind of the state of things. And so what the reforge people are trying to do is really to take all the knowledge out of all of these frontier skill sets, right? Everything that we've talked about today, actually. Everything from Web3 to metaverse and game design to all the creator economy stuff. And how do you take all these frontier skills and actually get them out of the practitioner's heads and organized into ways that you can train the next group of people. And so this company has been a really interesting vehicle for me to be able to publish more of my

Starting point is 01:57:11 thoughts and content in a very organized way. And so they'll work with folks like Casey Winters, who's the chief product officer at Eventbrite, or a bunch of folks from Airbnb and Slack and some of the really interesting companies, and really to bridge that disconnect that exists between academia and what actually happens in the real world and to provide it in a format where people can basically learn all these frontier skills from other people and to do it in a way where their employers are paying for it and it's part-time. And I think that really stands in stark contrast with this whole reinvention that we're seeing in academia as a whole, where the top 200 schools, maybe 500 universities will probably be fine, but you're actually seeing a ton of universities going bankrupt these days.

Starting point is 01:57:56 Student debt is obviously a huge crisis, and it makes the whole process of going to one of these schools less attractive. And so Reforge is part of a really interesting new trend of trying to reinvent this whole system that I think we all know needs to be reinvented and starting it on business education and tech and so on. And we'll link to it in the show notes, but what is the URL offhand? Yeah, so if you just go to Reforge.com,

Starting point is 01:58:23 R-E and then Forge.com, it'll list all the new programs that folks are doing in product management, in marketing, in growth, and a bunch of other upcoming programs that Brian Balfour, who's the CEO, and that whole team is putting together. Amazing. Is there anything else you'd like to share? Any comments, complaints, requests to the audience? Closing comments that you'd like to share? Any comments, complaints, requests to the audience? Closing comments that you'd like to add? No, all good. Tim, I hope you allow me to take you out to dinner

Starting point is 01:58:53 in Austin when I'm next out there. I would love that. I would love that, man. Just like old times. Holy cow. Exactly. It's been a long, long time since we were neighbors in the mission. That's right. And so great to see you. And to everybody listening, we will link to all of the resources we discussed, including

Starting point is 01:59:12 the new book, of course, The Cold Start Problem at tim.blog slash podcast. That's tim.blog, B-L-O-G slash podcast. And until next time, pay attention to those meerkats. Be nice, experiment often, and take care. Enjoy getting a short email from me every Friday that provides a little fun before the weekend. Between one and a half and two million people subscribe to my free newsletter, my super short newsletter called Five Bullet Friday. Easy to sign up, easy to cancel. It is basically a half page that I send out every Friday to share the coolest things I've found or discovered or have started exploring over that week. It's kind of like my diary of cool things. It often includes articles I'm reading, books I'm reading,

Starting point is 02:00:07 albums perhaps, gadgets, gizmos, all sorts of tech tricks and so on that get sent to me by my friends, including a lot of podcast guests. And these strange esoteric things end up in my field and then I test them

Starting point is 02:00:21 and then I share them with you. So if that sounds fun, again, it's very short, a little tiny bite of goodness before you head off for the weekend, something to think about. If you'd like to try it out, just go to tim.blog.com. Type that into your browser, tim.blog.com. Drop in your email and you'll get the very next one.

Starting point is 02:00:40 Thanks for listening. This podcast episode is brought to you by Helix Sleep. Sleep is super important to me. In the last few years, I've come to conclude it is the end-all be-all, that all good things, good mood, good performance, good everything seem to stem from good sleep. So I've tried a lot to optimize it. I've tried pills and potions, all sorts of different mattresses, you name it. And for the last few years, I've been sleeping on a Helix Midnight Luxe mattress. I also have one in the guest bedroom, and feedback from friends has always been fantastic. It's something that they comment on.

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The Tim Ferriss Show - #550: Andrew Chen — Metaverse, Metrics, and Meerkats

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