Every company has a story. Learn the playbooks that built the world’s greatest companies — and how you can apply them as a founder, operator, or investor.
Wed, 11 Jan 2017 14:58
Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the Founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and founder, so we knew there's a natural fit. We know the host of founders well, David Senra. Hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how they group us together and then they say it's like the best curriculum for founders and executives. Really, as we use your show for research a lot, I listened to your episode of the story of Akio Maria before we did our Sony episodes this incredible primer. You know, he's actually a good example of why people listen to founders and to acquired because all of history's greatest entrepreneurs and investors, they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research. But I think this is one of the reasons why people love both of our shows and there's such good compliments is on acquired. We focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of founders listeners. The other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them because in my opinion, the greatest such a printer to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20 year old Steve Jobs, he's talking about Edwin lands my hero. So the reason I did that is because I want to find out like I have my heroes who were their heroes and the beauty of this is the people may die, but the ideas never do. So Edwin Land had passed away way before the apex of Apple, but Steve was still able to use those ideas and now he's gone and we can use this idea. And so I think what requires doing what a founder trying to do as well is find the best ideas in history and push them down the generations. Make sure they're not lost history. I love that. Well listeners, go check out the founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders, go check it out. Ideas to fix Twitter Jack Dorsey says Twitter is quote thinking a lot about an edit tweet button. Oh God. Like the things that are innovation in Twitter now. Yeah, sad. Who got the truth? Is it you? Is it you? Is it you? Is it you? Is it you? Is it you? Is it you? Is it you? Sit me down. Say it straight. Another story on the way. Who got the truth? Welcome to episode 29 of acquired the podcast where we talk about technology acquisitions and IPOs. I'm Ben Gilbert. I'm David Rosenpill. And we are your hosts. This is a very different episode for us than usual. We decided to do a year in review and probably more importantly than that. Talk about what lies ahead in 2017. So David and I were thinking, you know, we've talked a lot about a lot of tech themes in a very sort of rambling and unstructured way over the course of the show. And we went back and actually pulled out what were the tech themes that we identified from each episode. And we've kind of basically have a little tally going of which ones were we thought were the most important. And we're going to kind of talk about those and then get into the themes that we think are going to be pretty dominant in 2017 or at least make some freewheeling predictions. Yeah, no, you get what you pay for here. So no guarantee will be right. But yeah, a couple notes. So Ben and I are recording this on December 30th right at the tail end of 2016. It will barring some editing heroics. It will probably be up for you guys already into 2017. But as we came to the end of the year, we thought, especially this being our first full year of doing acquired. We wanted to look back and run some data on our own content and see what the biggest themes of our show been. So Ben and I were chatting just before we started. We recorded 23 regular episodes. I guess that includes specials, but 23 full episodes in 2016. This is our 24th. And it was really fun to go through and pull out the themes a lot of a lot of repeats. Yeah. So with that, should we should we announce the acquired 2016 theme of the year? We should. And frequent listeners to show I'm sure can guess what this one's going to be or at least who the originator of this theme was. And I'm shocked. Yeah, so discussed in six different episodes is aggregation theory by Ben Thompson Ostrotechery. This of course talks about building superior user experiences as the winning strategy in an infinitely accessible zero cost distribution world, aka the internet. And this was discussed on a compley snapchat, jet, Android, Skype and Marvel. And so I think for us, it's such a it says a lot about the power of the theory that once you see it, you can't unsee it. And once you realize that, oh, this is a, this is a very dominant factor in making these companies successful. You know, every company we analyze were like, oh, I see what they're doing here. Yep. And obviously a big hat tip as we always do on this show to Ben Thompson and all of his work, but I think it's interesting how much we've talked about it and also reading Ben's work throughout the year. He first published the post on aggregation theory last year in 2015. But how much he keeps coming up in his work too and how he keeps refining this concept and adding on but the core of it. I think, you know, that insight that in this world where, where distribution costs are the cost of distribution is zero. And in digital marketplaces, your accessible market is the entire world that it is really the superior customer experiences that are going to beat everything else because you can have sort of perfect competition amongst the whole world. And so the best will rise to the top. And it's totally informed, you know, my work and I'm sure Ben years to, you know, in companies that we work with when I'm meeting with startups trying to decide which to which to invest in and which, you know, I think might be successful and won't be. It's a very, very hugely influential not just on this show, but in my everyday work too. Yeah, absolutely. Moving on to things that were discussed four times throughout the year. And I think listeners what we're going to do here for the structure of the show is move through these fairly quickly to kind of just establish a baseline of where we come from and then really spend the book on 2017 themes. And also we have sort of an extended carve out section to kind of talk about the best things that we've bought or read or listened to or paid attention to this year. So that said, going back to the 2016 themes, the ever so dominant network effects in in Virgin America episode, PayPal linked in in Adobe. And you know, this one like for me was such a dominant theme that I gave this talk at a product conference called industry. Right. Earlier this year and I had like two ideas for talks going and I was working on both of them and David and I were recording. I forget which episode it was, but it suddenly dawned on me that like, oh my god, my this talk has to be about network effects. And I think it was actually pretty interesting because it was a conference for like product managers and people that have some amount of product management in their role. And it was really interesting to take sort of an adventure lens to a product audience and talk about building building network effects and virality and dependencies on the rest of your user base into the core product and rather than thinking about it as kind of an afterthought. Yeah. And is Ben, is your talk on YouTube? It's not yet. It's not there. They're going to start releasing the talks. I think pretty soon here. But we'll definitely let the acquired audience know when when they can check that out. Yeah, it's I got to got the privilege of seeing Ben slides and hearing hearing a first draft of the talk and it was it was great. So we'll be sure to share that with you guys. And you know, this one I think what's one of the things I learned doing the show this year and thought about is how rare like true strong form network effects are and talking about it on these episodes. We spent a lot of time on LinkedIn. And when we graded that episode, talking about how you know that is one of the very few really, really strong form network effects out there. And it's striking me that all the companies we covered, you know, some have varying degrees of them, but only a few, you know, Facebook, Snapchat, LinkedIn have have the strong form effects. Yeah, it's really interesting thinking about the strength of the sort of like relationship between the nodes of the network and how that can be super variable. Like you can you can have a product that has network effects that are that are just not core to the product itself. And that ends up not not scaling and becoming as powerful of a sort of force of your business as the incredibly strong ones. So a couple examples I'm thinking of are I use my fitness pal what I'm tracking what I eat. And there's sort of two components to it. There's there's utility to actually provide me the ability to track, you know, how much of each macro nutrient I'm eating, you know, how many calories have I eaten today. What should I be getting more of the actual catalog of food that has all the nutrition data associated with that. And then you know, I can make friends on that. And that's kind of important. I mean, it's interesting for sort of encouragement or accountability or anything like that. But an app like that is so much more utility than it is network. And then you have apps that are sort of a crossover like you look at Instagram at first. And there is incredibly utility to the fact that you could put filters on photos and sure you could share it out to the small network that was Instagram. But ultimately there was a powerful utility there regardless of network. Now that that was an amazing product that actually did grow into incredibly powerful network effects. And then you get into things on the other side of the spectrum that have no utility and are pure network effects like the telephone. I mean, if you have a communication network, the only purpose of it is to talk to other people on the networks and are on the network. And when you think about how entrenched that technology became and how long the telephone has been the de facto means of communication. It's pretty clear that like the more core your network effect is to the product itself, the more power and I guess staying power that technology has. Yeah, and it's interesting to the maybe a better distinction between it because as I was just going through the list again, network effects have played a large role in many of these companies we've talked about. But there's the the strong form single platform network effects that Facebook has that LinkedIn has that Snapchat has. And then there's the two-sided network effect that multiplexes have of which we spent a lot of a lot of time on this show between Amazon and Skype. Well, the Skype is also a strong form single platform network effect, but YouTube where you have supply and demand getting matched. And that's a that can also be a strong network effect, but it's so much harder to get going because you have to bring both of these sides together. Whereas the single platform strong form effect where it's literally been you being on Facebook makes Facebook more valuable to me. Whereas you buying stuff from Amazon only indirectly makes Amazon more valuable to me. Right. Oh great. There's so so few companies that can achieve the scale in that single platform. And then once you do just the the defensibility is pretty much unbreakable. Yeah, it's funny. I saw I was reading a thing. It was reflections of Obama and his presidency and he was talking about. Actually, I think it was I think this quote was from one of his his aides, but talking about how important the telephone was to. The Obama administration and how amazing it was that that's the way that he speaks to other world leaders. And how that's pretty much unchanged over the last I don't know how many decades, but we have all this this new technology and you know he was notoriously a blackberry addict. But you know the phone is is ubiquitous. It's you know the especially for land lines pretty high quality secure. It's you know it's one of those well, and that's the that's the classic case right of like two world leaders. The value of the telephone is solely in the fact that other world leaders are available be at the telephone. Yeah. Yeah, exactly. All right, let's move on our next theme that we also discussed four times this year was what I like to call start small, but is focusing at the outset on solving a specific problem for a specific customer base, not trying to be everything to everyone as at the startup phase. And you could also think about this as targeting niche markets and then growing from there. We talked about this on the Virgin America episode with Alaska, obviously targeting the Seattle market and Virgin targeting the California market. We talked about it on Snapchat with Snapchat, you know really tailing the product after some wandering in the woods for a while to high schoolers in Orange County and with with Trulia and also with Amazon, you know, Amazon was just books until long after the IPO. And several of those companies in Amazon obviously have been potentially snap to have going on to become huge companies that do lots of things and have many different products and target diverse user bases, but they all started with that core, solving a very specific problem for a very specific audience. And relating this to network effects like we just mentioned, what's not in this list, but easily could be his Facebook and you think about the issue of the cold start problem, like if they launched Facebook to the world, it would have been no fun because let's even say there's 10 people in every city on it. I mean, that's this year's not going to know anyone, maybe one person and by launching university by university and focusing on just Harvard first, you take advantage of those pre existing networks to make sure that there's there's density among your customer base. Yeah, when you can provide you can you can do the program things that don't scale to get those nodes on the on the small niche network and then grow up in there. And actually, I think in our well, let's let's jump to the third theme that we discussed four times this year. And I think that three of these kind of form a trinity that you know if you are working with startup, starting a startup or working in technology generally, you know, you could do far worse than to keep these three things in mind. And the third one is is growth culture and what we mean by that is is the discipline of growth within startups and technology and it really started with PayPal. And that was the first episode where we discussed it of using real data from the marketplace and from usage of your product to iterate what you're doing and to iterate your product towards the signal of how people are using that data. So we talked about that on PayPal, Snapchat, next and the Amazon IPO. But I think they interplay of these three things, you know, one, you know, keeping the power of network effects. But the problem with that is that it's they're very hard to achieve because you need a lot of scale and then companies that have achieved them have huge defensibility. So how do you attack that? You start small with a very specific niche, you know, that's underserved and tar, by whatever solutions are in the marketplace today, target them. And then you, you know, use the discipline of growth to be honest with yourself about what's working, what are people using and you take it one step at a time. Well, and I'll tell you in looking at growth culture and thinking about the way PayPal did it when they released, you know, a product that wasn't really resonating and then they found, you know, where are people using this product and it turned out, oh, wow, like an incredible amount of transactions are actually happening over. On eBay sales, yeah, or you look at like the initial product was for palm pilots, right? Right, right. And you look at like Twitch and they realize, you know, it's a general purpose thing, but wow, people are really using this thing around gaming. So let's focus on that. We've totally discovered that with with PSL and Medrona Labs companies where it's so important to like get in market with something and just be like a player in that space to have something to talk to partners and customers to and ways to get actual data back from the way that people are using your thing. And it's just funny how companies either narrow or you know, move to an adjacent market and it's so important to get in the space, have a product and market, be able to learn and then you'll find what the real opportunity is from there because it's always, you know, there's varying degrees of how similar it is to your original idea that ends up working, but you know, it's never exactly that and you need customer data to know. It's a, you know, we didn't plan it this way, but you know, as we've been talking about these themes, I almost see it as like this, this kind of trinity of the themes that we talked about four times throughout the year, being how you, you know, sort of the playbook of when you're actually building and running a startup what you work on and then the theme is aggregation theory on top of that because the output of if you do these three things is you'll create a superior customer experience. That really is the goal of, you know, starting small, focusing, solving a specific problem better than anyone else for a specific customer and then growing from there and and and then network effects layering on top of that of making the product even better and providing defensibility. Add those together you get aggregation theory you could do a lot worse than using these as your checklist when starting or pitching or refining an idea. You know, as like am I going to be able to create a successful company or at least convince other people that my company could be successful this sure feels like a decent decent place to start. Yeah, unfortunately, nobody has yet invented a magic button to translate theory into practice in the technology world. That's what makes it fun. Yep. Yep. Yep. All right, moving on to things we've discussed three times. So, Flywheel is a big one with Lucasfilm, Marvel, and the Amazon IPO episode. And, you know, I think I look at a flywheel as sort of a very specific type of network effect where any any increase in one piece of your business adds momentum and grows an additional part of your business. And then Amazon and Disney of course being classic examples of this Disney with, you know, movies that feed into theme parks that feed into TV shows that feed an merchandise and then Amazon with the ability to create a better experience through lower cost building more customer trust driving more traffic and then their ability to continue and grow and scale from there. So, yeah, and it's, you know, Amazon is definitely a two sided network effect or I guess now with AWS all of the different businesses that Amazon has multi-sided. But, you know, for them, the flywheel is about adding to one side of the network effect and then that pushing the other side. You know, Disney and the companies they've acquired in their flywheel, I don't know how much it's about a network effect, but it's, it almost makes me think more of like economies of scale and sort of old world businesses. But I guess you could argue to the extent that people come that consumers come to see content that the more consumers they have coming to see Disney content, the more they can channel those consumers into other Disney content. And then so you could, you could think about it as kind of a content consumer network effect. Yeah, but it's not as strong, I don't think. Yeah, yeah, it's a good point. And it's funny. And in thinking about the best way to define flywheels or potentially if you're in an existing business to see flywheel opportunities in the business, I think a good way to define it might be what does your existing asset of, you know, business line customer capabilities, all those things. Allow you to do that is an unfair advantage that people starting from a cold start wouldn't be able to do. So there's sort of criteria one. And then criteria two is does the existence of that new thing that you do feedback and grow your your original business. Yeah, yeah, Disney, you know, somebody trying to create a caricature, you know, like a toy business doesn't have Disney's IP so they'd fall in their face. And so criteria one is like boy, you can really bootstrap merchandise business. And then criteria two is of course more people are going to go want to see want to go see the movies and visit the parks if they have the toys. Yeah, this makes me think about Airbnb and what they're doing now with launching experiences and blending both of the lodging and experiences into trips, you know, lots of people have tried to solve the kind of destination services and travel for a long time. But Airbnb has a complete unfair advantage in that they have travelers who are coming and using their site to book lodging. And are especially travelers who are oftentimes looking for experiences at the destination that they're going to. And so they can feed that into the experiences product. And then as that product materials and potentially some day people will be coming to Airbnb specifically for experiences, then they can funnel those people into booking lodging. So we could see you could paint what they're trying to do now in a flywheel light. Yeah, good point. All right, next one that we also discussed three times this year was as this idea that as a particular technology generation mature so we saw this with the PC generation with the mobile generation and and potentially with with future technology generations to come maybe we'll talk about this in 2017. But the the basis of competition moves up the stack throughout the generation and you know kind of starts at the hardware level and then moves up to the operating system level and then to the application layer level and then eventually like we're seeing now in mobile and on the web into the service layer level, which is cross cross application. So we talked about this in the accompli episode and the Android episode where I think you can see it most clearly and in the push pop prep press episode which became Facebook instant articles. Yeah, I really like this one and we talked about it was like not exactly the same, but in that episode about rightly in Google docs. Yeah, we were talking about you know as as productivity moved toward the cloud from from desktop software, you know like who there's a low end disruption thing that happened where Google decided that they were going to create you know not as good tools for the professional but you know very good for people that wanted to do sort of lightweight editing in their browser. And then that began a total arms race of wow there actually there is a services in cloud based productivity market here and you you don't necessarily discover those things without somebody building in an inferior product further up the stack first. Yep, which is a great transition to our last our last three point theme or three times theme for 2016, which was business model based disruption which we talked about on the right lane Google docs episode and on the ways episode and on the Android episode but you know anytime. If you're an incumbent in an area and somebody pops up that can offer the same product as you and make money by via different business model you should be very very worried. Yes, and this is classic Clayton Christians in here. It very much falls in the same sort of fear as the Jeff Bezos quote your margin is my opportunity and in this method it's more like your business model is my opportunity because if you're able to leverage something like how rightly was able I'm sorry how ways was able to to crowdsource all the data suddenly it's like hey I've got this huge asset that costs you money for free and now I get to decide what to do with that. Yep, and we'll see this all either Amazon is one of the best in the world at this and actually this is part of one of my car vows coming up not Amazon video my car about is not Amazon video but you see it happening there I mean Netflix is a great great company and valued very highly right now but Amazon video has improved so much throughout 2016 and it's free with prime. And you have to pay eight bucks a month or whatever it is for Netflix now it's you know it's a different business model it is it is it is. All right well we've got some things that are discussed you know twice and once throughout the course of the year but we're going to put those in these show notes so if you're curious about other tech themes that. We're we're prevalent in 2016 at least through our lens those will be in the show notes and we're going to move on to talk about some themes that we think are going to be key in 2017 so David do you want to do you want to start us off with one of your. Yeah well well and I'm laughing and I'm sure a long time listen to the show will be laughing as well but my the first one I wanted to talk about is I think aggregation theory is going to continue to be critically important and one of if not the clearest lens through which to view. Opportunities and challenges and disruption that's happening not only in in tech going into 2017 but but I think in the world broadly too in society I mean Ben Thompson has had some great posts really great posts in the back half of the year here talking about how you can apply that lens the aggregation theory lens to looking at politics. And you know obviously the US election presidential election in 2016 but the media as well and I to me personally I actually see it becoming more important in 2017 and and thinking about sort of beyond just the traditional IT sector of tech you know consumer technology and enterprise software technology. But what is it what does it look like when aggregate when the dynamics of aggregation theory and the. The both opportunities and and implications of internet dynamics get trained on all industries you know we're seeing it with driving right now which if I'm not getting my facts wrong which is entirely possible that I could be I believe driving jobs are either the. Number one is certainly top five yeah category of jobs in the US and it's like two million jobs are directly related to the logistics industry so kind of trucking and yeah tracking and then you add you know I don't know how many uber drivers there are if you add up uber and lift and taxi drivers that's another huge amount of people and all of a sudden you're going to have a superior. A superior customer experience through self driving you know technology that's going to come on board in the next few years. I think everybody in some form or fashion is going to have to come to grips with the implications of what this needs. Yeah yeah that's a it's pretty interesting I am well this segway is nicely into one of mine and I think I was going to talk about three things that I think will happen in 2017 then three things that I think will begin to happen but really you know 2018 2019 2020 themes but this totally gets into. One of mine which is autonomous vehicles start to make people more serious about universal basic income and I was having this discussion with a friend recently where. Let's start with this hypothetical world that is we can basically produce in a very sci fi way. Our basic means of living for free we create technology that is efficient enough that you know let's say that we can have firms that have all autonomous equipment that are powered by solar arrays of you know renewable free energy and can deliver all these ingredients to to people basically free of charge so we have clean water clean food entirely for free and maybe it's even possible that the transportation is there too. So you know then there's things like you know shelter other other basic things that you need to live that that aren't free but we're we're going to start trending toward this world where we could provide those things for everyone but the thing that will happen much sooner than that is that we'll be able to provide these things with very little jobs and so you know if you look at like the industrial revolution the argument that everyone always makes as well you know. Technology eliminates jobs but it also creates new jobs and I think in this era of of autonomous you know autonomous vehicles autonomous machines and in leveraging machine learning the differences that you don't create as many jobs as you eliminate and that might be okay in the extreme long run where we do have societal structure in place that we take care of everyone that. Doesn't have a job because like nobody needs to work like let's imagine a world where everybody gets to live without working and then we need some you know some ways to distribute that that well thought people but what we yeah we also need something for people to do when they're not working yeah boy that's like that's an organization right of of you know figuring out what to do with your time in an era where we don't work but I think there's a immediate pressing problem which is companies will get extremely wealthy by having really fat profit margins on being able to achieve great value for you know tons and tons of people through aggregation theory. Yep and those people will be completely served but it will be you know the same price that we've been paying for things except that lots of people don't have jobs and there's going to be this kind of scary valley where we eliminate the jobs long before we have a sort of like support and redistribution system. Yeah there's a couple thoughts I mean I think one of the I think what we're talking about is a consequence of aggregation theory where you know if you believe it that we're entering a world across all industries now where a superior customer experience becomes a winner take all business you know that means there is a winner and lots of losers and you know as opposed to where you have equilibrium and other industries now. Such as the auto industry where there are you know 10 20 or the airline industry 10 20 firms that are all employing lots of people and maybe they're you know they are not as profitable as firms as a winner take all business but they are at least providing jobs. So so this is definitely you know as far as far as I know nobody has solved what this means you know how to deal with this on a societal level. But but what you're saying after that reminds me of there was a great I believe this was in wired I'm going to find this article I'll link to it in the show notes. When right before the election Obama gave a few interviews where he talked a lot about tech and sort of you know mused on what he saw as the biggest challenges you know for the world and for America going forward now and called on the tech industry to respond to them. And the first one was was inequality and this piece they had had six you know well known figures from the tech industry sort of respond to each of these things the challenges that Obama called out and I believe yes it was Tim O'Reilly the founder of O'Reilly Media answered the inequality topic and and he said exactly what you're talking about Ben which is that Silicon Valley often forgets that it takes you to the world. It takes consumer surplus and people with jobs who have disposable income to then spend money money on Silicon Valley Silicon Valley products and technology. So you're always kind of eating your own tail in in the economy and to the extent that we put more people out of jobs as an industry then there's going to be far less consumption of our own products as an industry. Yeah, it's got a funny thinking about it's not as much funny as sort of haunting. Yeah, it's ironic but not in a happy way. Yeah, so I guess like you know technology is this interesting sword that has to be responsibly wielded like you we've talked about this in the past that the purpose of technology is to make things easier so that it requires less effort from people. So when you run that to a six stream it's that you need less people to do the jobs that you know that create the value for people for you know the consumers of those things. I mean this is one of the themes that we talked about in the Facebook group here that we have that technology is a lever. You know it doesn't mean technology is like a not like it's a caliber right it's not like it's a you know a sword for good like it magnifies what is going on. Whether that's you know good or evil or or indifferently just magnifies the consequences. So in having this ability to you know create incredible automation and incredible value without human input. I don't think we've necessarily figured out what a societal structure is in a world where technology is so powerful. And I think a lot of the things that we take for granted in a society that is a democratic republic and has a capitalist economy function pretty well in a world where aggregation theory and automation is not so powerful. But I think we could be forced to do some serious rethinking in the coming decade as these new harsh realities come to light and think about like boy if we just. Pure capitalism may not actually work anymore or I think I'm venturing into danger territory there. Well we're going to have to call my wife Jenny under the show as a guest expert for this as a. She's a PhD in the humanities and things a lot about this but you know I think channeling her she would say you know we have been in a late capitalist world for a long time. I mean at least since the end of World War two and this is kind of the hallmark of late capitalism which is that you have rapidly increasing wealth inequality. And then the theory is that it ends in a in a communist or socialist revolution. We'll see not predicting that that will necessarily happen right right but that's the direction that you know if you look at like Europe that that. That political economies there have been moving towards over the last 20 years or so but it's also a world where innovation isn't encouraged as much as it is in a purely capitalist society. Maybe I think then you start diving into what are human motives besides economic ones like you know if you look at like the reason Daniel Pink has done a bunch of research on this like what makes people happy in their jobs it's not really money it's autonomy mastery and purpose. Above once you hit a certain dollar amount of sustaining yourself and you if you think about you know that on one hand and you you look at sort of like the things that motivate people in general you know money power love there's a lot of like very core human things that we often like wrap up with how much money someone makes and people often define themselves by by their job and their value in the world is so. Tide to that and I think we might start seeing and maybe not in 2017 and maybe not for for a while once we get to a kind of a post scarcity society is a place where we start defining ourselves and and doing things by different measurements. And actually I'm glad you brought that up because I'm catching myself sort of falling into a trap that I think a lot of people and a lot of economists have for a long time I've been. Reading a bunch of economists lately and realizing that you know classical and traditional macro economics is kind of like voodoo right like and not effective voodoo like it's really deeply flawed and some of the one of the assumptions that is really flawed and it is that every individual is a irrational actor. B has perfect information and C is motivated by by money and wealth and that's been all of those three of those things have been proven to be just not true. Are you reading caught them in right now. I'm not yet started reading the I'm doing project but it's on my list. But no I've been listed I've been reading and been reading Tyler Collins blog the marginal revolution and and a lot of the links and work that he worked at he links to and post there. And he's sort of one of the poster children for the new breed of economists that that reject a lot of these classical assumptions. That's cool all to check that out yeah well so we move on to so one that I wanted to bring up on a sort of looking more on the bright side note of all of this that we talked about on the on the Facebook IPO episode is I'm hopeful that 2017 sees at least starts to see the beginning of the end of this stay private longer. And startups private technology companies delaying their IPOs indefinitely you know it sure looks like we're going to see a snapping IPO in the first half maybe even the first quarter of 2017. And I'm really really excited and hopeful to see what that does for the market you lots of questions to me and say both about the company and what valuation they end up getting both at pricing and how the stock trades afterwards but I hope that you know I'm encouraged by by their courage I get to quote a word of 2017 of 2016. Thank you for doing this yeah thank you Phil Schiller so I hope we see more companies that are building long term sustainable businesses. Yeah it's not clear to me if it's like like courage like they're taking some big risk necessarily that being private wouldn't make them risk or that like they're doing it out of some sense of like it's probably like just overwhelmingly the right thing for them to do so they're doing it but regardless of motivation. It sure seems like it's better for everyone to have companies IPO and you know add up before the five year mark and after you know somewhere between like three and six years rather than waiting to 10 because it just yeah I talked about this on the Facebook episode but like it lets the American public get in on the growth and wealth that is created from. Late stage American innovation and I think it also you know I think this is something that don't get me wrong Wall Street has its own set of issues and the short term focus on short term earnings results can be a bad thing for companies of all types but I think going public it forces a level of accountability and. Being forced to see the real picture reflection of your business and that I think in the long term will be good for companies you know we like we talked about on the Facebook you know episode it was. I really think it not being the time but doing all the research and talking through the story I think Facebook going public force the company to recognize how big a problem they had a mobile and to move. I have work speed to fix it yeah that's a great point alright I've got another couple that that go together yeah so. The first one is the commoditization of basic machine learning I think you know there's that I am let me just create a disclaimer that says I am not a machine learning practitioner or a data scientist nor do I have formal education on the topic. I am a curious person in tech and so I've been doing as much reading as I possibly can and talking to some people that are a lot smarter than I am in these things and trying to understand what is the landscape look like and what's become really apparent is that a lot of these things are 50 to 70 year old technologies or I guess really like math papers that only now are coming to fruition and actually being a part of the world. And actually being applied because number one we have the hardware to do so not only with just cheap CPUs and GPUs but with actual like Google creating tensor processing units that that are more effective at doing the sort of math quickly and efficiently that you need to do for for machine learning. So you have access to elastically scalable clouds exactly you don't have to build tons of data centers you can use s3. Yeah, store all your data. So variety of factors contributing to this there are tens or hundreds of defined machine learning methodologies and I think something that that is pretty interesting is like there's about there's less than five that are actually used right now by a lot of people and have actually had a lot of research on them a lot of like time and practice. And you know it's interesting that like relative to a decade ago when there was still this green you know lots of green space of like this is an emerging field it's been research for a while but not commercialized. We don't know which things work best now there's like a fairly understood scope and scale and understand of what they can be used for for the few basic types or few most use types. And what we've seen is the platformization of those so if you have machine learning task to do your company that are not like wildly different than something somebody else is doing or don't require any sort of like new research or actual mathematicians to be you know hammering on a methodology that's that's not well understood yet. But these are often available from from Google from Amazon from Microsoft as as cloud services that that are built on TensorFlow or at Google or any of the other platforms at these other companies and so what you see is like companies that might be like 3040 people don't really need to build out a data science and machine learning practice in the company they just need to find a way to create really clean data and then feed it into these sort of like off the shelf system. That the big companies have created. Yeah and that makes me really excited as an investor because it's going to enable so many more companies in so many more industries to take advantage of these tools and I think it's going to you know I think this will be one of the enabling factors that further pushes aggregation theory out into the world you know beyond the traditional borders of the quote unquote tech industry. That we talked about earlier. Yeah and that that brings up a the second point that I have is you know the reason that these larger companies are incentivized to make these things available is that the value once you hit a certain kind of scale and understanding and saturation of these things the value isn't the algorithm themselves the values all about the data and so these companies with with large sets of data. Google Facebook Microsoft Amazon etc. can solve problems that startups just can't and there's a total flywheel effect of you know once they know once they have like just incredible critical masses of data and and have the you know the machine learning algorithms kind of and practices built in house to really be competent at at turning that data into you know new products and new services they're just able to to be the right thing. Be the best at things that startups have no chance at so it category of of machine learning problems that like you're saying David are very exciting as an investor to new startups because they can use these off the shelves to shelf tools but there's a whole other category of things that that you know the big tech companies with lots of data can do that no one else can. Yeah I think well i'm going to agree with you with a caveat on this one and more to come you know on my front in in 2017 on this idea but but my view at least right now on this question is I think the key to the data is its data about your customers and your domain and people who could be your customers and the interaction between those customers and what your product is so. Yes I agree that if you have multiple companies doing the same thing the company that has the most data and the most the most robust and rich data is going to be able to create the most superior customer experience and win the application theory which we've talked about ad nauseam but to the extent you're doing something slightly different like I don't think it it pivots very well you know so. That gives me some hope for opportunities for startups maybe like I think there's this category of things so I see you I think there's definitely a category of things around personalization where all those points are like spot on right anything that requires lots of information about you to to bootstrapped from for example like showing you the photos of your best memories of the last five years when you were in motion you know or some like we're going to see. Some like queries like that but like Google has the most photos of cats so anything that relies on a very accurate cat recognizer like you're not going to be Google at that and so I think about like these companies have the largest data sets of like a lot of things and so I think you're right that like outside of the domain of things that these companies capture like you know you can imagine like flow meters on plumbing like none of those. Big tech companies have the data on flow meters on plumbing but anything that's like photo related or conversation related or you know data sets that people create in interactions with themselves in the world is really like locked up there and I think you're there's probably interesting opportunities to try and go find data sets elsewhere and figure out what value can be created from those that those companies don't have. I think that's right but I guess I guess the perspective I come at it from is that if you think about all the activities in our economy and in our lives like there is a infinite spectrum of products and services that can be built that are very different and I guess the excitement I come at it from is that you think about Google you know and the things you were saying you know understanding cats and and I do think machine vision is just like that. Like machine vision is going to be perhaps the biggest category of machine learning value creation in the coming years but like you know what about I company that I work with that were investors in a major on as a company called booster fuels and they deliver gas to your car. And you wouldn't think that that would be driven by machine learning but actually turns out that you know the route that trucks take to deliver gas is hugely important and the more efficient you get at that the better your business your product will be and the better your business will be you know you can Google can't do that. So I just think there is or at least they don't have an unfair advantage in doing that they don't have an unfair advantage in doing that yeah. And even Uber doesn't have an unfair advantage in doing that so I think there's a big sea out there to fish in cool yeah I see it there. All right last one that I had more more fun one for me at least to end on is I think 2017 is going back to the niche sort of I think we didn't talk about in the preamble but is what the native experiences quite unquote look like in new mediums and I think 2017 could be a really interesting year for VR and in the whole VRAR industry and I think we'll get a lot more signal this year on whether VR and AR is going to be a mainstream industry anytime soon or a large niche industry or not of the above and I'm hopeful that by this time next year we'll have a lot more information on that front. And to the extent that it either becomes mainstream or a large niche industry I'm really excited to see what native quote unquote experiences look like in in the VR world yeah yeah me too because it's funny it's like you're going to be the first Steve Jobs demo the iPhone when he pulls up the New York Times and he there's no such thing as a global optimize site yet need double taps to zoom in on all the articles and you look at like a desktop rendered version of the times. Yeah it's like what's the equivalent there like what's the one of the native VR experiences that are are right now like we're so excited like oh my god we're playing a similar video game but a VR. Yeah well and a lot of the games you're seeing in VR right now are those you know oh man this game that we've always known and love would be so cool if we could do it in VR like my craft or whatever like but what are the and I think this is just where the creativity of entrepreneurs is going to come out. It'll be things that you and I haven't imagined yet and having done a lot of your experiences myself I would imagine a lot of our listeners either haven't done many or haven't done any yet it's very much a bleeding edge niche technology right now but you can see so much potential in the immersiveness of the experience you know it's like the anti mobile you know a lot of ways. Yeah yeah yeah I mean it's right now it's a largely tethered experience that's you don't you certainly can't move around much outside of a very controlled environment you know the best VR experiences right now we still have lots of problems with them but where you know as opposed to on a mobile phone where you're getting 16,000 notifications every minute and jumping between context all the time you know you really do start to forget that you're in a simulation and just get totally immersed in what you're doing. Yeah well David I would argue I'm frequently completely immersed in my phone and not paying attention to what's around. It's all a question of what context you're thinking about. Well hey I've got I've got one more and it's more of a question. Yeah do it. I'm curious what you think because it for how political we could get on this show we pretty we stay pretty far away from it even though we sort of discuss societal issues and I was trying to think through you know we've been in this era of rising abundance. Of both information and physical products over the last several decades and I was trying to figure out like do is it possible that we start moving to an era of scarcity of physical products where in any years past you know it's it's it's. It's been incredibly inexpensive to manufacture overseas and you know that's the reason why we can get an iPhone for $600 when it's this incredible magical device and. With the combination of a rising middle class in China you know additional countries where a lot of this very inexpensive manufacturing is getting done becoming more of a developed developed nation and then also it's hard to predict what's going to happen but all indications lead toward. We may have a little bit more restrictions and tariffs on trade to encourage things to be built in America under the Trump administration I'm curious even if that doesn't come to fruition do you think that that we start to shift back toward an era where goods are more expensive and we have less physical goods yeah I don't know I hadn't I hadn't quite thought about that. It's really hard to imagine that just from a consumer perspective which doesn't make me wonder if it happened what would the political reaction be I mean let's let's say can let's assume that if more barriers to trade get enacted that a consequence of that is that the price of physical goods goes up significantly and less people are able to afford them. Like how would people vote in reaction to that I don't know I don't know if you can't buy your big screen anymore yeah I don't know it's at the same time like we also live in this moment where you know one of the books I read this year was one of the top selling books in 2016 was that the life changing magic of tidying up the Japanese art of decluttering. All about removing physical things that there's there's too much many people have too many physical things in their life and you need to remove them so if prices go up will it solve that yeah I don't know and I can't tell if there's a cultural I'm trying to decide if I live too much in a bubble but it sure seems like there's a trend toward owning less things just just to you know try and be more minimalist and especially with the shift toward more people being in urban environments and having small spaces that we we may just start to see this from a cultural desire perspective too yeah I mean no question I think one thing that seems very clear to me that you mentioned is urbanization regardless of what happens with globalization and trade I think urbanization is going to continue to be a very very powerful force throughout the rest of this decade and likely into the next. So many for a whole variety of reasons so many people in this country and around the world are migrating to cities and the you know the migration to cities that I think is happening is going to force a lot of this change you know the the big mansions in the suburbs you know aren't what a lot of people aspire to more. It's a great point let alone let alone the fancy cars that you drive to get back and forth yeah no kidding with that do you want to move on to to carve out. Yeah so for carve out for this episode since it's the end of the year we thought that we would each do a carve out across a whole bunch of basically all the categories that we talked about throughout the year. So we've got a lot of artists, articles, podcasts, music, TV and movies and apps should we start with the books. Yeah let's do it. I've got one that I'm rereading now and I don't think I've done it as a carve out before but it's one of these books that I probably should read every year and you know I'm just reading for the second time now but it's called on writing well. Kind of a spiritual supplement to the eb whites the elements or elements yeah elements of style and it it's this really great very enjoyable to read book that harps on the importance of writing in plain English using one word when you can instead of two or three or ten eliminating kind of colloquial phrases that are you know not adding anything to the piece. And and really decluttering your writing and having clarity of thought and one of the things I want to get better at in in 2017 is just being a better writer and writing with with more clarity and purpose and and and be more pithy and it's just a phenomenal. A phenomenal guide to doing exactly that I've had that recommended to me several times over the years I've never read it and I got to get that and read it very few things that we can invest in that'll do more for our communication and then learning to be a better writer something I definitely definitely need to keep working on. Okay for my book for the carve out I actually broke it into two I did nonfiction and fiction so for nonfiction the creative habit by Twila Tharp which was a book that actually got a long time ago and it been meaning to read it started never finished and I finally picked it back up again and finished it this year really great. Twila is a American choreographer and dancer and just has it's a really creative work itself but a lot of great advice for how to think creatively and structure your life if you are someone from an entrepreneur to an executive to an actual artist who needs to think creatively in your work and then my fiction for the years actually a whole multiple series of books but I finally read the entire book. The entire Isaac Asimov canon not not all the books that he wrote but the robot series the Empire series and the Foundation series which are all separate series but later in his life he wrote other books to fill in the gaps and tie them all together really fun and also a great a great read as we head into this world as we've been talking about on this episode of artificial intelligence and robotics potentially coming along with that. A lot of his work has been an inspiration to actual innovators and inventors throughout the years so highly highly recommended all of the series that he's written. Awesome and actually that that kind of leads into my article yeah it's a religion for the non religious which is a way but why column and so good. Yeah really really great like talks about you know level one thinking which is more like instinctual level two thinking which is more empathetic level three thinking which is like thinking about the whole universe as we know it and being just floored by our place in it and then level four thinking which is we don't even know what we don't know and it's kind of an interesting like way to tie everything together from why am I acting so silly right now all the way to what are the bounds of the known universe. Yeah such a great blog we put what my article is a piece in New York Times that came out a few weeks ago about the alleged activities by Russian hackers in hacking the DNC and the RNC and then their use of that information to try and influence the outcome of the US elections. This is a really great long reporting piece and they sort of deliberately make the analogy in the beginning of the piece between Watergate and the hacking of the DNC that physical hacking of the DNC headquarters for information during Watergate to to the digital hacking now but why I thought it was super cool is they make the argument in the piece that if Russia did in fact do this that this is actually the way to do it. This is actually moving beyond espionage into trying to influence outcomes of elections in another country is a war to like act and it made me think a lot regardless of what you think about this particular situation about disruption and evolving technology as regards to war too. This is this might be the way that at least one of the ways that war is conducted now as opposed to you know tanks and planes and bombs. Super interesting to think about disruption of at that level too and also relevant to what we're talking about earlier in this show. Wow yeah totally ties it together. Speaking of being all over the place my podcast recommendation is the episode of the Ezra Klein show with Patrick Collison the co founder and CEO of Stripe and fascinating at a lot of levels it truly is all over the place in a lot of the best ways that you would hope super intellectual on technology politics philosophy and highly recommend checking it out. That is so funny because the Ezra Klein show was my podcast as well fortunately I had two episodes to recommend one was that that show with Patrick Collison which is a great great episode. The other one I think is the one that they that Ezra did immediately following that episode either immediately or two episodes later with Tonahese Coats completely different type of person in different world. Coats is an author and a journalist but also very very great episode and worth listening to I agree music music so we've been writing this really high brow intellectual train so I'm going to bring it back down and declare 2016 the year of Justin Bieber. His last album of mega hits technically came out November of 2016 but boy did they have staying power and stayed snappy and hot and release fresh singles all year so I unapologetically go Justin Bieber. That's great. I'm also unapologetically going to go back to I think I mentioned this in episode or two ago. Jenny and I went to Stevie Nicks concert this year and it was so good I've been a huge Fleetwood Mac fan for a long long time and but in 2016 I have discovered Stevie Nicks's solo career too even beyond you know edge of 17 and the famous hits. She really is an amazing artist and both her own solo albums and her collaborations especially with Tom Petty and the heartbreakers also prints I didn't know until I went to her show that prints played the guitar on her hit stand back. They are the really close relationship. That's my that's my music for 2016. Awesome. So my TV or movie is Westworld the HBO show. I mentioned as my carve out a few episodes ago but that was the piece of entertainment of 2016 for me. It was so thought provoking worth watching twice worth listening to podcasts about worth talking to your friends about and reading the subreddit and diving in it is a JJ Abrams and Jonathan Nolan at their absolute best so. I'm gonna bring it down even further here I haven't haven't gotten into any of the heavy gray television that's being produced these days but my video content of the year was Rogue One so good if you haven't seen it yet I know it's gotten somewhat mixed reviews but I thought it was just fantastic. I saw it together on opening tonight on opening night it was a blast I've seen it once more since then and I totally go see it again. The forces with me and I am with the forest David moving on to app my app of the year is when I just started using which is reach now the car sharing program by BMW it behaves very similar to car to go if you've used that but you get a car that's not a smart car. So you can take take four or five passengers it's enjoy a little drive you can go on highways costs about the same amount and it's a really great renting and drop off experience. Interesting I tried to reach now when they first launched in Seattle earlier in the year and I stopped using it because I remember the prices being way more expensive than than car to go have they have they gotten better. The same right now they're waving sign up fees which is like 39 bucks I think that they'll probably start at some point but it's 40 yeah 40 cents a mile and I think that's pretty comparable I remember when I stopped using car to go like three or four years ago it was 33 cents a mile and I think has gone up since then so. Interesting yeah great and concept for the same price as a smart car you could drive a BMW yeah yeah I take the BMW and I think sorry not a mile per minute and I think it's actually kind of part of their their plan for eventually building a self driving fleet I think they're kind of data collection vehicles getting the data for machine learning yeah yeah. My app also plays into a bunch of themes we've talked about on this show and throughout the year and a company is Amazon music I discovered this in 2016 and as perhaps evidence by my music carve out in Stevie next I'm not I don't spend a lot of time staying up on new music and the Amazon Prime music is free with prime and is pretty great especially for free. So talking about business model disruption the Amazon if you are not already a Spotify or Pandora or other paid music sir or Apple music subscriber and it's not something that's like so important you to have a absolute full catalog free with Amazon Prime music app is pretty great. Yeah I'd be curious listeners if you are a music lover and have tried out Amazon Amazon MP3 I would love to get your review if you want to reach us in the slack go to acquired dot FM you can you can see the the slack where the conversations happening and yeah I would love to hear about it from music lovers. Yeah I also have a request to for anyone out there on going back to books I love reading sci fi and but I'm super curious I haven't read a lot of current science fiction and I would love to hear read and learn about what people are imagining about the future today and especially women science fiction authors which I've read embarrassingly little so if you have any good recommendations for current sci fi especially by women authors hit me up in the slack awesome well listeners we hope you had a great 2016 and ring in the the 2017 with you know however you choose to ring it in it's probably a week or so in right now but we hope you have a great year if you have been listening to the show for a long time or even if you're brand new and enjoy the episode we would love a review on iTunes and to share it with your friends and colleagues or anyone that you think would be interested on on Twitter or just email or word of mouth so thank you so much for being a listener and have a great year happy 2017 we'll talk to you soon.