Oct 13, 2022 · 1h 27m · news
Spotify CTO Gustav Söderström: TikTok's Music; How Olivia Rodrigo Gamed the Algo | 20VC #936 · 20VC with Harry Stebbings
0:00 / 0:00
▶ Watch on YouTube →
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Spotify CPO/CTO Gustav Söderström sits down with Harry Stebbings to share deep insights on product leadership, discussing critical pivots like the mobile free tier, the impact of music licensing, and how to successfully manage scaling organizations through Socratic debate and strategic counter-positioning.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 19.5% of the talking time here. How this is scored →
Harry as informed peer 3.3 Guest teaching 3.1 Guest disagreement 1.7 Harry pushing back 3.1
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 40:42 Söderström rejects execution speed over accuracy
When Harry argues that fast execution and shipping code beats debate, Söderström bluntly dismisses the premise, stating that going fast in the wrong direction just efficiently leads to nowhere.
Hardest push from Harry ▶ 40:11 Harry challenges the talk is cheap doctrineHarry directly rejects Söderström's core management philosophy, insisting that debate and talk are extremely expensive for startups that rely purely on execution speed.
Biggest teaching moment ▶ 17:47 Söderström explains feature retention via loss aversionWhen Harry asks if keeping buried features is a mistake, Söderström educates him using Kahneman and Tversky's loss aversion research, proving users value retained features 1.5 times more than new additions.
Harry holds his own ▶ 1:23:00 Harry defends product design as an artistic disciplineHarry uses his industry knowledge to forcefully challenge Söderström's assertion that product is pure science, citing legendary leaders like Tony Fadell and Scott Belsky to prove vision cannot be systematically replicated.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| The Founder Mindset in Product Leadership | 2 | 2 | 1 | 1 | Harry asks Söderström about his early entrepreneurial career and how founder ownership translates into effective product leadership. Söderström explains his transition from electrical engineering to startups and Spotify's early technology-driven culture. | |
| Lesson 1: Navigating Macro Winds and Shift to Mobile | 3 | 3 | 1 | 2 | Söderström details the strategic rule of never fighting macro winds, illustrating it with Spotify's forced pivot to a free mobile tier. Harry probes into how the team managed fears of cannibalizing paid subscriptions. | |
| Distinguishing Macro Shifts from Temporary Anomalies | 3 | 3 | 1 | 2 | The discussion turns to differentiating permanent macro trends from temporary disruptions like COVID-19. Söderström explains using multiple mental models to reduce dimensional errors in strategic planning. | |
| Feature Complexity, Loss Aversion, and Recommendation Paradigms | 4 | 4 | 2 | 5 | Harry challenges Söderström directly on product design, asking why GoToRadio is buried deep in the app and if that represents a product mistake. Söderström cites loss aversion research to justify the difficulty of removing legacy features. | |
| Strategic Counter-Positioning and Spotify's Background Play Edge | 4 | 3 | 2 | 4 | Söderström explains strategic counter-positioning against giant incumbents, using Spotify's background audio licenses versus YouTube's foreground focus. Harry questions how video integration alters this paradigm. | |
| Music Licensing Constraints and TikTok's Musical Innovation | 3 | 3 | 1 | 2 | Söderström outlines how music label rights create narrow product constraints compared to open tech platforms. He points to TikTok's early Musical.ly emergence as the biggest innovation in music formats. | |
| Lesson 2: Climbing Taller Mountains and Losing Altitude | 3 | 3 | 2 | 3 | Söderström uses the mountain analogy to explain how fundamental product shifts temporarily degrade key business metrics. He describes the anxiety of watching premium conversion rates temporarily plunge after launching mobile free. | |
| "Talk is Cheap" and Socratic Debate vs. Speed | 5 | 5 | 4 | 7 | Söderström advocates for extensive Socratic debate, arguing talk is cheap compared to shipping code. Harry strongly pushes back, asserting that talk is expensive and speed of execution is a startup's only edge. | |
| Psychological Safety in Hierarchy and Synchronized Swimming | 3 | 3 | 2 | 3 | Söderström discusses bridging Swedish non-hierarchical debate culture with American organizational norms. He introduces the synchronized swimming metaphor to explain why Spotify avoids independent organizational swim lanes. | |
| Personal Re-Invention, Machine Learning, and Balancing Family Life | 3 | 3 | 1 | 2 | Söderström details re-inventing his leadership style from hands-on example to executive coaching, as well as teaching himself deep learning mathematics. He reflects candidly on family life and managing executive imposter syndrome. | |
| Spotify's Existential "Cuba Crisis" with Major Labels | 2 | 2 | 2 | 2 | Söderström recounts Spotify's Cuba Crisis moment when major music labels threatened to pull their entire catalog over free tier access. Spotify built a manual switch to shut down the catalog before the labels backed down. | |
| Quickfire Round: A GitHub for Music and Technology-Driven Art | 3 | 3 | 1 | 2 | In the quickfire section, Söderström envisions an open GitHub for music if label constraints disappeared. He also confirms how artists like Olivia Rodrigo restructure songs to accommodate streaming algorithms. | |
| Quickfire Round: Future of Podcasts and Curation vs. Recommendation | 3 | 3 | 1 | 2 | Söderström outlines the multi-billion user potential for audio content. He confirms Spotify's deliberate shift over four years from human curation media to algorithmic recommendation media. | |
| Quickfire Round: Technology as Strategy, Simply Piano, and Business Innovation | 4 | 3 | 2 | 3 | Söderström defines technology as strategy, praising Big Tech companies for continuously expanding beyond initial product categories. He explains how combining consumer innovation with business model innovation produces maximum leverage. | |
| Quickfire Round: Product as 100% Science and Working with Shaq | 5 | 4 | 3 | 6 | Söderström claims product development is 100 percent science and zero percent art. Harry forcefully objects, arguing that legendary product visionaries like Tony Fadell prove product design relies on unreplicable creative art. |
Statements from this episode (33)
Söderström: Early mobile data messaging cost 1/1000th of SMS
“So we started this company where you could send text messages over data instead of SMS. And already back then, even though you paid per kilobit, it was still one month thousand the cost of sending the same, you know, 160 characters over, over text message.”
Söderström: Spotify's early desktop app was so fast it seemed fake
“When I tried it, like everyone else, I just couldn't believe that it was true. I thought it was a fake. I thought they had a file server standing somewhere nearby because it was too fast.”
Söderström: Statistically, joining a music startup in 2008 made no sense
“If someone had told me there's no chance I would have started statistically, it would have made no sense to join a music startup.”
Söderström: Companies Must Early-Accept Unstoppable Macro Shifts and Reposition
“What you should do instead of fighting is obviously to rethink your position, try to reposition yourself so that instead of having this wind blow in your face and slowing you down, you somehow get it at your back. And, you know, I've been fortunate enough to b…”
Record labels only granted Spotify's free mobile tier after growth stalled
“We had to wait all until, all up until we had stopped growing and actually started losing users before they agreed to give us the licenses we wanted.”
Söderström: The shift from social media to recommendation media is permanent
“Macro shift is, you know, from curation to recommendation. Or as Mike Mignano puts it from social media to recommendation media. That's not going to reverse.”
Spotify treated COVID-19 consumer behavior as an anomaly and maintained car investments
“We chose the former. We said that we're going to model this as an anomaly, and we kept investing in The world going back to normal”
Söderström: Evaluating decisions across three distinct models reduces strategic error
“One way to try to avoid it that, you know, comes from sort of Berkshire Hathaway and how they think about the world is you should use at least three models with different dimensions. If they all agree, chances that you're completely wrong are much lower.”
Söderström: Test new product paradigms on new users to bypass habit bias
“One is you separate new users from existing users. You're going to get very different metrics. Existing users have a habit. Your metrics may go down for a feature, and then if you tried on new users and never had that habit, you may see that if you're not taug…”
Söderström: Spotify designed its free mobile tier to counter-position YouTube
“We licensed a foreground, a background shuffled here where you can play any playlist you want in shuffle mode in the background forever, but you actually can't play on demand in the foreground. So it turns out that Spotify mobile Works exactly where YouTube mo…”
Söderström: Most video podcast consumption on Spotify occurs in background
“People consume the vast majority of these shows in the, not the vast majority, the majority of these shows in the background, but they do bring it up every now and then to see what they are talking about, who is talking.”
Söderström: Music tech is constrained to record labels' lowest common denominator
“What you do when you work in the music industry is you try to figure out what the best possible thing is. Then you go to the labels and you try to license the lowest common denominator of what is licensable. And that often means that you can't build the best p…”
Söderström: TikTok is the biggest music innovation of the last seven years
“I think the biggest innovation clearly in the last six, seven years has been TikTok who found like a new format of using music for something completely different.”
Söderström: Spotify cannot test features without paying upfront music licensing costs
“And that's actually a problem with being big. We can't really just try things. We have to license them first, which means we take the cost up front.”
Spotify took over a year to achieve feature parity in podcasting
“But to your point, that took over a year before we had everything in place that people even expected from a podcast player. It was painful to spend that time, but it wasn't the problem of actually, you know, losing altitude in the meantime.”
Söderström: Increased free usage directly drives conversion to paid subscriptions
“I had a lot of faith that conversion would go up because we had seen so many years that the core correlation was the more you use the free product, the more likely you are to convert to paid. We call it the more you play, the more you pay, which always made se…”
Söderström: Debating strategy with smart teams is far cheaper than writing code
“In fact, just talking and debating with really smart people who are not afraid of you importantly, which I think is also sort of a Swedish societal trait that you're not so afraid of authority is way cheaper than writing code. Writing code is one of the most e…”
Söderström: Rapid execution while fundamentally wrong just leads efficiently to nowhere
“There's a difference between being fast and being right. You can get, you can go very fast to nowhere, you know, ship code every day, but if you fundamentally wrong, you're just going to get to nowhere extremely efficiently and fast.”
Söderström: Spotify's major music label licensing agreements lasted 3 to 4 years
“Had to be licensed as the lowest common denominator between, you know, three, four majors with, you know, the impact of being wrong being three, four years. Cause that's a term of one of these licenses.”
Söderström: Spotify R&D is structured to feel built by one developer
“I've chosen to do the complete opposite in my organization, because even if I have a really big organization with thousands of people, at the end of the day, it's just one user who is going to use this application. They're not going to care if it was, you know…”
Söderström: Overly polite employees are Spotify's biggest organizational hurdle
“Because they're often in Spotify because they're too nice. That's actually a bigger problem than being, than people being too aggressive. In other companies, you may have the opposite, that if it's unclear, people are gonna power grab. I've seen the opposite. …”
Söderström: Technology leaders must deeply master technical shifts themselves
“If you're going to be a technology leader, you need to understand it deeply. Otherwise you can't evaluate what you should do.”
Söderström: Spotify has experienced negative growth and lost users at least twice
“I've seen Spotify have negative growth, actually losing users and contracting at least twice.”
Söderström: Digital music services required a free tier to succeed early on
“Nokia comes with music and stuff who try to go straight to premium and it didn't work. People didn't think they wanted to pay for music at the time. You needed a free tier.”
Söderström: There is no GitHub equivalent for music collaboration
“There isn't anything like that in music. There is no GitHub for music.”
Söderström: Music formats have barely innovated in a century
“I think that's the reason why music has actually had very little innovation. The track is sort of still three minutes and, you know, an intro and two courses a hundred years later, almost.”
Söderström: Artists are shifting choruses earlier to grab streaming listeners
“Because people now have shorter attention spans. You can see the chorus moving closer and closer to the beginning of the song, right? Everyone is trying to optimize for the first few seconds”
Söderström: Audio TAM will match social media at 2-3 billion plus users
“I think it is at least as large as social networking, you know, two, three billion plus. The way I think about it is I think music and actually podcasting is a Sort of a core human behavior like communication. And that means that the sort of time in, in, you k…”
Söderström: Spotify drastically rebuilt its app to prioritize machine learning recommendations
“So we actually made a bet on the shift from curation to recommendation or social media to recommendation media. Four or five years ago and rebuilt the application quite drastically. And today we, I would say we are a recommendations based company much more tha…”
Söderström: Disruptive tech innovation requires changing product and business model
“The greatest innovations are when you find a new technology and you change not just the product and how you use it, but you change the business model. Those are always the most disruptive changes.”
Söderström: Crypto will succeed as infrastructure rather than consumer products
“I have a feeling that just like AI and other things, it will take quite a long while, but it's going to be, there is a chance that it becomes a fundamental part of the infrastructure just further down that it actually powers a lot of things and is very valuabl…”
Shorts cut from this episode
▶ Did Olivia Rodrigo HACK Spotify's Algorithm? 🎧🎶 · 20VC wit (@1:07:48)
▶ Spotify CTO: Why I taught myself Machine Learning 🤖 #shorts (@55:24)
▶ How Warner almost killed Spotify 🔫 #shorts · 20VC with Harr (@1:03:30)
▶ Did Olivia Rodrigo hack Spotify's algorithm? 😲🎧 #shorts · (@1:07:48)
▶ How Spotify almost DIED | Spotify CTO Gustav Soderstrom · 20 (@1:03:30)