The Wisdom Wall

“there is a positive benefit to monopolies because they create the cash flows that fund these sorts of boondoggle basic research. A lot of the most important technologies that move society forward come out of these.”

“So in the long run, if the main reason to subscribe to any given channel ends up being actually about the game content itself and not differentiated by stuff around the game, then the excess profits in the long term Will just be captured by the rights holders like the NFL and the NBA.”

“It's structurally a worse business, as you were just mentioning, than the old cable bundle where you just got checks. Consumers can cancel easily. They do so every few months. It's expensive to make The amount of content you need to make, especially now with the quality that people expect out of streaming content.”

“if you want to operate a streaming service that gets to scale, and if you're going to operate a streaming service, it has to get to scale since the fixed costs are so high. Then you must have a broad set of content. That is weird. That it must be a broad set of content because you must appeal to lots of people and…”

“Passive index investing just lends itself better behaviorally. If you're in one of those funds to just saying, I know the market's up, I know the market's down, but whatever. I own the index. I've, I've made my piece. Whereas if you are either the active manager trying to improve the outcome of the fund or an investor…”

“I think even if you had 95% passive, the prices are set by the marginal trader. Right. You don't need very many people in there arguing with their dollars about what something is worth to figure out what it's worth.”

“I think the point I keep kicking around is much like the quartz crisis in the world of watches, speed is no longer relevant. I mean, the F-Eighty goes zero to 60 in 2.2 seconds. This is the supercar. This is the three to five million dollar car. The Tesla Model S Plaid does it in 1.99 seconds. So the reason that people…”

“in the media business, in podcasting, You can grow your audience, and thus your revenue, and thus your importance in the world. All outputs can scale completely independently of your inputs.”

“The most liquid auction Will always win, and Google has already run away with the search ads auction liquidity, and so traffic on Google searches will forever be worth more than traffic on the second place browser.”

“If the DOJ's ruling is that Google has to divest Chrome, there is one way that Chrome is a business, and that is getting paid by Google to drive traffic to Google as a search engine. It's the only way to operate a business of a browser.”

“The state of play of being a big tech company, and this dates back 80 years, is technology moves fast, and the new paradigms disrupt everyone that came before you, so you get one era. And you gotta make the absolute most Of the one era that you grew up in, and after that, you're probably gonna lose relevance.”

“Almost all of Google's successful products are based on a core technology insight that is underneath the whole thing. The type of insight that could be in an academic journal.”

“This is basically why Google beat Yahoo. I mean, there's a lot more to it, but The portals all had this mentality of we want to build more and more and keep people on our site, in our ecosystem, continue to look at our banner ads, and Google, from this point, basically forever, was how quickly can we deliver someone…”

“If you're trying to unpack how did our health care become 18% of GDP versus 11% of the UK GDP, or a staggering six percent of Singapore's GDP, albeit at a much smaller scale. Why are we 18%? A big thing you have to understand is, psychologically, every healthcare encounter is that the system is paying for it.”

“The reason why they truly are among the very highest quality watches in the world is because they throw their scale economies around. They do absolutely unreasonable things to engineer and build and test these watches that other people in the industry just can't.”

“it was the best thing to ever happen to Rolex, Audemars Piguet, Patek, etc.”

“Mechanical watches are an industry today that serves an entirely different job to be done than they ever served in the past. And this is a new industry that has nothing to do with telling the time, and is just goofy to compare to other quote-unquote parts of the watch industry, like the smart watch, the quartz watch,…”

“when you combine these two things, the Moore's Law and Moore's Second Law, it implies that the leading company, that most profitable company, will become a monopoly.”

“multiples are kind of a blunt instrument used for valuation when you don't actually deeply know and understand the business, and when you do, you can just underwrite better than everyone else, and you have more margin of safety in the price that you are willing to pay than the rest of the market does.”

“everyone loves to talk about product-led growth, and how it's this new thing in the late twenty-tens, and how Slack, and Atlassian, and Trello, everyone figured out PLG in this bottoms-up, workforce-adopted way, rather than selling to procurement, or IT, or the central administrator. And it's just not new.”

“So fundamentally what this does for you as a business is it just leads to better risk-adjusted returns. You already know what's going to work before you ship it. Like, you don't really take market risk. So you're not gonna be the first to the market with early adopters, but most of the time you actually don't need to…”

“every moat only works if the castle is sufficiently small. If the prize at the end of the finish line becomes sufficiently large, you're gonna need a bigger moat, and you need to figure out a, uh, you know, how to defend the castle harder.”

“I think the athletes are your most important marketing tool. I think the product is a monetization method for the marketing that you do through athletes.”

“All these contracts kind of go to all of the contractors. They just rotate around who's the prime on it, and the prime makes the most money, and then it has the most sort of sway, and you don't want to be with a subcontractor, you'd rather be the prime contractor. But still, this current military-industrial complex is…”

“So there really isn't power. Within the industry. But to the extent that you have already become one of these five, then together the five have power versus new entrants.”

“For the type of podcast that we are, where you have lots of founders and CEOs and hedge fund managers and these sorts of people listening, You, you could never ask someone to pay you in membership what they are worth to the most valuable advertiser for that slot. And so the way it sort of works out is like you're…”

“The result of Sarbanes-Oxley being stay private longer, that it's much more likely that fraud now happens in the private market than the public market, and that is basically what we saw with Theranos, with FTX.”

“backing a repeat entrepreneur in the enterprise sector is near risk free.”

“You want that to be true when you make the investment, but you don't want to be very non-consensus for long. You want to quickly be consensus and right. You just don't want anybody to see it until you make that bet. But like, you don't want to make that bet and then be sitting there for five years still non-consensus.”

“And the unfortunate thing for Microsoft and for Google, who really started at this platform as a service layer, was you basically didn't get the startups because you didn't have a mature platform yet that people were excited to build on and understood how to build for, but you also didn't get the enterprises because…”

“What's becoming clearer to me is the machine learning capabilities that Amazon has need to be good, but they actually don't need to be as good as Google's. Because here's sort of the strategy with machine learning. You're gonna use whatever ML is available with where your data is. Because running machine learning near…”

“in the last 10 plus years, there has not been a breakout consumer hardware piece of technology that is, that survives as a standalone company, and you look back at Fitbit and GoPro and Jambox. Uh, I, I even wanna call out, this one's gonna be a serious callback, but Flip Video. Some of these companies that kind of…”

“It was because it had ESPN, but it also cost the company It's strategic clarity. Disney never again would get to be just Disney. It's the flywheel business and the ESPN affiliate slash advertising cable business. And it's worth it because buying ESPN was this pseudo infinite wellspring of capital to fund everything…”

“The business of feature film production is a mediocre one, especially by the standards of, uh, what we study on this show here with Acquired, except for Disney.”

“If you take all the winners and all the losers and sum them up, And don't take out any fees. You come up with zero. Every positive winner on the side of a trade has a loser on the other side of the trade. And so in aggregate, all investors together are the market.”

“Jack had the insight that running a successful mutual fund is actually not a differentiated product. It is a commodity. What you are seeking is the highest possible long-term return on your capital. That is not like buying a unique piece of jewelry. It is like buying a soybean.”

“There's gonna be lots of funds that you can be in that will outperform in fits and starts, but if you wanna be the, in the upper decile, After 40 years, then it turns out owning the market with no fees is an almost surefire way to do it.”

“Ferrari is Hermes and Manchester United smashed together.”

“If you can marry a luxury brand with a sports team, it is a business cheat code.”

“Niches are way bigger than you think they are. So if you think you're writing about a niche topic, the internet being a global community of four-ish billion people means that any little niche, there might be six people in your geography that care about it in your local town, but there, there's millions of people…”

“The media business model of splitting the commercial activity from the editorial is a societal benefit that we all benefit from, from publications like the New York Times.”

“great businesses have a stored potential energy that you can't see in the current financials.”

“The, you know, growth stage private companies, you can tell what the good ones are. Most people can't get in. If you can, you should.”

“You're really just making a founder bet, and then you're trying to support it with all this like structural information that is a very, um, imprecise. You're acting like you know the third or fourth decimal place, when in reality you barely know the first one.”

“And so the core insight is that Pronto Markets is effectively just an empty vessel to sell the same products. In a situation like that, it is a race to the bottom on your margins, and scale will determine the winner.”

“Trader Joe's has this philosophy of we only make money one way, and that's when someone checks out an item and pays money to us. We don't make money from our suppliers, whereas those other grocery stores, they actually make a lot of money from the suppliers. They make a lot of money in slotting fees and in advertising,…”

“all of social ended up pivoting to either look like messaging or like YouTube anyway. YouTube is kind of the winning paradigm in quote unquote social media and UGC media.”

“It's a Google-y thing that this genius technology is the product itself, and if you try to Craft some cool idea that you have that is not just directly translating tech breakthrough. It's not gonna be the type of product that succeeds at Google. They don't know how. Some people can make an Instagram, and those people…”

“It also is interesting because it basically rewards the most reliable software, not necessarily the most innovative software. You end up not taking any risk in situations like this because you're not going to get rewarded unless you actually stand the system up and then start getting meaningful use. So you end up with…”

“And so in a situation where you can't make any mistakes, the single vendor playbook is the right playbook, even if it's going to take 47 years to build the dominant company. You should have to write a lot of software, and it all has to work together really well.”

“Well, they raise prices slowly every year. It's a modest price increase every year that kind of sets the floor. And frankly, if they do it over enough decades, Everybody just believes forever that these things are gonna appreciate, because it's almost like they're the Fed, and they're guaranteeing a certain rate of…”

“I think it's kind of an innovation lab. It's a way to protect Rolex's brand, because if there's something new and interesting that might be a fad that customers seem to be caring about in the watch world, Tutor can go and implement it, and they can figure out how to produce it. If it's a flop, that's fine. The watch…”

“A government top-down innovation mandate from a country that's not a world power tends not to turn into a gigantic economic success.”

“There is a thing that you have to raise 10 to 20% of the capital that you otherwise would have needed to raise if TSMC exists.”

“Essentially, if you trust the brand more, and the prices are the same, you just buy more of it over time. So you give more absolute margin dollars to that company over time, especially in a reoccurring purchase business like this. That's the way that brand power accrues. It's not in Margin percentage. It's in total…”

“If you're okay splitting the market, you go for the white space, and then you say, let's see how much of the low-hanging fruit we can easily get. But if you're Facebook, you're gonna say, let's go to the hardest possible competitor, Extinguish them. And then, and then we, uh, we'll have a better shot at owning the…”

“The reason why we aren't all using rich Facebook apps all the time today and think of it as the default platform, it was just too many layers of abstraction away from the hardware to win.”

“a network effect is good, but it's not as good as that incredible platform durability.”

“The way that you should look at YouTube is not, what is the, the discounted cash flow of YouTube as an independent business if you look at their, you know, profitability today. It's, what was the existential risk to Google of not owning YouTube? If YouTube became a thing somewhere outside of Google, and that is worth…”

“If your distribution decides to compete with you, and decides to make that a priority, your business is over in a minute.”

“In doing all this research, it seemed to me that once a enterprise adopted Active Directory, They were gonna tip, and they were gonna buy the rest of the software, too, because whoever manages the source of truth for who are all the people and what are all the resources, you know, devices and everything that my company…”

“When it doesn't cost you focus or your best people or whatever the scarce resources are and it only costs you cash, then you should totally think about it as, am I willing to bet 2.3% of my company or whatever percent of the cash that I'm not getting any credit for if something could go really right? It's a venture…”

“Microsoft used IBM to generate demand for their software, and then they used every other PC manufacturer to capture the value. That all that demand created.”

“a new technology generation, when something becomes possible and opens up a new market, It enables a shift in the point of integration in a value chain. The old value chain of IBM, if you shipped the mainframe, you had all the power. But in this new world of PCs, if you controlled the operating system that all the…”

“The key insight is that by adopting art as a critical piece of the bundle that is your product, it enables you as the seller to completely switch tracks, to disconnect from any evaluation of value.”

“This is the crux of the incentive problem in our healthcare system. There is just a mismatch in Time Horizon. You are invested in your own health for your whole life, but your insurance carrier is not.”

“the money that card issuers make Only a minority of it is actually from the interchange. And keep in mind, the card issuers are the ones that make that 1.6%, the bulk of the transaction. Most of the money that card issuers make is from interest payments.”

“Well, I think most of the time it is negatively correlated, except for the most extreme outlier successful outcomes, it is required.”

“we don't change anything about the structure, we just give it way more data and let it Run these models for a long time and make the parameters of the model way bigger, and like, no researchers expected them to reason about the world as well as they do, but it just kind of happened as they were exploring larger and…”

“the constraint today is actually in how much high-performance memory is available on the chip. These models need to be in memory all at the same time, and they take up hundreds of gigabytes. So while memory has scaled up, I mean, we're gonna get flashing all the way forward, the H-one hundreds on-chip RAM is like, 80…”

“unlike tech businesses, there's no potential for any form of lock-in, and there's no potential for really any form of network effects.”

“and the reason that it's in 46 states is because That way, basically, every member of Congress is incented to vote for it.”

“In a 130, or whatever it was, space shuttle missions, there were two that were tragic loss of life calamities. And so, you look at that, you're like, that's actually not a great safety record, so maybe this isn't the right way to do it. Maybe calculating something to, you know, 15 significant digits of unlikely to fail…”

“It's like Morris Chang and TSMC. It's like, he invented the notion of a fabulous semiconductor company before there was any demand for that, and then it turned out that his timing was exactly right, that, like, within a couple of years, a whole ton of, you know, fabulous companies spun up and wanted to use his foundry,…”

“People who crave security, which I get, like all humans crave some level of security, um, miss sort of mispriced security because no jobs are as secure as we think they are, but they definitely cap your upside.”

“The venture business is an intensely personal relationship business, and it's not an industry that scales well.”

“And as a venture investor, you want to be buying all that risk. You don't really want to be making these sort of risk mitigated bets and have a port. No, that is why you have a portfolio of 30 companies. Go get all the risk you can.”

“And I also think that's why they have to retire once they sort of age too far out of their forties, because it is an implicit thing among the group of you gotta be bringing it all day, every day. And at some point, if you want to notch down to 90%, it's time for you to not be a GP in the fund.”

“it takes seven years or it takes fifty million dollars to make a VC, which I think are all quite reasonable because your first several investments, you're like, it's like, you're getting the crap out.”

“The other thing where they're sort of a victim of their own success is the Amazon two pizza team thing led them to launch all these different services. Rather than having a cohesive product strategy, AWS has kind of been alphabet soup.”

“When you launch a service for enterprise customers, it is really hard to kill it. You burn customer trust, and actually, if you think about what's the bigger risk, burning the trust and losing that customer in all their future revenue, or having to maintain kind of a crappy service that didn't work, you just maintain…”

“Basically points out if you can do something in the old paradigm, you should. And when there's a new paradigm like the internet, you basically want to find things that you could not do any other way. In order to really exploit the power of the new paradigm.”

“It's that insight that people far out from cities want the same thing as people in cities, and so they're just as bright, they want the same things in life, they just happen to not live in cities, and so let's not be pejorative, let's serve them with high quality retail experience.”

“And it's only the advent of the internet with cloud computing with, you know, super low cost to start a company that there has been this wave of, uh, very young founders creating these consumer internet companies, but That's actually a blip in history.”

“oftentimes when someone has hardware that is differentiated by software and services, and then they decide to start selling those software and services a la carte, it's a strategy conflict. It's your classic vertical versus horizontal problem, unless you are good at segmentation.”

“Actually, public company shareholders are not short-term oriented. They're long-term oriented, and that's why when you change your guidance for the next quarter, the valuation can change by billions and billions and billions of dollars because people are accounting for the next 29 and three-quarters years after next…”

“because they don't make most of their money from actual profits at the box office when the movie comes out the first time, There's a delayed impact to animation sucking that doesn't show up in the financials until way later.”

“There's a great business model lesson in this, which is with the first two Mickeys flopping, if you just do the same thing as an existing competitor who already has distribution, brand, customers, It's not enough. You need to go do something leveraging a new piece of technology or a new platform. You gotta come at it…”

“This gives you a sense of Walt's leadership style. He would take a talented creative person and he'd be perfectly willing to assign them to things that they've never done before and say, yeah, you'll figure it out.”

“And Disney is playing a many decade compounding game, which can take three decades to really kick in. And all these other studios change ownership every decade. And so there's really not the right, like, ownership incentive structure to play a three-decade game.”

“They can't fully avoid being a hits-based business. They are a movie studio, but they've gotten about as far away from it as they possibly can.”

“The lowest cost provider will win in those markets.”

“The more you're just buying the market, and the more you're buying the market, the less interested you should be in paying fees. You should pay fees when it's more concentrated and thus uncorrelated with the market.”

“The investors are the board of directors, or elect the board of directors, and thus will always vote To lower fees when they can lower fees, because it's in their own interest.”

“If you were to try to start a new one today, in order to break even, you probably need one or two percent fees. Starting from a zero asset base, and so you'd be inherently non-competitive. You, if you're not already big, or you don't go raise a giant amount of money to subsidize it, then you kind of need Vanguard scale…”

“There's no chance that I'm going to sell my Vanguard index fund and realize the capital gains tax only to switch to a different index fund.”

“They love that cold shoulder of a artist creating the car mysteriously, In some small town in Italy who's just interested in racing. He's not interested in mass market cars. You're just lucky to get one of these racing cars, and he couldn't even care less about you.”

“Ferrari will always deliver one car less than the market demand.”

“And the really impressive thing about Ferrari is the cars are just different enough where they deserve different names. But a lot of the R&D and the components are carried over. When you look at the internals from some of these cars to the next generation that carry a different name, that have a different body style,…”

“The thing that makes you successful at scale prevents you from being able to execute Ferrari's strategy.”

“If you're gonna build a luxury brand, you need time and you need heritage where you tie it to an important emotional thing that people lust for connection over. And in cars, it's racing. I'm sorry. It's just, it's the, it's the obvious thing to tie the emotion of your brand to.”

“back on our Rolex episode, we threw out the idea of a, uh, functional alibi, a reason you could claim that you need such a watch. For Ferrari, they have lots of incredible alibis. Most people do not experience the thing that you just described, feeling maximally alive and going right up to the edge, but that is one of…”

“If you bring a client to an F-one race, like ServiceNow brought us, you spend three days together, and the race is only like two hours, and actually in the race there's not that much you need to pay attention to most of the time, that there's some really exciting moments and you pay a lot of attention then, but there's…”

“In other words, the teams are already making 72% of what they would make if they owned the league, because there's just not that much profit left over after all the costs to run the league, after selling all the sponsorships at the league level, general overhead, administration, and of course, running the Las Vegas…”

“But ultimately, they do say yes, and it really, like, speaks to the thing that has made the NFL successful, which is saying no to growing my slice of the pie to grow the greater pie.”

“What you want to be paying for is the smallest amount of content possible that gets distributed to the widest audience possible. So you actually should be willing to pay up to twenty million as long as the aggregate number of viewers that you get on that day is the same.”

“on a revenue basis, you know, it's an eighteen billion dollar a year revenue business. The NFL actually owns way more mind share than its revenue would illustrate. A strange statement to make is the NFL is an oddly small business for how large a role it plays in our lives.”

“maybe if we just admit that we are heavily constrained, and then try to just lean into that constraint in the way that Hermes leans into every single Birkin bag must be handmade by one artisan, and we're going to build a business model around that. And it turns out to be a great business.”

“So podcasts are unique in that it does have that true subscriber base, but unlike anything else where you click subscribe, there's not an algorithmic platform that disintermediates you.”

“We thought the interviews would be better than our core storytelling episodes because we hadn't discovered that the Ben and David storytelling is our N of one product. It is the thing that we uniquely can do that no one else can do, and we thought getting these big gets would be the key to success, which is funny…”

“All dollars do not have equivalent value. The marginal dollars have way smaller value than the early dollars.”

“If you're only going to sell very few things, you're only going to make very few episodes, it puts a lot of onus on making Exceptional choices on the things that you do choose to carry. So it's like a very high leveraged strategy.”

“The fact that there's a large number of listeners to amortize all the inputs across makes it So that we can do an unreasonable amount of things for each episode. I mean, if you were gonna try to compete with Acquired today, you couldn't do all the stuff that we do for your job.”

“I don't think we've figured out a better way to do it. Like, I don't think we figured out the way to do it and everybody else should just snap to our way. It's like, we have an enormous amount of Privileged that we can run a business in this way, and most people have constraints that prevent them from doing this. I…”

“The Coca-Cola company has higher gross margins, much better returns on invested capital, requires less invested capital. They get to focus on just making syrup and marketing. They don't have to do any of the undifferentiated stuff. You'd much rather be Coca-Cola than the bottlers.”

“if you really boil it down, the Coca-Cola company in a nutshell, it is figuring out how to incentivize partners to sell your product. And everyone is incentivized. The bottlers are massively incentivized. The retailers, there's great margin there for you. The soda fountain operators, the restaurant, the billboard…”

“It's funny, when I finished reading Joe's book, One of the takeaways was it seems like if you can master, A, negotiating real estate leases, two, regulatory stuff, like if you can figure out regulatory arbitrage, and three, if you can figure out how to not have your employees and customers steal from you, then you're…”

“You can build a much better business on being known for, I will be surprised and delighted when I come to the store, and you have selected interesting items for me, than you can on, you are an empty vessel through which to provide me milk.”

“They aren't focused on the margin percentage of each item. We didn't talk about this yet, but they actually don't apply a consistent markup. They focus on the absolute dollars of margin in each item.”

“And this is how AI research tends to work, is there's some breakthrough that gets you this big step change function, and then there's actually a multi-year process of optimizing from there, where you get these kind of diminishing returns curves on breakthroughs, where the first half of the advancement happens all at…”

“When you have a small number of total websites, curating them is interesting, but when you have 10,000 times more websites and 10,000 times more niches that people are interested in, directory is not going to be an efficient way to surface what people are looking for.”

“if you're a better advertiser for that Keyword, then you actually get to pay a lower price. If people are more natural to click through to your service and transact on your product, you get the privilege of bidding lower prices and still winning the auction.”

“Having marketplace liquidity means you always generate the most revenue per search versus other smaller search engines. So it's not just that unit costs go down, it's that as they scale their revenue per search actually goes up due to the auction system.”

“A pop is a bad thing for existing shareholders. It means that in the IPO, you incorrectly priced it too low, and then within one day, upside that should have, or really like is yours because it happened in all the intrinsic value was built all over these years, goes to the people Who had access to buy your IPO shares,…”

“Our customer, these hospitals, do not want to buy piecemeal solutions. They want to buy everything from one vendor, and they want that one vendor to provide the very best, most integrated experience possible.”

“Epic has bet the whole company on having a reputation for, we don't have failed implementations. And that wins deals.”

“When we say customer, we mean hospital CEO, CIO, the chief information officer, and CFOs. When we refer to their customers, that's who we're talking to. Obviously, the chief medical officer and all of the physicians and nurses and care folks are a part of that, but A part of my research has revealed the customer is the…”

“regulation tends to Shut out new entrants and entrench the older companies because the older companies are the ones that have the resources to comply.”

“You'll continue to see this in everything that is in the Rolex universe, is we don't want to be lumped into any sort of a category, so we have to refer to something entirely different, such that we can't be put into a box. Like, they don't make spore watches. They make professional watches.”

“Once you create the Porsche nine 11, you should just tweak the Porsche nine 11 once every seven, eight years, and that way you can buy a nine 11 just like your grandfather bought a nine 11.”

“The mechanical watch renaissance really came first from auction houses.”

“My best comparison that I think I came up with is Rolex is Porsche. And I know there are different categories of price, but, like, cars are expensive things, and you do need one anyway. It's real scale manufacturing with a high-quality engineered product with extremely good margins differentiated by their brand. You…”

“Nobody for any reason needs a watch. It, it has no functioning alibi anymore, and so it is a pure display of, I feel like a better version of me when I wear this, and that's the only reason why I'm owning this thing.”

“Assembling an iPhone is completely, completely different than taking a brand new design for a next generation chip and manufacturing that chip. One is manufacturing and one is alchemy. The alchemy can only be done by alchemists.”

“Software will always match the complexity on the most advanced hardware it can run on.”

“You look at Ingvar, you look at Sam Walton, you look at Buffett. I mean, all these guys, it feels like it's a part of their childhood story that as a teenager or a college student or something, they were out earning the average head of household.”

“complete ownership, or at least board control in Meta's case, is freedom. You can do things like invest for 10 years from now when it's gonna be a super lumpy period between now and 10 years from now. If you believe in the long-term vision, you can suboptimize the short-term.”

“who won chocolate between 1950 and 2024 is a story of marketing and distribution.”

“Mars just has a durable competitive advantage in that they're selling something to consumers that they value at the same price, but the cost of goods sold is way lower.”

“Great retailers have more in common with P.T. Barnum than poor retailers.”

“I mean, it's the Amazon play, right? Of once you reach scale and you have enough customer eyeballs, You can staple on a near hundred percent margin advertising business for free.”

“The ultimate maximization function is, it's almost like, it's not margin dollars. I think it's like number of items sold profitably at all. They want to sell more things to more people.”

“People react really strongly when you change the ease of obtaining that information or whether it feels like you are pushing that information out Versus someone is sort of pulling by going to your profile and viewing.”

“I think when someone invents a new interaction paradigm, it's one of these things where, like, you have to adopt it because otherwise people are just going to flee, and of course your business depends on you adopting it because you can't let someone use this new discovered mechanic that's perfectly timed for this…”

“When a shift like this happens, the most scale player with the most engineers and the most data turns out they're still the winner.”

“When you think about it, it's actually a form of operating leverage, where he's basically saying there's a big fixed cost I am willing to bear in order to bootstrap this ecosystem and commoditize all of these complements, commoditize all of these other closed source AI models, and in exchange, what I'm going to get for…”

“Amazon uses interface so teams don't have to talk to each other. At Meta, they require incredibly tight communication. It's a very different organizational philosophy where they're like, no, no, no, not only do we not have external customers, we want this insane type coupling between our infrastructure and our internal…”

“It would be easy to look at this company and say, wow, what a viral product. What a universally applicable product. That is not the case. It is unnatural to have connected four billion humans. This is a freak of nature. This is not just something that people adopted. And so, while I think it is totally fair to say,…”

“Ultimately, my big takeaway is the company moves like water. It is the company that has connected the world that will always gear up for the next battle and be whatever they need to be in the next era, and whether it's them defining the next generation of computing or creating all these AI experiences or fending off…”

“You're already getting this picture of Microsoft's business strategy, which is until we know exactly what the future looks like, start placing bets that approximate So that we're sort of in the mix, even though we don't know exactly what the future is.”

“the embrace and extend thing is actually a brilliant business strategy. There's already a whole bunch of people who love this thing. We want to embrace that new behavior. There's sort of no product market fit risk because we can clearly already see it happening. People want to use this browser thing to access hypertext…”

“the key to enterprise is backward compatibility. Saying, look, we don't necessarily need to promise you anything too groundbreaking. We need to meet your needs today and be the most cost efficient, you know, total cost of ownership driven system that meets your needs and your employees are fine with. And from here on…”

“If I could take seven billion people in the world and sell them Windows, or I can take seven billion people in the world and have them use my search engine for free and then make the money from the advertisers, I'm gonna make three to five X more money from the advertisers that I actually would selling them software.”

“Eventually, Google comes along and creates a browser. They also don't sell that browser, but they monetize all the traffic coming through that browser, and they do it way better than Microsoft does at monetizing selling licenses.”

“Microsoft built a browser, had a bunch of share, and then kind of looked around and said, we don't really know what to do with it. I guess we'll use it for defense? And Google built a browser and said, we know exactly what to do with this, and they used it for offense.”

“you need developer excitement if you're going to have consumer excitement. I mean, Or you need to develop every interesting app on your platform yourself, but that's just not how it goes, so that consumer and developer excitement goes hand in hand.”

“the mobile industry to this point had been, how do I make the cheapest possible phone? It's certainly not a scaled down version of a Mac, which is what the iPhone was. So that was a completely different paradigm. This is a tiny computer, not a kind of crappy embedded system that is optimizing for pennies.”

“There's this great general rule that it's really hard for any business to enter a lower margin business than the one they are currently in.”

“the iPad was not the PC of the future. It had its place, but it did not in any way replace PCs And it turns out that Apple scaling up the iPhone metaphor was good for tablets, but that never was gonna take over most PC use cases today. In fact, the phone has far more replaced the PC than the tablet has.”

“anyone who's listening who's a leader at a company right now knows that the right amount of repeating yourself to do is about 10 times more than you think it is. You need to just keep Delivering the same message over and over and over again, and, uh, that wins.”

“the more externalities you have depending on you, the more difficult it is to reset, and usually a next generation technology requires you to hit a big reset button.”

“You kind of have to counter position. If one, two, three is the best spreadsheet out there for the current technology generation, you just can't compete with them. You need to wait for the next big leap forward in order to find a new competitive vector.”

“these individual craftsmen are entirely non-competitive with Hermes. It's a completely different value proposition to the customer. When you're buying Hermes today, you don't start from a place of, you know, I think I want some of the very best sewn leather goods I can find. Let me evaluate the whole landscape of…”

“If someone else wanted to go compete with Hermes, it'd be hard because they don't have the brand, they don't have the history, but also, you literally can't find any more craftsmen, so you'd have to train them yourselves.”

“There's basically nothing other than food that you can sell someone for their entire life, but for diabetics, insulin absolutely has that scenario with a customer.”

“the thing about pharma patents, which is interesting, is they're fairly narrow. You can patent a molecule. I don't think this is quite true at the time, but the way it sort of works today is you patent a molecule, which is extremely specific. It's different than other industries where it's a system and a method for…”

“So there is sort of this, like, magic number around if you can actually safely enable someone to lose 10% of their body weight or more, then there's a market. But otherwise, it basically rounds to zero, because people just don't think it's worth the trouble, and neither do the companies.”

“And so in many ways, this entire old system that we created that consumes 18% of our GDP may actually not make sense in this new world of treating the things that are more likely to kill us now, which is chronic illnesses.”

“It turns out you actually don't need a deep pipeline if you have a drug that you can be profitable on, where there's not a lot of competitors for it, your patent actually gives you a good amount of room, you build a brand around it, you get approved for a ton of indications that all have large populations. I mean,…”

“We very much have moved away from current events, and I think that is in part because of what we talked about earlier, that we want to create n of one content, and the way to create the most possible commodity content is to try to cover the current news cycle that literally everyone else is covering concurrently.”

“Some advice I gave like three years ago that I really deeply believe in is harvest when everyone else is harvesting and build skills when there's no harvesting to be done.”

“when you're a young person, you should try to become singularly productive. And I mean productive in the economic sense. That you are able to soup to nuts within your control, make something of economic value, and put it in the world in a way that you own the design, engineering, creation, marketing, distribution,…”

“Anytime that you have something that's more distributed, you're going to be compromising a little bit on the user experience because you can't sort of rule by fiat when you want to make a change, but it does potentially come with much better scalability, which is the reason why Visa and MasterCard have become the…”

“The first one is, this business is a toll booth, and toll booths make for great businesses, especially when everyone has to drive on your road or the road next to yours, and both of them charge the same toll.”

“That is sort of the playbook that Visa runs, is they figure out what is something that we can sort of advertise as a benefit to you that also helps us either increase number of transactions, margin, or lock-in.”

“So there are no breakout hits. No episode is ever twice as big as your next best episode.”

“The very structure of language and the way to interpret knowledge is actually embedded in the training data itself rather than requiring labeling.”

“The first one is that it actually selects for wealthy customers. As does buying in bulk. So the items that you're buying are literally cheaper per unit, so you're saving money, but you need to buy a lot of it up front, just like you need to pay a membership fee up front, which means that they tend to get members who…”

“You can't just have low selection and be like, well, it's all cheap stuff. It has to be, like, high quality in its category and the best deal on the market in order for people to be ok with low selection, which drives low SKU count, which drives all the amazing things we've talked about so far.”

“Costco will never generate excess margin because of their brand. But their brand earns them something. I mean, people become members and trust them, and that leads to something. I assume it leads to volume, it leads to willingness to buy, which leads to volume, or it leads to retention.”

“There are bottlenecks everywhere to scaling, and no amount of cash is gonna solve that problem.”

“The idea that your core competency is just distributing someone else's product among a geographic area where you have a relationship with customers, that might have actually been a pretty good plan and much more defensible in a way that it's much harder to build something like that from scratch now.”

“Yeah, they sort of discovered they couldn't have their cake and eat it, too, of saying, we are the brand that inspires you. Oh, but by the way, anytime there's an issue, oh, that's one of our suppliers' problems, we simply don't make shoes. Even though it is technically correct, the court of a public opinion will find…”

“These endorsement deals are not about the sneakers that that basketball player is going to sell or, oh, I want to buy the cleats that my favorite college football team is wearing on the field. No one else plays football other than college football students and the very few NFL players that exist. So there's really…”

“there is this tipping point where a brand becomes the scale player. Like, think about Disney in media. They've become the scale player. They can run a different playbook and go directly to customers in a way where other places that make content need to integrate with the existing distribution channels.”

“Just like a luxury brand, they have to market the dream, but their mechanism for capturing value is entirely different.”

“The primary way that you get someone to be a twenty-year customer of Nike is to go and spend money on the biggest athletes in the world. And the whole game, just like Netflix, is Nike's acquiring content. Nike is acquiring the LeBrons of the world to be Nike athletes. And the LeBrons of the world are gonna go where…”

“we literally fund these companies to keep them alive so that they keep employees trained should we need the employees trained. Which is, like, something that doesn't really exist in other markets.”

“platforms probably have a role to play in verifying authenticity. Like that, that actually raises the value of platforms, because, uh, platforms like Spotify, YouTube, you actually can point to, we know for a fact that this was created by the creator, and we can stamp it and say that this, you know, you can trust this.”

“most podcasts should generate about 50% of their revenue from direct monetization, some kind of membership program, or paywalling their feed, um, and about half from advertising.”

“Like, you have to, you have to inspire emotion in people. Otherwise, like, you just, you can't stand out in the world. And you certainly can't have repeat behavior and, ah, in a sea of choices for someone to keep choosing you over and over and over again. Just like, it's, it's like how founders have to be weird. Like,…”

“A lot of people play characters on the internet, and Which in other mediums Plays really well. Uh, and, like, It's a way to catapult growth. If you adopt a polarizing character, you can get a bunch of followers. Yeah. There's, there's like a, there's a lot of dividends that pay to it, but it's exhausting to maintain…”

“advice is always an average that hides the distribution, and if you know that you're actually an outlier in some way, then you have to sort of, like, selectively follow advice because it may not apply to you.”

“The number of new tidbits of information you can consume per minute in Twitter is high and reasonably low in TikTok. It's 10 to 20 versus two to three.”

“When the App Store first came out, you could stare at it and go, this is going to change everything, but it was only a select few people who actually saw the particular massive use case with the new thing.”

“Sure, you could make more money doing that, but it goes in the too hard pile. I think you and I have a really big too hard pile. In some ways, that's strategy. It's like, if you actually believe in the set of trade-offs that you have, Then you have to be willing to have a really big too hard pile when there's a lot of…”

“no matter how hard we try, we've really never been able to more than double in any year, because podcasts are sort of an inherently unshareable mechanism.”

“the thing that occurs to me is this is something that can only occur to this height in a bull market, where there's so much capital saturating so many opportunities that people are willing to go way out on the risk curve looking for returns. Where there's so much FOMO playing into it that they sort of have to pile into…”

“Of course this was the birth of the Wall Street mania because the super high interest rates from the Volcker era would have led to unbelievably low multiples on any asset you could buy. So of course you've got tons of room to run on investing at Bargain basement prices for things that are gonna go up.”

“reporters love getting tips from short sellers, because short sellers have a massive financial incentive to go and investigate and figure out what companies are going to fail, and that's a really good where there's smoke, there's fire for reporters.”

“I think as soon as the business became the derivatives trading as an end, rather than as like a means of hedging, or as a means of cash flow stabilization and price predictability, I think that's sort of where basically everything after that was bad.”

“any, any, um, company in the sort of emerging space economy, it's a totally different engineering problem than you're used to today, because if you ship code up to your satellite and you find a bug, it's like very expensive and very slow to go get enough bandwidth and actually make sure you have the right time window…”

“And early stage investing, it's almost silly to compare to, like, my opinion is it's very silly to compare to public comps, because the only thing you know for sure is we're going to be at a different place in the cycle by the time this company gets liquid.”

“The hardest thing to do in venture capital is create those massive outsized returns that only come from investing in one of the five or so truly important companies each decade. Then, once you've done that, the next hardest thing is to keep doing it with an entirely different generation of partners.”

“Product market fit was a lot less organic and quite frankly, a lot less real because you didn't get this immediate signal of users finding your product and paying for it in this sort of high fidelity organic way. You had few products available to you, and they were whatever products got done in these deals, and so true…”

“The only way this works is if everyone truly brings the same amount of value to the partnership. Because otherwise, over time, you will have a situation where even if you're equal economically, you become unequal in everybody realizing, hey, that person's not bringing it the way that we're bringing it. And that creates…”

“really what you want is a board member who feels psychological safety in their partnership to do the things that they think are right without conflicting incentives. It is crazy how rare that is for someone to actually have that psychological safety.”

“Where this shows up for a founder is, how nice is it to have your board member be someone that you're not pitching? Board meetings aren't pitches because they are not your next round of capital.”

“The first thing that I just want to say after doing the research is they are just not a thesis driven firm. Period.”

“Being a web two point O company means that you can do business with other companies without needing like a BD agreement in place. You don't actually need a partnership agreement. You basically can just publish your API. You can say pay as you go and here's how you pay and here's how you get an account and we can shut…”

“They truly were unopinionated about this as a platform. They said, we're going to launch with primitives. It's the most basic story. That's the most basic compute. It's the most basic way to host your databases. It's the most basic CDN. And we can't wait to see what developers build in an innovative way with our…”

“This is probably one of the biggest keys to success or sort of playbook Themes for why AWS became successful. They realized how perfect this was for startups. They realized how hard it would be for large enterprises to just wholesale move over. They realized that was not going to be the first beachhead market. But for…”

“If you're worth 1.5 trillion dollars, it does suppose that you're spitting off like a hundred billion dollars a year or somewhere on that order of cash, which we've never seen them do or come close to doing.”

“Was amazon.com was the original idea. And then everything else was a brute force algorithm for finding your way through a maze where it's just like, try this pathway. Oh crap. Nope. Backup, backup, backup, backup, refine, turn. Amazon brute force their way to success a lot in just finding out where all the doors were…”

“When you have the network effect of more buyers attracting more sellers and more sellers attracting more buyers like eBay had, and they were a couple years ahead, it was just already in full swing. And even if you have a more technically superior interface.”

“They have an immediate organizational design problem where a whole bunch of people are incentivized and comped against their fiefdom. And what you've just done is you've created a brand new business strategy that tells people that the greater good is more important than their fiefdom. And in order to rearrange everyone…”

“Any web platform of sufficient scale can layer on for free a second business of advertising because they just have the traffic and they can put stuff in front of people and they can prioritize it however they see fit.”

“And what he's describing is the most perfect, vivid example of scale economies, where once they get all these customers, and once they acquire them all to prime, so they are all loyal, subscribed, guaranteed to shop here customers, then you can amortize every new investment and every new feature across a massive…”

“Jeff is absolutely laser focused on not gross margin percentage, but the absolute dollar amount of margin dollars over a full customer lifetime that you can sort of get.”

“Interestingly, there are no supply to supply side or demand to demand side network economies. The fact that you're an Amazon customer and Amazon, Amazon customer, I don't care. I don't benefit from that at all.”

“There's counter-positioning in the era that we're talking about, Barnes & Noble, and subsequently Walmart, because those folks would have to invest so much and did, well Walmart did at least, to completely reinvent the way that they do distribution and all their distribution centers to be fulfillment centers and…”

“if you're gonna look at Amazon as a straight line, it was a philosophical straight line. It was a strategically squiggly line, but it was a tactically random set of dots that there was just a fact-finding algorithm going to figure out.”

“I still actually believe pretty strongly in, in ownership, especially as a lead investor, and why that's important in architecting a fund model. But at the time, if what you're playing for is three, four hundred million dollar outcomes, then like, it's pretty important for your multi-hundred million dollar fund to own…”

“If you're gonna compete on price, you must avoid buying anyone else's inefficiency at all costs, and it means having often very contentious relationships with your suppliers.”

“as long as Moore's Law continues to hold and computing power continues to get exponentially cheaper, The markets that technology can attack should keep getting bigger and bigger.”

“Really, venture capital in the early stage is not at all cash flow-based investing. It's actually options investing, and as you sort of think about it that way, the world starts to make more sense, because how do you value an option? Well, you look at the range of potential outcomes, And the probabilistic likelihood of…”

“Throughout the company's history, they basically have these, like, six to 10 year epochs, and during those, they have, like, A meteoric rise when they do something contrarian that's off the rest of the industry, and then it starts to taper, and they need to figure out how to reinvent themselves again.”

“company culture and company values don't mean anything until they're tested. And when I don't think he used the phrase direct to consumer, but when they sort of decided they wanted to be a direct consumer company, that's cute and all until someone offers you a big pile of money to, you know, be a white label OEM…”

“The second order thing that I don't think they realized by jacking up the price is that now they're picking their customers, and they're picking affluent customers, and in particular they're picking customers who have extremely low price sensitivity. And what happens when you pick people with extremely low price…”

“it's anything that's instructor-led that is a big market. On the offline world can be an instructor led large market in connected fitness.”

“There's a trend that they need to follow over the entire lifetime of their business, which is Dropping the price point so they can keep attracting that next concentric circle out from the core affluent customer. If they're actually interested in continuing to grow the business, they need to do that.”

“it was less about the music itself and more about, do I identify with the type of person who I perceive to listen to that thing? And it's the same with any other sort of music. It's often the same with movies too. It's a, it's a form of like self-identification and community building, That just so happens to sound like…”

“Most of these startups, most of these artists are going to fail. And the record labels or the book publishers or the VCs are gonna have sunk all this money in to get to a point where we can even see if it's gonna work, and when 90 plus percent, I don't know what the failure rate is in the music industry, but when, you…”

“She has the opportunity to take advantage of scale economies and bring stuff in-house that no other artist could bring in-house. She's not necessarily doing that, but I think the fear that she could do that is one way that she got the deal that she did, where she actually owns the masters and licenses them to the…”

“creators can typically convert at best two to three percent to a paid offering unless they're significantly handicapping the main content where you'd say like, sorry, every other main post is behind the paywall or, or something, you know, big like that.”

“the period of time where Hey, this isn't going to cover our lifestyle is long. And then, Hey, the period of time where, Whoa, this is going to more than cover our lifestyle is long. But the period of like, Hey, this is great. We're, we're like right at break even sustainable is like remarkably short. So you sort of…”

“It is this incredibly unique thing about John D. Rockefeller where when you describe him as one of the wealthiest businessmen of all time and a philanthropist, it's very different than the way that you would describe today's billionaires as wealthy people, and it's not one then the other. It's not career and then…”

“Which is, by the way, a great way to do it. Like, if you've got a partnership that's blowing up, like, all right, whoever wants to pay more to buy the other person out is the person that should get to own the whole thing. And so the, the idea of a bidding war between the two of them to figure out, to have to figure out…”

“monopolies, even if you don't trust bust them, uh, are always at risk of being disrupted by a paradigm shift.”

“There's so much tied up here, but one of them is this is kind of the first venture capital business. Like we talked a lot on the TSMC episode about these massive fixed costs... And then it's all a volume game. Like how much can you get the plants at full capacity as fast as possible? Because the, the unit costs can,…”

“You can't be a distributor unless you're on great financial footing because the cash flow cycle means that you are fronting money to print films, distribute them before you actually get paid by the theaters when tickets sell.”

“In luxury, you never want a customer to feel like they've done it all. You want a place for them to graduate to.”

“There's three things that make a great acquired episode. One, there's a compelling hero protagonist that takes a hero's journey, where we're going from obscurity to ubiquity. How it starts is this thing that nobody cares about, and then it becomes the most important thing in the world... Two is there's a secret hiding…”

“Coke can be profitable at way lower end consumer prices than the other subscale companies.”

“Oh, there's two expenses. There's sugar, and there's the bottle, and then everything else is approximately free.”

“When someone is linking to you, they often do a better job of describing your website than you do on the page yourself. Anybody that's just sort of looking at your website to try to figure out, what's this about? The actual words on your website tend not to do as good a job as everyone who links to you in aggregate.”

“click-through rates on search ads are higher than ads that are just randomly around the internet, because someone is intending to buy something. They have high intent. That's a great place to show An ad. The click-through rate's gonna be higher.”

“Basically, the more volume you have in your market, the more deeply traded the market, the more likely you are to have an ad that has perfect product market fit with the query.”

“So the payers are always gonna have a tremendous amount of leverage over individual physicians, small hospital systems, even larger hospital systems. So you really need to be extremely buttoned up and extremely standardized and extremely auditable because you're negotiating with this large counterparty, whatever the…”

“This is a very engineering-heavy industrial thing, and they didn't have to devote any resources to the war because they were completely neutral, and so all of their craftspeople and machinists and everything can keep making watches.”

“It helps Rolex's long-term value to help their customers feel like they made a good decision when they bought the product.”

“And that's what makes it different than all these other social networks. Myspace existed. Friendster existed. But anyone could sign up for these. And in part, that meant that they had more explosive growth, because there was no governor on the growth. And we'll talk about all the problems that sort of come from anyone…”

“For the first time in history, you actually could. All these companies with big climbing, Microsoft would ship every three years with a service pack once a year. It's a whole new era where all you have to do is, you know, upload some new PHP code to the FTP server, and then boom, the application behaves differently the…”

“The document formats are a huge network effect thing, even before the internet, even before organizations were networked and computers were networked outside of an organization. File formats. You're right. There's huge network economies to file formats.”

“traditionally, you'd say this is very, very inefficient, and it actually means that the larger your context window, aka token limit, aka prompt length, gets, the more computationally expensive it gets on a quadratic basis. So doubling your input means quadrupling the cost to compute an output, or tripling your input…”

“So the big innovation here is you could now train sequence-based models In a parallel way. You couldn't train models of this size at all before, let alone cost effectively.”

“So the magical unlock, of course, is to make a computer that is not a von Neumann architecture. To make programs executable in parallel and massively increase the number of processors or cores. And that is exactly what NVIDIA did on the hardware side, and all these AI researchers figured out how to leverage on the…”

“And the hardest thing is figuring out how to extend that audience and make products for them to buy without compromising that step one, that belief that you make Pinnacle products. And what Nike has been able to do and thread that needle and figure out how to make the 15 dollar t-shirt that you get at Dick's Sporting…”

“all content, because there were a limited number of channels and a limited number of time slots, everything had to be produced for the lowest common denominator, and now you can opt into your niche and find the highest quality content in that niche.”

“You could increase the velocity at which a financial company could operate by packaging up risk and selling it to someone else so that you could make new loans off your books or something like that.”

“There are so many things that we've talked about in the last, I mean, on Acquired generally, but especially in the last year, where their success came from correctly forecasting where Moore's Law would be at the time that they shipped their product.”

“It has always been a well-compensated profession, so it's not like the owners of the management company were back there saying, we're not gonna pay any cash out and sell, no, they would pay a high salary, but then they would get to keep everything remaining in the management company at the end of the year and sweep it…”

“Stores have to store all of their inventory, or a lot of their inventory, in very expensive real estate. Amazon totally does not.”

“So much of Walmart is trying something, doing an experiment, watching it fail on some small scale, choosing not to roll it out, or watching it succeed, and then choosing to rapidly roll it out across as many stores as possible.”

“The whole CUDA investment. Not at first, but definitely now is predicated on being able to amortize that a thousand plus employees spend over the base of the three million developers and all the people who are buying the hardware to use what those developers create.”

“Getting a reference from the CEO of a portfolio company is a really good way to come in with a venture capitalist already leaning toward investing. Especially if you're referred by the top performing company of all time in their portfolio.”