The Ledger, every show

“Even before you have product market fit, It's worth thinking about strategy. Now it's not strategy in the sense of sort of this fully articulated strategic planning. We're going to do this. These are going to be the competitors. This is going to, how we're goi…”

“There are some that only are really available in the, when you reach a stability phase of a business pretty far out there. And so if you're starting a company, take those off the table. So those two are branding and process power.”

“People often think that they get scale economies through data. And I'd say that that's possible, but it's rare. And the reason it's rare is not because there aren't scale economies in data, but rather that the range of scale that the existing competitors have…”

“There are often flywheels, ones that really are material, are rare. The key thing here is materiality, not whether the flywheel exists, but whether The effect is strong enough to really tilt returns.”

“You asked me earlier, or in the material you sent me about Uber and Lyft, I'd say that, you know, they probably have network effects involved, but not network economies.”

“I'm kind of the view from very much uncertain at this point that That generative AI will, its biggest impact will be that tertiary class. It will be used in a lot of things that that existed before and exist after, but are made better by it, like semiconductor…”

“There are this incredible, I mean, business is really hard, right? And there are just a multitude of things you have to pay attention for. I'm right because all those things fall into those three categories. So it's an exhaustive set, and it's just, it's, it s…”

“All these things that reduce friction are easily available to lots of people, and so your very ability to spin up quickly and make something happen, and it seems very powerful, may in fact be the very thing that makes it easy for a competitor to catch you.”

“People that are just amazing at innovation, which I have a huge admiration for. That is to say, getting product market fit, think that they can just out invent the competition forever. And that story usually doesn't end well, I don't think. And the things you'…”

“So flywheels are a sign of product market fit. And tell you absolutely nothing about power.”

“The 10 X came from Andy Grove, the CEO of Intel, and that's what he observed in the semiconductor was that for a generation to be different, it had to be 10 X. And in his space, that was probably a very reasonable empirical statement, but it is no guide in gen…”

“My view is that if you can pretty carefully estimate your market size with great confidence, you're probably too late.”

“How long? I don't know. At least 10 years, I'd say. Maybe it can be done in some cases shorter, but if it gets much shorter than that, you worry about whether there, in fact, is a barrier, because others can do it, and then it's no longer a source of power.”

“Almost every startup that you want to deal with starts with, ah, counter positioning, because remember what mark product market fit is primarily is a substitution. It's you are coming up with a way to satisfy a more or less existing need in a novel way that cr…”

“UI development there that it's been an enormous amount of resources on trying to get just the very best UI. I mean, a zillion AB tests, all kinds of things, their recommendation engine, everybody's kind of knows the story about how that, that went you know, th…”

“My own view currently, I don't see any change in seven powers from it in terms of an eighth power or something”

“In, in the, this takeoff phase in a business when, that we talked about before, when you're trying to attain competitive position, operational excellence is everything. And so, so in, if you think of not strategy, not statically endpoints like Professor Porter…”

“There are really two major step changes in the value of a company. The first is product market fit, and the second is getting power. And they're quite distinct and involve different things.”

“If edge cases matter, there's a pretty good chance there's an opportunity for power. And because when you say edge cases matter, what you're really saying is that curve doesn't flatten out very quickly.”

“I think if they hadn't completely flubbed the Mac three, I think they might've ended up in a very attractive power position because they did own the stack and they did own the operating system and they didn't yet own the processor, but they could eventually.”

“That performance frontier is moving in sort of a kind of predictable way, and so being a leader in technology means that you are a cost and performance leader in the business, and so it makes a lot of sense to me to kind of give up current profits to guarantee…”

“And my advice always is don't think, how am I going to lock in my customers, but actually think of it a different way. What is it that I can do for my customers that create value for them And then if that proposition has with it a way that they're tied to me, …”

“So the value comes from matching a buyer and a seller, but power in these things is really different. It comes from one platform doing this materially better than another platform, And that the thing that drives that difference in performance is sustainable. T…”

“What I realized when I got very deeply into it was there's a crux moment in strategy where you sort of form the thing that develops your strategic source of power, if you will, and that that happens in areas of great uncertainty and on the fly, and then hiring…”

“So if you have an operationally incredibly effective company, you're very efficient, but you miss the strategy issue, then in the end, it won't be an attractive business model.”

“So remember that potential value is equal to power times market size, right? And power comes from the simultaneous satisfaction of a benefit. Something about your business makes you more money, you know, lower cost or higher prices. Plus a barrier so that othe…”

“So Facebook, obviously, network economies. Apple is, they're a variety. Brand switching costs, scale. Amazon is primarily scale. Netflix is primarily scale. Google is probably network economies.”

“So if you asked me 10 years ago, could these three things all be true? Fully electric cars would become what every automobile company in the world thought was going to be the future. That another firm would actually join the ranks of world-scale automobile com…”

“So for example, if you look at Uber's source of power that they might have versus, for example, an upstart, it would be the scale density, physical scale, regional scale density. In a particular region like the Bay Area, if they have enough riders and enough c…”

“For Netflix, on the other hand, if they go into another market, if there is sharing across markets, and I suspect there is, say you go into India and the Indian audience likes, say, 20% of your catalog in the U.S. Is something that Indians like to watch. That'…”

“Another thing that's quite surprising about iconic businesses is they often have a second act or third act or fourth act. I mean, think of AWS or Intel going into CPUs or Apple going into iPhones, all, all not the original business, right? And that's actually …”

“And what it is, is there's something in what you do That gives you either a cost or price advantage over others. So let's say you're lower cost and that's the benefit. And the barrier side is that there's something that is durable about that, that makes it ove…”

“It only works because they, there are modest scale economies. If there weren't any, then If they did all this stuff, they'd still have equivalency.”

“A direct network effect is where your joining has an immediate value impact on somebody that's sort of on the same side. So I joined Facebook because I'm your friend, and those effects are strong because they're additive. So another friend's join, it doesn't s…”

“The bar for effective mental models is that they are simple but not simplistic, because if they're not simple, you can't retain them. Easily. And you can't use them. If they're simplistic, then you miss important stuff. So it's got to be exhaustive, not simpli…”

“So if I looked at the CEO or founder's time, 99% of their time is spent on operational issues.”

“Really powerful scale economies. There are many instances of it, but in terms of being the source of power against all the types of competitors you have to consider, they're much rarer than you would think.”

“The fact that MySpace came before Facebook doesn't in the slightest in the way I think about creation diminish the creative act of all the things that Zuckerberg and others at Facebook have done to make Facebook a great company. So first mover and invention to…”

“And so that's why market surveys fail in really new stuff, because customers don't know what you're talking about.”

“So if you're a company that focuses just on competitors, it's an outside-in. Type of situation. You lose touch with your own creative core. Your culture is not unique. You don't have that ability to tap into something that really makes you different and valuab…”

“In the case of Netflix Reid actually had me come in and train the top hundred people in Netflix and strategy. We actually, I actually ran classes in the company.”

“I have in my cabinet at A bottle of Hermes cognac, and the story behind that is a friend of mine is one of the Hermes family, and he was over for dinner one night and brought this bottle with him, and Hermes tried to do cognac, and it didn't work, and so there…”

“The cost of their content is a very large fixed cost, about 50% of their cost structure every year.”