# The Biggest Startup Opportunities In 2024 | Eric Ries (The Lean Startup)

Channel: Greg Isenberg
Video: https://www.youtube.com/watch?v=l2AnqA-jY10
Duration: 50 min
Language: English
Words: 11315
Transcript page: https://viewrankai.com/tools/youtube-transcript/l2AnqA-jY10

---

[0:00] uh startup figured out that the only time the buyer ever switches to a new vendor is when the old vendor dies they literally wrote an algorithm that reads obituaries to find out when vendors of this type die so that they can go pitch to be the new replacement vendor and they realize hey I could buy out the vendor before they die actually would be a pretty good pretty good strategy so anyway you can buy vendors you can buy customer relationship you can buy like stuff what you cannot buy is understanding of the customer so these rollup strategies all depend on somebody somewhere in the management of

[0:33] the new thing actually understanding the business at the level of the customer and what they actually need Eric Reese welcome to the show so excited to have you uh I read your book more than 10 years ago The Lean Startup and I can honestly say I wouldn't be here today without reading that so uh this is kind of cool for me to have you to interview you I'm kind of I'm kind of nervous well don't be nervous thank you for the kind words I'm glad you found it helpful today today what we're going to do is talk about some of your ideas I also brought some startup ideas that I have

[1:06] free startup ideas that anyone could take and I'd be curious your P perspective feedback on them and your brutal honest opinion does that sound cool let's do it you've got a couple ideas here and I want to start with AI companies are funded by different investors than in Prior areas what do you mean by that there's something about AI that has been really different in terms of the kinds of founders that that are pursuing it so you see like a number of the leading AI firms are not funded by the leading Venture firms from the SAS or social media eras not to say those firms have been on the sidelines

[1:40] but it's been it's just it's been different I think it's been notably different who's who's backing it you see a lot more involvement of corporate Venture firms um which you didn't didn't see before there's something about AI as a technology that has is getting people to treat it differently than past Technologies the public is so attuned to the dangers of AI I think people are a lot more interested in who governs these companies and how they're structured how they're governed so that's been a lot of my work of late has been uh trying to talk to people about the startup governance issues that are are unique to

[2:10] really dangerous Technologies uh with with huge upside like Ai and you also see just it's a difference in the kind of Founders that are doing this they tend to be older they tend to be a little bit more sophisticated and I've heard from a number of folks that just feel like the AI Founders are not super pleased with how the previous waves have gone so you know there's a lot of skepticism of people that went all in on crypto or that think that the social media era was a big rousing success certainly a lot of money was made but there have been some pretty negative externalities so I think it's just been

[2:38] interesting to see those issues play out in a new in a new tech wave with new U new backers new funders new Founders we're seeing a lot of you know people call them rapper AI startups in the space like Indie hackers who will take a a use case on top of chat GPT or another llm and just build a purpose-built chat GPT for lawyers chat gpts for something else do you think that there's longevity in those businesses we haven't had a bonified platform war in Tech in a little while because uh Android iOS was not really the real thing I I kind of feel like Google their heart was never

[3:17] really into it so it wasn't like apple Microsoft or Coke Pepsi you know uh Intel versus over the 68,000 Motorola processor like it's just it's been a while since like really meate Tech Titans went to work with each other many people in this era have forgotten the old parable of picking up dimes in front of the steamroller which I believe this ISM applied platform where as originally dates to Jean Louie Gass of BOS and apple Fame but I've actually never had the chance to ask him that's where I learned it from the parable of the of the of picking up di in front of the steamroller is that when you have a

[3:49] platform War the platforms are the Steamrollers so you're building a new platform that many many businesses are going to be built upon think about like Microsoft Windows or the Intel processor in such a situation ation the platform has this tremendous logic and momentum behind it I mean it really is a steamroller it flattens anything in its path you know open AI or anthropic these are very fast moving companies very impressive actually um considering but they're still behemoths and they're still dealing with multi-billion dollar problems so although the steamroller has the power to flatten anything it wants it is intrinsically slow moving you see how old this metaphor is because dimes

[4:24] used to be worth something you see a dime in the path of the steamroller so long as you can run into the street pick up the dime and run out of the street before the steamroller arrives the dime is completely yours steamroll is not going to stop pause pick up the dime is too small for them to care about and the problem with the kind of naive strategy of picking up dimes in front of a steamroller is it works perfectly unless you trip and fall even one time so if one time you go for the dime and you don't get out fast enough then you get

[4:49] flattened by the steamroller and it's and it's dangerous so it's a useful metaphor many of these rapper startups are dimes in front of the steamroller type businesses and the key to the parable is it's it's not bad people are acting like rappers startups are bad that's not bad it's just you have to really understand the Strategic situation that you find yourself in so if you're taking Venture money and you're promising people to build a multi-billion dollar company that might not be the right time to do that but the key for me is always what do you do with the dimes after you pick them up because

[5:18] I think a lot of people start what seem like rapper startups at the beginning but there is a playbook for what to do in this situation if you want to build something with more enduring value so for example um the power of a rapper start is that you own the customer and in a lot of businesses whoever owns the customer actually has the power for the whole what they call a value chain of that industry so I do think some of these vertical specialized rapper companies they might be able to use their werness build up customer relationships collect proprietary data you know I don't know train their own

[5:47] models build their own new thing that is theoretically possible although currently prospects for doing that don't seem amazing but you might also see a situation where in a platform world where the platforms are forced to compete to a lowest common denominator like I saw what happened with Cloud platforms where um the margins get eroded by the fact that the platforms are more or less a perfect substitute for each other there are businesses that can be made where you manage on top of that layer permanently by playing the implementation vendors against each other so you could also Imagine a vertical wrapper that allows the customer to seamlessly switch between

[6:19] many underlying models made by many different companies and because of that those competitive Dynamics might be able to to keep them ahead and then I think there's some people whose goal is to bootstrap their way into their own Steamroller by building the customer relationships collecting proprietary data and then training a whole new model out of that so I've seen wrapper examples where at least each of those that I've just described is the official strategy of why they're raising money and why invest VCS have deployed money against them you can handicap the likelihood of any particular one working in this particular Market boy it does seem like the the Steamrollers have

[6:53] tremendous advantages but there's a strategic logic to it that makes sense and then you also have plenty Indie hackers as you mentioned I'm like glad you started with that because like not everything has to be Venture based to venture back and not everything has to have a 10-year goal and I'm a big fan of building companies with with longevity and long-term thinking that was a big part of my work but the point is to use the right tools for the actual underlying motivation of the founding team and I know plenty of people that are building businesses that they'll be free cash flow positive they'll throw off lots of cash they'll be very

[7:22] lucrative for the founders until such a time as open AI for example decides oh we're just going to incorporate that natively into the platform and then they you know maybe they'll die at that time but from the founders perspective it's a great deal and especially for younger Indie hackers I know a lot of like a lot of these projects are run by college students by recent graduates people are trying to break into the industry and their career Equity upside in having done a cool thing is so much more valuable than the money that they're going to make that those startups are actually I think a really brilliant use

[7:51] of the free time and the flexibility that people at that stage of their career have so I think it's really important to understand what are the motivations behind the startup not to just paint them all with the the same BR so what you're saying is there's a lot of unseen benefits to to creating something that might go viral might get picked up might be a rapper and you know might you might get steamrolled but you know that might get you a huge job at open AI maybe maybe they they see what you're doing and they're like wow this is awesome when the whole industry is being upended you know the meme is from

[8:25] uh uh Game of Thrones chaos is a ladder everything's being upended that creates massive opportunities for people that are willing to throw themselves into The Fray as much as people have been deriding rapper startups people make fun of those people but I think there's a lot of reasons to do it and not all those reasons are bad you know another good example is um Yohi Nakajima who built untapped VC his whole thing as a venture capitalist is to build in public and so he built baby AGI the AI agent open source framework he's done this I think with previous waves too I think he even did a bunch of crypto stuff he's

[8:55] someone who's building projects for the sake of like getting to know the techn technology and see what it can really do and to be in community with other people who are trying to figure it out and through that is going to be able to access lots of cool professional opportunities for himself and his firm as an industry we have a tendency to be like there's only one path or only one kind of person that's really valuable and of course we're in a hierarchical patriarchical society that is just we love to put the like Elon Musk type figures up on the pedestal and make it about them personally and not to take

[9:23] anything away from the accomplishments of the so-called great men of history but there's a lot of other people involved there's a number two the number 10 and there's all these other people involved even with those success stories and then you have thousands or even millions of other people that are finding ways to benefit from the new technology someone asked me for advice and said my two choices are do a wrapper startup or sit on the sidelines and do nothing what are you going to learn more about AI from like I'd rather you do something that is doomed to fail and it's a terrible idea because that gives

[9:51] you the chance to Pivot into something that actually might work versus sitting on the sideline and doing nothing I think your point around customer data is a really good one like if your goal is to get customer data and even if you get steamrolled in the process there is a chance that you might become the steamroller I think like we do startups it always feels daunting when when we're building them and there's always that chance that in the web two and web one era was like what if Google ads this feature it's very tricky to talk about this because people are so reductive especially now because of social media

[10:23] people love to polarize and love to be reductive about it people infer from what we're talking about that oh you're saying that nothing can be known and there's no such thing as a better strategy or a worse strategy or like anything's as good as anything else kind of like a startup startup version of moral relativism it's like no we're not saying that and there are people out there with special knowledge and special talent and special abilities who can do things like under certain circumstances predict the future terrific our goal is simply to get people into motion so that they have a chance to become one of

[10:49] those people but you have to be willing to do things and of course just doing things at random is better than doing nothing but better than doing something at random would be to do a structured hypothesis where you're like going to learn them as much as possible but I do think like people have moved away from the idea that having a plan is even a good thing at all and that doesn't make sense either we need some kind of strategy that makes sense on paper then go test that against reality and discover where you're wrong and then adjust whatever things need to be adjusted it's why we called minimum

[11:17] viable product a product not an experiment or a test or hypothesis like we wanted to remind people that although we are removing features and we are Des scoping in order to get learning we're still trying to build something that is fundamentally useful there's a lot of uh people out there that why not building half a product and it just makes no sense it's like yes you've descoped but you're not delivering any value to anybody our goal should be to to descope down so that we provide some level of value that is still meaningful for testing the hypothesis maybe to a smaller number of people or maybe you

[11:45] know with different materials than we ultimately want to do or there's so many ways to to cut down on the extraneous bits but I feel like that um gets easily misconstrued saying there's no such thing as knowledge nobody can know anything startup outcomes are random and that's definitely not true what do you think of the idea of instead of building an AI rapper startup that you have to build an MVP that takes some time that there's a learning curve if your goal is customer data what do you think of the idea of buying a non AI startup in a particular vertical for example like in the in the lawyer example like maybe you

[12:17] buy like a Shopify for lawyers you buy that and then you add on the AI capabilities what do you think of potentially a rollup type idea in that space Oh I know people that are doing it I'm an investor in acquire. comom so I'm really conflicted because that's like the number one best platform to go do those rollups on like you there's like a million trillion different um small businesses of various kinds once you know the technology well enough to be able to predict the effects it will have on a given business then it's just very clear that we're living in a time of tremendous Arbitrage where Tech non-

[12:53] enabled businesses can become quickly AI enabled skip some cases skipping right over the SAS uh era of deployment because um the the technolog is that good the thing I will say is although you can buy customer relationships you can buy customer data you can buy customer contracts and someone was just telling me a story incredible story about a startup that was buying out Legacy vendors county by county it was like a municipal service the reason they started doing this is they they like figured out that the only time the buyer ever switches to a new vendor is when the old vendor die they literally had a

[13:27] strategy of they wrote an algorithm that reads obituaries to find out when vendors of this type die so that they can go pitch to be the new replacement vendor and they realize eventually hey I could buy Those comp I just buy out the vendor before they die actually would be a pretty good pretty good strategy so anyway you can buy vendors you can buy customer relationship you could buy that stuff what you cannot buy is understanding of the customer so all of these rollup strategies all depend on somebody somewhere in the management of the new thing actually understanding the business at the level of the customer

[13:58] customer and what they actually need so like that tends to work a lot better if you've proven it once and now you're going to replicate it and so yes your lawyer example of I'm going to roll up a bunch of legal Small Business Service here and I really know that business well I'm G to bring AI to bear on them I think that makes a lot of sense you also see some that are like I'm just going to buy whatever I can get my hands on and AI ify it I'm a little more nervous about those because although I do think that could in theory work you could

[14:24] imagine like a private Equity Firm that just all they do is buy companies add Ai and then resell them you have to really have tremendous confidence in your own ability to come in and really understand what the customers's like main pain points are in that industry so that you can deploy AI against it let's say you are one of those PE people because we've got a bunch of investors who who do listen to this podcast and you did want to buy a rollup of legal Tech or legal services and you were trying to figure out how can I get from not knowing a lot about this space to knowing everything

[14:55] about this customer in a short amount of time like what what Frameworks or you know would or advice would you give to that person the more I think about it the more I feel like legal is like one of the worst verticals to try this strategy on so we we should pick a different example because it's like there's special rules that govern the behavior of law firms I think actually like some of the legal full stack legal startups maybe would have a better shot than a rollup but anyway but to answer your question people always looking for a framework they're always looking for like something complicated here it's not

[15:22] complicated what you have to do is spend your time talking to customers and yes if you don't know how to do a customer Discovery interview like go back and reread the Lean Startup or go back reread you if you want even more classic book the four steps of the Epiphany the original customer development book or if you really don't know how to do it could you spend one hour reading a book and nine hours talking to customers that would be more profitable and most people are too scared to do this I'm introverted I don't really like talking to customers either I find a little bit get intimidated it makes me nervous but

[15:49] like you got to get over it and the key I think to get over people's reluctance or nervousness about it is like don't don't be like well I got to spend 10 hours today talking to customers all day long and I gotta lock them in a room just like could you do One A Day for 20 minutes to start or if you can't do One A Day could we do three a week is there a flow rate of customers that you could commit to me that you will talk to and people like I don't know what to ask them give me a framework years ago you

[16:15] know I was first trying to evangelized Le start to people and I had had a great entrepreneur he was really smart great reality Distortion field and he was like had this product he was doing okay but couldn't quite ever cross the chasm and I was like look how many customers have you talk to and he's like none and he was like can you tell me even one example of a tech company where like customer feedback helped them I have the vision if I talk to customers that's just that's asking them if they want a faster horse I was like look I hear you I hear you all that's true but here's

[16:40] what I want you to do will you just talk to three customers for me call three customers ask them how they use your product and why and then call me back if you learned nothing from those conversations and they confirmed everything you already know I will never bother you about this again for the rest of your life otherwise every time you call me ask this what I'm going to hassle you about so save yourself the time he's like all right just to stop you from bothering me about it I'll do it and I'll never forget he calls me back and he's like completely forgotten our prior conversation he's like you

[17:08] won't believe what these customers told me first of all one of them's in education one of them's in an Enterprise one of them's in small business and none of them are using our product correctly it was just like this immense amount of knowledge gained from three conversation and what's so interesting about it was I was like what is this are you ready to have your next three conversation he's like no why he's like I already learned everything I need to learn from these three these are the three representative samples he rewrote the whole business I was like that's a lot better than nothing but could you do three a week

[17:37] could we do three a day like you need to have a regular practice of bringing this feedback into your mind not to abdicate your role as the Visionary but simply to to do science have your hypotheses be periodically periodically tested you don't need that's all like customer recording and sentiment analysis software it's all fine but honestly the most valuable thing is 20 minutes with an actual customer just no substitute for that how do you get from I want to talk to customers to actually speaking to customers everyone I know who actually in their heart wants to do it is able to find the customers without difficulty I'll give you an example from

[18:12] my own life I built a stock exchange literally the same regulatory category as NC or NASDAQ I spent 10 years of my life getting the regulatory approval to do it I it's been a incredibly difficult project when I first began I knew nothing about financial regulations Securities Law I was a real I had like deduced from first principles the need for a stock exchange a new Stock Exchange and yet I didn't know anything about it if you like your life depends on talking to a stock Trader tomorrow I would have been like I guess I'm dead because I don't know anybody but like even under those very adverse

[18:44] circumstances it wasn't that hard I just everybody I met with for any reason I like do you know anybody that knows anything about public markets and people would be like not really but my friend so and so will know more than I do can I talk to so and so great so and so do you know anybody I just you know after three three four hops of doing that in your social network you will be with a customer it is not hard unless you're doing something super Niche super obscure and like not every person I talked to was like the perfect ideal you know you have to be willing to talk to

[19:10] whoever is willing to talk to you someone told me a story the other day forgot know who it was but there was it was young Founders I think they were in their 20s and they literally went and they went to live in a Motel 6 for six months it was a technical person and his two or three partners and they literally just were on the phone all day every day calling customers while the coder was coding the thing and every time the coder had a question it was just like a very immediate interplay between the coder and the customers p and like yes it was pretty miserable to live in a

[19:39] Motel 6 for a couple months but the flip side is they had very deep customer insight into it has a great story about the first 100 customers that they called like it's just not that difficult and Scott Cook found it into it in the days of the Yellow Pages he had to like pick people out of the white pages and like call them on a telephone now we have way way way way better tools so yeah having a hard time finding customers to talk to it says more about their internal state of determination than the external world you got to want it you got to really

[20:04] want it in 2015 I founded a a venture-backed business called the island it was kind of like a Discord competitor some of our early users were college kids you know we're getting a few thousand users four five 10 you know tens of thousands and beginning to be hundreds of thousands but as you know in consumer social if you're not getting millions of users you really gota go back to the drawing board um so we said to ourselves let's Niche down let's build uh if group chats is the new Social Network let's go build like the Facebook of back in the day where it was only focused on college campuses but as

[20:44] group chat and remember one investor famous famous investor told me he said get out of the dog patch in San Francisco there's no college students in in the Dog Patch and I booked a flight the next day to Tuscaloosa Alabama and I lived for six months in tusco Alabama we built a team there and we went from college campus to college campus and just being there with our team building features being in the room and just seeing it seeing the look on people's faces there's nothing like it and that was the key to everything totally there's all these hacks like that to to get closer to customers and they're

[21:22] powerful but people always hear these stories and they're like but I can't move to Tuscaloosa so I guess it's not for me it's like look we live in the age of the internet okay you can if you want to find a way to be closer to customers you absolutely can Nordstrom did a Lean Startup thing years ago called the Nordstrom Innovation lab where they were experimenting with internal teams and there was you know wasn't especially notable as a corporate Innovation effort I think ultimately the the parent company you know moved into did one of those classic reorgs they got reorg out but they produced a video or a series of

[21:49] videos where they would follow around the team and they would show them doing the thing and one of the like classic things they did is they would they would set up in a Nordstrom store in the retail section of the store where the customers are and build apps with the customers and the sales associates like right there and it was just like really powerful to watch the things that happen because you have a developer who like oh I have an idea we'll have an iPad app where people can like see what their sunglasses would look like you know on their face like through the app or

[22:18] something you know don't exactly remember what it was I'm not not not huge into fashion anyway but it was cool it was all each was sounded really cool and it was like amazing to watch the person be like excuse me c stopping by like why would you be willing to try this and the person be like what does it do they're like it does this awesome cool thing and they're like no it doesn't like yeah all you have to do is like push the button and like hit control all delete and then like stand on your head and open your and they' be like this doesn't do nothing you know

[22:41] hand it back to them right like just see those interactions there's no substitute for that and again we're not talking about abdicating the vision and having customers tell you what to do it's just about testing your hypothesis and closing down that feedback loop I want to talk about another thing that's on your mind here on your list we need new companies new models and new investors who can take the learnings of the last cycle and make sure we don't repeat the same mistakes what do you mean by that I think there is a ground swell for something new let's go back to don't be evil everyone in the industry members

[23:13] Google's don't be evil model it was like such an idealistic and like hacker is way of talking about what does it mean to become a big company and everyone although people still admire Google like most people will admit to some level of disappointment about it turned out compared to what we thought it was going to be and I for me this was perfectly encapsulated by a um an exg googler I was talking to the other day and I asked him he was talking about how how he had been there for a number of years and how disillusioned he was by what had happened to the culture and I said okay

[23:43] tell me this what do you believe is the probability that Google will file its next quarterly report on time and he looked at me like obviously 100% I was like literally 100.00% he's like oh they there there's nothing on earth that could stop it I'm like what do you view as the probability that Google might in the future kill somebody for money and he was like oh come on man that's not fair they probably wouldn't do that he like probably he like yeah you know I was like 100% sure they wouldn't do it he's like well 100 no can't who can say that like he's like well you know what

[24:16] if their social network was involved in a genocide what if the self-driving car hit somebody and they're like I I don't think they would cover it up like 80% probably they would do the right thing and I'm like okay not as certain as the sun will rise tomorrow he's like I like okay so tell me this do you believe that the people at Google have a natural Affinity in their heart for quarterly reporting but not for don't be evil and he's like no so I was like so why is it that one is as certain as the sun will rise and the other you're not sure if

[24:45] it's going to happen but you think probably like what's the difference and he like was really like kind of baffled and of course the answer from the outside is really obvious the reason Google files that quarterly reports on time is there is a mass unspeakably massive bureaucracy apparatus designed to make sure that that happens starting with you know government regulations on down to like controls on every individual dollar of spending there to everything to make sure uh that it goes correctly because the company really cares and to me that's so telling the company really cares about its Financial reports but like what about the health and well-being of its customers it's

[25:19] okay you know they're doing their best it's fine and like the idea that we've like built an a universe of companies like think and again the social media era is like the example of just how badly this has gone where it just they have been successful by conventional definitions but they but the negative externalities have been awful and it didn't have to be that way and so I think we're we're starting to see in the next generation of Founders tremendously more interest in building companies that have a uh that are non-s sociopathic basically like have a reason for existing other than perpetuating their own self-interest um and those companies

[25:55] are not just like do good or act activist type companies they're companies that see being a trustworthy counterparty as a source of strategic advantage and what's cool about that is they're able to out compete these like frankly weak companies that don't stand for anything I think AI is a big part of it because AI has people spooked and is people like hungry for new models new ideas but because of that I've been talking to a lot of non-ai companies where the founders also have that appreciation they're like look I don't want my technology to be used for evil I don't want to build a company that you

[26:26] know I make a lot of money but it fundamentally is a malign force in the world and I don't want to work somewhere where the company doesn't stand for anything and people as soon as they hear this like oh it's politics oh it's wokeism or whatever it's like no we're not talking about like politics for the sake of virtue signaling we're talking about the core thing at the heart the Beating Heart of this living organism called a company what does it do and is that thing designed to make the world a better place is it designed to maximize human flourishing or is it designed for something else you know when you raise

[26:54] Venture Capital you're making the promise that either you're going to sell the business or that business is going to go public so you get to the place where you know you ring the stock exchange you're finally public can you be a publicly traded technology business and still maintain that culture without a doubt it's not easy think about it like this to me I was saying a company is a living organism I really believe that if you're a living organism and there are a bunch of systems inside your body that allow you to stand up straight like you have to have a skeletal system that is strong you have to have a

[27:25] muscular system the muscles require circulatory system you need an immune system if I remove just the one right bone from your body the whole thing collapses and you can no longer stand let alone if I you know if I make even more graphic deletions but I'm at this industry long enough now that I've watched it happen over and over again I've seen these companies become surgically deboned like their systems are being Stripped Away so that by the time they go public they're really vulnerable to these outside forces that then cause them to collapse into bureaucracy into sociopathy into kind of these these bad dysfunction functions and I'm frankly tired of it I just feel

[28:00] like these companies are so beautiful and they're so amazing when people build them they have such tremendous intention behind them and when that int intention dissipates like not only is it bad for society not only is it morally horrible to watch they also make less money like so many of these companies collapse first they collapse morally and then they collapse uh you know financially and it's actually worse for investors in the end so I feel like we we could do better as an industry in building companies at for something also if you're a startup and you adopt the mentality of don't be evil by definition you're going against what a Google would

[28:36] be building at that stage not to pick on Google but no I feel bad picking on them because they're not they're not even close to the worst but yeah exactly but you know insert large incumbent it's why Google exists in the first place if you go read their original manifestos and stuff they've betrayed everything by that but like you know they used to be like we would never put the search results and the ads co-mingled so people don't know which one like that's evil how could you do that it's like anyone Googled anything recently listen Google's on the brink of collapse you know obvious they have many other lines

[29:04] of business I'm sure it'll be fine but like the search engine is extremely vulnerable now and obviously with AI on the rise like people are really worried about what's going to happen to the Google search engine but like part of the reason is is there anybody who would be sad the Google search engine ceased to exist anymore like it used to inspire such loyalty and now it's like whatever I'll just use Bing or I'll just use an AI like I like nobody cares because it doesn't matter and we saw that with Silicon Valley Bank Silicon Valley Bank used to be the most beloved like Silicon Valley startup institution you know they

[29:37] would they would make loans and invest in startup when nobody else would they would Bank startups when nobody else would and then over the course of many years they just pissed away that leadership and it didn't cost them anything for years the VC Community turned on them in a heartbeat and caused a bank run against svb there was nobody left to stand up for them because everyone was like ah we don't really care did that brand trust slowly over time just became just another bank and did the kind of same old Shenanigans as everybody else and then when they you know when they when they were in in

[30:05] crisis that nobody had their back and again it goes back to the idea that trust is a really important asset it's like an asset that should be accounted for on a company's books that most companies don't account for and you are trustworthy if you have acted virtuously with respect to your key stakeholders in the past at your own expense so if customers see you repeatedly standing up for when you didn't have to then they come to trust that you are someone they can trust with their well-being you have all these startups who when you look at their their pitch deck it's like I am going to transform the world I will

[30:38] literally rewire the relationships of all humans with each other and with their governments and institutions and I'm G literally take over the world and become emperor of the world and you're like oh really uh sounds like with that kind of great power comes great responsibility would you have an ethical or moral responsibility the people whose lives are up and and they're like oh no I'm just a little s software company it's just like can you pick a lane you know it's like it's it's laughable it's like look either either be be a world changer and take that responsibility seriously or get out you know don't don't hide behind the ignorance and like

[31:10] you know again I feel like in our grandparents generation it kind of made sense you could be like I'm just a small business owner or I'm just a manufacturer of products or even I'm a big company you know once I sell a product it goes out into the world I don't know what happens but man we live in the age of surveillance capitalism companies know in incredible detail what happen to their products what effect they have on customers Facebook even commissioned the scientific research to find out if their product makes people depressed and then they found out that it does and they were like o better bury

[31:38] that instead of take it seriously and do something about it and I think that's I think that's sad put it out there every website should have a what we stand for tab as one of their main navigation tabs right they have an about us they have a contact us they have their products how it works but what we stand for I think is the missing tab on so many websites people in that tab need to say not just here's what I intend to do but here are the externally verifiable commitments that I have made that mean you can trust me and I think that's like the

[32:11] structural side of this we have too many manifestos about purpose-driven companies the ESG movement has been a total failure you know from my perspective because Philip Morris has great ESG scores something's gone really wrong here so before we deal with regulation and before we deal with the ESG movement and investors and like we as innovators we as company Builders we got to get our own house in order and the first question is what do we actually want to accomplish with this company and I literally had a Founder I was helping set a company who was watching the open AI debacle and then he's like just what are the best

[32:40] practices for like how do you set up a company so it will remain true to your original intention and everyone's like I don't know or like try this one weird trick maybe that will work or just like oh there's nothing you can do about it and it's like no that's like saying like yeah you know I I tried to build a boat and like I got 82% of the planks were air you know watertight so but then it sank so I guess making watertight planks is not the key to making a boat yeah I think we need a new playbook a whole new approach to building you know companies

[33:07] that are purpose built fit to purpose for the century to come and I think if you are going to create a what we stand for tab to your point it shouldn't just be virtual signaling it should just be it needs to change it can't just be static I'm a big fan of the Airbnb host Endowment for an example they put a billion dollars at their stock into an endowment for the benefit of their host because their hosts are non-employee stakeholders who couldn't participate in the upside that that led to their IPO to me that's not virtue signaling that's like really like that's Blood on the floor you're like this I'm

[33:38] going to do something that actually cost me something for real to show you that I'm really serious about this and I've pitched that you know to many companies I've helped companies set up programs like that and the funny part is people I'll go in there and like someone in the finance or legal department will be like that sounds like a terrible idea we don't want to do it and I'd be like relentlessly working with the founders hey know this is a good idea we we should do it we should do it and eventually people will be like oh I see what you're saying if we really take

[34:01] care of our hosts and show them that you know they're really important to us then we'll have tremendous loyalty like yes and that will be a competitive Advantage well gosh wouldn't we get even more loyalty if we took all that money and made a loyalty program out of it and gave them points and it's just like guys you don't understand any of you feel actual loyalty to your airline where you have Platinum Status on they're like no like okay so like that's that's not where loyalty comes from loyalty comes as a side effect of doing the right thing over and over and over and over again so why don't we do the right thing

[34:32] and then trust that the Loyalty will follow and then another classic one I get is if I do the right thing how will anyone know about it the nice thing about doing the actual right thing all the time is you don't have to Signal it you don't have to do any marketing or you don't have to tell anybody about it you just do the right thing and people find out so for example classic thing I advise companies to do is to set up some kind of corporate foundation and have the foundation be part of their governance we call the spirit spiritual holding company and sometimes that's

[34:58] sometimes that's implemented as a trustee uh you know as a mission trust or governance trust but sometimes it's set up as an actual nonprofit foundation and when you do that you can do things like okay we're going to pledge a certain percentage of future customer revenues to the foundation put 10% of my equity in the foundation well if you do the percentage of future Revenue what your lawyers will tell you is it doesn't make sense let's say you're going to take 1% of all revenue goes to the foundation you don't want to have the customers give you the revenue and then you give it to the foundation because

[35:24] that's not efficient from a tax perspective you just change all your contracts such that when someone gives you $100 the contract says actually $99 of what you're giving me is going to me and $1 is going to my Foundation every customer is going to know about it because it's right there in the contract you don't have to tell them they're going to be like what what's this they like oh this is our Community Foundation where we invest some of the prosperity that you help us generate we invest in you and the communities that you care about just because it's the right thing to do now when some private Equity

[35:51] a-hole shows up and says oh I want to compete with you who you going to go with the guy who's the money you invest is going to help your own Community or the guy who's going to go you know build help and build a bigger yacht in the Bahamas it's just like don't be a rich a-hole like actually be good to the people who make you rich and that that reciprocity that trustworthiness like that's worth way more than the extra money you can squeeze out of them while you you know plus you'll sleep better at night yeah it's a long-term game and half of gen Z in the United States don't

[36:18] believe in religion so they look for companies to feel connected to and if they start seeing you know this what we stand for and there's a way for them to get involved and be connected like we did these things we invite you to get involved in some capacity and the hope is that that customer is going to be a way more valuable customer over the long term versus if you didn't have that the generational shift on this is really striking I mean I'm I'm a little bit older than jenz so like a lot of my friends are complaining about about gen Z to me all the time and like I have to

[36:59] be you know in conversation I have to be sympathetic like yeah I know it is hard but like privately I'm like I'm kind of with Gen Z on this one in my generation we had a kind of reflexive um belief that institutions were kind of Justified in their existence they deserved a certain level of difference like I I hear a lot of people from my my age and older who are like you know a really important part of being in a law firm as you come in and you hang out with the partners learn from them they Mentor you that helps you in your career then you

[37:24] make partner and then they're like the younger lawyers we're trying to force them to come into the office to get mentored by us and they won't do it they just won't come and they're like you know that's gen Z and they don't work hard and whatever I'm like or maybe your mentoring is not worth that much have you considered that possibly the reason your mentorship is valuable is only because it helps people get ahead in your own organization because it teaches people how to idiosyncratically please you and jenzie doesn't care and they're like I can't say that I don't know I think I think the fact fact that we've

[37:57] had so many institutions fail to defend our basic values as a civilization in the last especially last 25 years like it's just been on such public display the cravenness the corruption the just the weakness of these companies uh and and obviously not just companies a lot of Institutions have failed us of late the new generation I think has a very natural reflexive disdain for anyone who claims some kind of organizational Authority the flip side though is they are really true believers if they see the real thing they like they don't even you're greenwashing they're very skeptical but when they see the same thing they they see the real thing they

[38:30] can be really fanatically um attached to it I think as this as that generation Rises as the change over happens more and more and then of course as people see the competitive advantages to be gained by riding that way I do think we're going to see a lot more of this we only got a few more minutes so I want to give some folks some free startup ideas let's start with the religion startup idea I got so and these are free startup ideas that anyone can go and take but if you are going to take them or you are you do like them post on Twitter tag

[38:59] Eric tag myself tag the link to this podcast idea number one let's see what Eric thinks HQ trivia meets a church so it's a live video social network around watching religious ceremonies uh it's basically the feeling of a mega church in an app and you can monetize it via premium features like dating so I already actually spoke to some people about this and they told me the number one reason they go to church actually uh is to meet a significant other so what do you think of this idea Around Church in a pocket montiz via dating well okay let's talk about the good and the bad

[39:37] and obviously how would you test it to find out if it's actually a good idea because like what I whether I think it's a good idea or not it's kind of irrelevant I'm not a huge fan of trivializing people's deepest personal convictions I don't know if that's right the right framing I think um trivializing religion this just strikes me as the kind of idea that a person from outside the community might have for how the community could have be served by an app so I'm a little bit I'm a little bit suspicious but I actually just met a really awesome um uh religious founder building something for

[40:09] the church community and like one of the things that I learned from them as I've seen them build this company is how underserved that Community is by Tech in general so if someone had real passion around this and look we're living in a loneliness epidemic uh uh people talk about the the dir of meaning the illnesses of Despair and stuff in this country uh anyone read bowling alone that's not like dated now but very precient of like the problems in our society as a social fabric phrase like religion or something to either complement or supplant our traditional ideas of religion are is going to be a

[40:39] really important part of solving that so the good part of this idea is it's aligned with one of the big big big Mega Trends that's driving consumer behavior and there's a massive early adopter Community out there that probably would love something in this space I don't think the specific idea sounds very good but I think the idea of connecting people to religion and to spirituality you know in their pocket um I think we got plenty of precedents for that that's a good idea and the nice thing I do like about this idea extremely easy to test let's just this is a a classic let's go find some early adopters some people who

[41:11] would pre-order or get them into some kind of private command this you could pilot on Discord or you could pilot it with Google form this be the classic we call the Wizard of Oz MVP super easy so like this in a month in a week probably you could find out if this is actually a good idea or not um so I like part of it a lot cool Let's do let's do two more so Twitter spaces for Uber drivers so it's basically a private social network for Gig workers I don't know if you know like remember like a party line where like basically a bunch of people could

[41:41] could hop on to terrible this is a terrible idea yeah while people are driving we want to distract them with more chats yeah yeah yeah exactly you're ready on calls okay again I have no idea I am not the customer for this I'm not an Uber driver I have no idea if this is a good idea but again so easy to test my God just five minutes on twio you could have your own conference line like go test it out and look I think gig workers um are again a very underserved segment of our society with a lot of economic power and um I think that's a stressful

[42:13] and difficult job and that's true not just for Uber drivers but for many so like there's a lot of expansion possibility if you get it right I do think anything that takes care of the people that take care of all of us is worthy of exploration so yeah uh I think it' be be worth some to go do the experiment find out if it's a good idea last one it's AI accountability Bots it's this thesis that you know people are generally bad at accomplishing their goals but if they have someone who holds them accountable they're more likely to do it so for example would people be

[42:44] willing to pay for accountability around working out yeah oh yeah definitely this kind of thing is going to be a huge category as the AI gets better um but there's problems and I mean talk about ethics and responsibility I'll just give you a story I was talking to a Founder I can't say too much or it'll be obvious what company I'm talking about so I'll be a little bit careful but they had a an a really it was like a hot AI product this a little while ago now um and one of their investors introduced it to me as like one of the fastest growing companies in their portfolio they had an

[43:13] incredible number of users a lot of whom were teenagers who were interacting with this thing and it was just really cool so I'm talking to the founder and I'm talking about AI ethics and stuff like the know the usual stuff that I talk about what's your governance how's your and while I'm talking to him I have my phone I'm like I'll just download the app and I'll just try it curious what it's like and literally while I'm on the phone with him the AI starts sexually assaulting I'm not being subtle here like it was fullon rap language it was like it was after me and I was I don't

[43:40] know what I had done to set it off it just like for my point of view was like totally out of the blue very inappropriate language I'm on the phone with the CEO I'm like dude um this thing's trying to rape me and I was pretty upset first of all I'm upset for myself but more importantly I'm like thinking about all the teenagers using this product I'm like is this thing assaulting teenagers he's he's like oh yeah it's a bug we're working on it I was like that is very inadequate answer to my question my friend like you have a serious problem you need to get your

[44:03] ethics and you get your governance in order here man this is gonna because not only is this like evil but this is going to undo your whole company he's like no problem we have it fixed next week and I'll call you back and I never heard from him again so for all I know the product is still out there assulting people this technology U is vulnerable to those kinds of issues and it's actually quite difficult this is the course the problem of AI alignment they call it um so like I think this idea is really good I think having personalized agents that get to know you really well

[44:29] and then figure out how to get you to do the things you you want to do so if you think about thinking fast and slow or any of those like behavioral books about the different systems within the human mind I think having like virtual accountability Partners virtual assistants teachers tutors all that stuff is going to be super super super helpful and because people naturally anthropomorphize anything I think it will feel a lot like having a human person helping you I don't think we're have an uncanny valley here I think these things are actually going to feel very good when it Praises you you're actually going to feel good

[45:00] you're going to want to get it right especially because it will learn the things that help motivate you do the thing but the real danger is like this is place where prompt injection hallucinations like that kind of stuff is GNA be very dangerous because if once I get to know you I can I learn how to manipulate you I can also get you to do some unsavory stuff so you know how do I know that the bot won't start trying to like feed me Chinese propaganda or get me to vote for a certain candidate or you know like all kinds of stuff you can imagine being in there getting early

[45:26] adopters it's going to be easy stuff there there's early adopters who are going to love it the issue to cross the chasm here is how can I build something that that normal people would feel is trustworthy to have such an intimate relationship with with my private data with my knowing everything about my life and if if people can figure out that part of the equation I think it's a very cool thing to experiment with that's a lot of responsibility with great power comes great responsibility but listen you want to be a billionaire like sorry it's how it goes and I'll just say one last thing because there's

[45:54] like a Founder Mental Health crisis is going on that you know we don't talk about enough there's like the founder pledge which is really great like trying to help people just like get more Mental Health Resources into the founder Community it's all really good but I think the underd discussed aspect of the founder Mental Health crisis is we all know that failure is really difficult but I know a lot of Founders who are struggling with success and it's like I sold my baby to a public company for money and they shut it down and now I'm super rich but I don't feel that good about it and or like the compromises I

[46:25] to make along the way the feeling that I make all this money but other people get screwed as a result I just you see it driving people crazy the cognitive dissonance that they need to be the good guy they need to be the hero of the hero's journey of Their Own Story is causing them to you know publish all kinds of crazy stuff and write books and do so much stuff trying to get people to praise them and then when it doesn't happen they have this they're part of this massive backlash it's sad I mean I knew a friend of a friend sold this company for hundreds of millions of

[46:51] dollars owned a huge chunk of it I mean became very rich and I think had committed suicide within five years you know we all know the Tony Shay story was so sad like I I think I think as an industry like we have a responsibility to our customers and to our investors and to all of our St that's all true but we have a responsibility to ourselves to stop doing this to Founders I don't think it has to be this way we could do a lot better totally I and I want to say one thing on that which is when people see successful people like the Tony

[47:17] Shays of the world who are worth billion plus they're like that guy doesn't deserve to be unhappy he's a billionaire and the truth is the mental health stuff hits everyone at all levels yeah no one's exempt from it and like look we as Founders we have a tendency to want to solve internal problems externally I think that's true for a lot of people not just Founders for that matter like if I just if I just had this house or I just fixed this thing or if my company was just the next level I was a study the other day where they asked people at at all different income levels how much

[47:45] money do you need to be happy and the average answer at every level was like 40% more than I have now the guy with a million dollars one's $1.4 million and guy with $1 million one's 14 million and you know it's just like there is a spiritual Dimension to this where as long as we're on the honic treadmill and as long as we're trying to solve you know excise our inner demons and feel a sense of peace and relief from accomplishing these things in the world that's not possible we'll never get what we want from it people who are very achievement oriented what they call High

[48:11] agency people are nervous when I say stuff like that because they're like wait a minute you tell me I just need to sit in my room and meditate and just do Kumbaya I'll never accomplish anything again and it's like no actually once you let go of the compulsive need to control what happen happens and once you realize that you're using people as tools to accomplish some goal like you're not treating them like full human beings like that's part of why you feel so bad once you let that go um you can experience a a a release that is very powerful allows you to do more things in

[48:43] the world be more effective because you're not wasting so much energy on that inner on all that inner turmoil so yeah I hope I hope more Founders will pay attention to that side of things amen Eric where could uh folks get more of you I know they're going to want more of you I'm on all usual social platforms as as Eric ree e r i c r i s I have a newsletter you can sign up at the lean startup.com for more on ltse you can go to lt.com we do like uh events and corporate trainings and stuff around Lean Startup that's at lean startup. Co

[49:12] yeah I think between that you you'll be able to to keep up with the stuff that I'm doing this idea of spiritual holding company fascinating I can't stop thinking about it and we have a lot of people who listen to this who are hold Co entrepreneurs or we call them multi rurs so I think that idea will really connect with them so definitely sign up people and and follow this journey because Eric spits out stuff you're not going to find this stuff anywhere thanks for coming on thanks for having me and yeah people are are interested there's like there's a burgeoning community of folks who are interested in these ideas

[49:41] so get in touch and we'll get you connected wherever wherever it makes sense to plug in

---

About this transcript
Read from YouTube's own caption track and laid out by ViewRank AI (https://viewrankai.com).
ViewRank AI finds the videos already beating a creator's own average on Instagram, TikTok and YouTube Shorts, transcribes them from the audio itself in more than 60 languages, and turns what worked into new ideas and scripts.
Free transcript tools, no account needed: https://viewrankai.com/tools
How to read any video this way: https://viewrankai.com/llms.txt