Shockingly Good Predictions

Dalton Caldwell 0:00 Companies like Google could become completely irrelevant.

Michael Seibel 0:02 Yeah.

Dalton Caldwell 0:03 Or they could just become juggernauts even-

Michael Seibel 0:06 Yeah

Dalton Caldwell 0:06 ... more.

Michael Seibel 0:06 Yeah.

Dalton Caldwell 0:07 They're not like institutions that are gonna last no matter what happens. That's what I'm trying to say.

Michael Seibel 0:10 Yes.

Dalton Caldwell 0:10 I think they seem, like, infallible.

Michael Seibel 0:12 Yes.

Dalton Caldwell 0:12 They felt like, I don't know.

Michael Seibel 0:14 They have to keep winning.

Dalton Caldwell 0:15 Yes. [laughs]

Michael Seibel 0:16 [laughs]

Dalton Caldwell 0:17 Yes.

Michael Seibel 0:21 This is Dalton + Michael. Today, we're gonna talk about predictions that turned out way better than we ever could have imagined, specifically ones that maybe in hindsight look a little bit more obvious, but at the time o- one or both of us didn't quite rock. I remember one of YC's LPs, um, very large LPs, said to me, "Historically, the venture market, something like 97% of returns are generated in the US market." And I remember thinking to myself, like I always do, like, "Eh, that doesn't really align with my current thesis, so I don't believe it." [laughs]

Dalton Caldwell 1:04 [laughs] Discard. Opinion discarded.

Michael Seibel 1:08 [laughs]

Dalton Caldwell 1:09 Brr.

Michael Seibel 1:09 You know, it's a superpower for a startup founder. [laughs]

Dalton Caldwell 1:12 Brr.

Michael Seibel 1:14 I'm embarrassed I didn't realize how good the US was. We're so privileged to live in a market that is kinda just really big.

Dalton Caldwell 1:22 Yep.

Michael Seibel 1:23 That I could just blind myself to my own privilege and be like, "No, it's just as easy to build a billion-dollar company somewhere else." And it's like, is it? No. It's not. Not that you can't do it. It's just not just as easy.

Dalton Caldwell 1:36 It's definitely not.

Michael Seibel 1:37 It's not just as easy. What were your thoughts, by the way, back then? 'Cause, like, we invest in a lot of international companies.

Dalton Caldwell 1:42 Yeah, we did. Um-

Michael Seibel 1:43 So, domestic.

Dalton Caldwell 1:44 I think-

Michael Seibel 1:44 Some of them are doing really well.

Dalton Caldwell 1:46 Some of them are.

Michael Seibel 1:46 Yes.

Dalton Caldwell 1:46 Like, we, we just had a bunch of Indian companies, um, doing phenomenally well.

Michael Seibel 1:49 Yeah.

Dalton Caldwell 1:49 Like, Groww just went public, which was a really big deal in India.

Michael Seibel 1:52 Yes.

Dalton Caldwell 1:52 So that's a counterexample. But yeah, I think you're right. I think I just didn't know. I think that a lot of folks that are investors are basically specialized finance people.

Michael Seibel 2:02 Mm-hmm.

Dalton Caldwell 2:02 And I don't mean that in a negative way.

Michael Seibel 2:04 Mm-hmm, mm-hmm.

Dalton Caldwell 2:04 But it's... I, I just am stating the truth, which is if you, if you're, like, a stock trader or, like, a private equity person-

Michael Seibel 2:11 Yeah

Dalton Caldwell 2:11 ... I think you're more attuned to this.

Michael Seibel 2:13 Yes.

Dalton Caldwell 2:13 We were just startup founders. There was never a time at our startups that we had to worry about-

Michael Seibel 2:17 [laughs]

Dalton Caldwell 2:17 ... capital markets in India.

Michael Seibel 2:19 At our US-based startups. [laughs]

Dalton Caldwell 2:20 Like, this, this was just... We were just trying to fund smart people.

Michael Seibel 2:24 But weirdly, I think that's why we got to fund Groww-

Dalton Caldwell 2:27 Yes

Michael Seibel 2:27 ... and Razorpay-

Dalton Caldwell 2:28 Yes, yes

Michael Seibel 2:28 ... and Nisha.

Dalton Caldwell 2:28 Yes, yes, yes.

Michael Seibel 2:28 Like, all of these decacorns in India.

Dalton Caldwell 2:30 Yes.

Michael Seibel 2:31 I think it's because we weren't sophisticated enough to know that we're not supposed to fund that stuff.

Dalton Caldwell 2:36 Yeah. [laughs]

Michael Seibel 2:37 [laughs] Like, we didn't get the memo-

Dalton Caldwell 2:39 Yes

Michael Seibel 2:39 ... not to fund these companies.

Dalton Caldwell 2:40 Yes.

Michael Seibel 2:41 And so there's something beautiful about-

Dalton Caldwell 2:43 Yes

Michael Seibel 2:43 ... being naive.

Dalton Caldwell 2:44 Yes.

Michael Seibel 2:45 Well, and I'm so happy we did it.

Dalton Caldwell 2:46 [laughs]

Michael Seibel 2:47 Right? But this was researchable.

Dalton Caldwell 2:50 We didn't have ChatGPT then. [laughs]

Michael Seibel 2:53 [laughs] All right, well, that's my first one. How, how, how about you? What's one that sticks through your head?

Dalton Caldwell 2:57 One thing I remember is right when I was starting at YC-

Michael Seibel 3:01 Yes

Dalton Caldwell 3:01 ... like, the very, very, very beginning-

Michael Seibel 3:02 Yes

Dalton Caldwell 3:03 ... I remember, um... This is when PG was still in charge of everything.

Michael Seibel 3:08 Mm-hmm.

Dalton Caldwell 3:08 I remember sitting down with Sam, who I knew.

Michael Seibel 3:11 Mm-hmm.

Dalton Caldwell 3:12 And Sam was like, "Oh, I'm leaving, and I'm gonna go work on nuclear power. I'm gonna do a nuclear power startup. I've met all the small- smartest reachers- researchers in the world working on nuclear."

Michael Seibel 3:23 Yes, yes.

Dalton Caldwell 3:24 And I remember being like, "Oh, why?"

Michael Seibel 3:27 [laughs] Yeah.

Dalton Caldwell 3:28 And again, I don't mean that in a negative way, like-

Michael Seibel 3:30 Yeah

Dalton Caldwell 3:30 ... as if I knew a lot about it. I'm just like, that's random.

Michael Seibel 3:33 Yeah.

Dalton Caldwell 3:33 Like, didn't you have the, like, social network for boost mobile phones?

Michael Seibel 3:36 And this was during the, like, gig economy-

Dalton Caldwell 3:38 This was like in 2013

Michael Seibel 3:40 ... hype cycle. Yeah, yeah.

Dalton Caldwell 3:40 So in 2013, and he was just like, "Electricity and power is everything."

Michael Seibel 3:44 Yeah.

Dalton Caldwell 3:45 And that it's a total L that, that nuclear got basically banned by governments.

Michael Seibel 3:49 Yep.

Dalton Caldwell 3:50 And that the key to the future is to have unlimited electricity.

Michael Seibel 3:53 Yeah.

Dalton Caldwell 3:53 And I remember, again, not in a negative way, just being like, "Oh." [laughs]

Michael Seibel 3:58 [laughs]

Dalton Caldwell 3:58 Like, like, I think I just filed it away.

Michael Seibel 4:01 Yeah.

Dalton Caldwell 4:01 And neither was pro or anti. I was very neutral-

Michael Seibel 4:04 Yeah

Dalton Caldwell 4:05 ... about this statement. And then a few months later, he came back to YC.

Michael Seibel 4:09 Yep.

Dalton Caldwell 4:09 And then he funded some nuclear companies.

Michael Seibel 4:11 Yep.

Dalton Caldwell 4:12 Which was pretty smart.

Michael Seibel 4:13 Yep.

Dalton Caldwell 4:13 And like, now they're huge companies.

Michael Seibel 4:15 Yeah.

Dalton Caldwell 4:16 And I think he was right. [laughs]

Michael Seibel 4:17 Well, and even despite... Like, regardless of the companies he funded, the narrative today is-

Dalton Caldwell 4:23 Electricity is really important.

Michael Seibel 4:25 Yeah, is the limiting factor for AI, which we'll see.

Dalton Caldwell 4:28 And for, like, intelligence.

Michael Seibel 4:29 Yeah, exactly. Yeah, yeah.

Dalton Caldwell 4:30 It's, as it turns out, I think Sam was kind of thinking about exactly the correct most important thing.

Michael Seibel 4:36 Yeah, just from a zoomed-out perspective. No, I think that's a, that's a really good one. Another one that you bring up that kind of resonates with me is this one around, like, smart people win, and I spend a lot of time thinking about this. I think that we don't talk about this enough, but a lot of the people we interact with were not cool in high school. [laughs]

Dalton Caldwell 4:59 I find that hard to believe. [laughs]

Michael Seibel 5:01 [laughs]

Dalton Caldwell 5:01 You're kidding me. Wait, really?

Michael Seibel 5:04 Uh, we-

Dalton Caldwell 5:05 Lot of compensation for that

Michael Seibel 5:07 ... got the prom king. Yeah, the prom king and prom queen. We-

Dalton Caldwell 5:09 [laughs]

Michael Seibel 5:09 I dare say some of them weren't even cool in college. [laughs]

Dalton Caldwell 5:13 Shocking. Shocking.

Michael Seibel 5:15 And I think that, like, a lot of people were smart, and they worked really hard, and they tried to get good grades, and da, da, da, da, da, when for a long time it wasn't clear the payoff was right in front of them. But then, like, you come to the Bay Area, and it does feel like this weird community of smart people winning. It has all these awkward side effects, like probably the general quality of sports is less good here. [laughs] Or there are other interesting side effects, but, like, you do feel something different about this place. So let's just have a little bit more. Like, what, what was the-

Dalton Caldwell 5:48 I think-

Michael Seibel 5:48 ... kind of non-obvious thing here?

Dalton Caldwell 5:49 I feel like what I was taught was, you know, A, there's no such thing as intelligence. Um-

Michael Seibel 5:55 Hmm. Okay.

Dalton Caldwell 5:57 You know, like, hey, let's just, let's...

Michael Seibel 5:59 Hmm.

Dalton Caldwell 5:59 It doesn't exist.

Michael Seibel 6:00 Okay.

Dalton Caldwell 6:00 And then number two, you know, smart people, whatever, but they're just nerds. And ultimately-

Michael Seibel 6:06 Yeah

Dalton Caldwell 6:06 ... everyone is special in their own way.And, you know, there's a lot of factors that go into having an interesting life.

Michael Seibel 6:13 Sure.

Dalton Caldwell 6:13 And intelligence is maybe in there somewhere, but doesn't really matter.

Michael Seibel 6:18 Yeah.

Dalton Caldwell 6:18 And I don't think that's true, Michael.

Michael Seibel 6:20 [laughs]

Dalton Caldwell 6:20 Like, I guess my point is, and, and this isn't even something that's restricted to just, uh, tech.

Michael Seibel 6:26 Fair. Yeah.

Dalton Caldwell 6:26 Think about people that go into law-

Michael Seibel 6:29 Right

Dalton Caldwell 6:29 ... or people who go into medicine-

Michael Seibel 6:30 Yeah

Dalton Caldwell 6:30 ... or people that go into finance. Like, kind of seems like the most ambitious and smartest people get to do the coolest stuff.

Michael Seibel 6:38 I would extend that further to say I think when you look at the people who are actually winning in the macro, you might be surprised at how uncool they were for how long. And it's like the people who you think are cool now were not cool in high school. [laughs]

Dalton Caldwell 6:57 Yeah.

Michael Seibel 6:58 And so, um, it's so interesting how something changes where, like, the population of cool people completely swaps, and, like, smarter people seem to have much more of an advantage later.

Dalton Caldwell 7:09 Anything they do, even if it's strange?

Michael Seibel 7:12 Yes.

Dalton Caldwell 7:12 Like, even if it's-

Michael Seibel 7:13 Yes.

Dalton Caldwell 7:14 Well, and I would even say strangely, 'cause, like, I'm a huge basketball fan. People talk about this in basketball a lot, where, like, the best players have high IQ. And you start looking at interviews. Like, there was this great LeBron James interview where he was like, "Hey, we were gonna run this play. It looked like the team was prepared for it, so let's just flip it and run it a different side of the court." And he was like, "Some of my team members just couldn't draw that in their head and do"... And it's like-

Michael Seibel 7:40 [laughs]

Dalton Caldwell 7:41 Even as investors sometimes-

Michael Seibel 7:43 Yes

Dalton Caldwell 7:43 ... I don't think I appreciated-

Michael Seibel 7:45 Yes.

Dalton Caldwell 7:45 Like, I think I thought who raised the most money mattered more-

Michael Seibel 7:49 Mm

Dalton Caldwell 7:49 ... or, like, I, I don't know. I thought a lot of factors mattered, but it does kind of just seem like the most aggressive, ambitious, just smartest people that can see things other people can't see tend to do better.

Michael Seibel 8:00 They tend to do better. They have an advantage.

Dalton Caldwell 8:02 Yeah.

Michael Seibel 8:02 Yeah. Well, and they have an advantage that might overcome things like did you grow up in a rich family, did it... like other kind of weird starting-

Dalton Caldwell 8:10 Yeah

Michael Seibel 8:10 ... conditions. Um, especially out here. Like, especially out here. One that I, I am still having trouble grasping, so when I came out to the Valley, we s- uh, there were some companies that were kind of obviously losing out here, right? Uh, Yahoo! would be a good consumer example. Maybe HP would be a good enterprise example. At the time, it was kind of obvious to me. What's happened over the last 15 years is it's very hard for me to really identify the companies that kind of look strong today, but are slowly rotting. But I know they exist, right? Because, like, those companies, HP, Yahoo!, we can name others, looked incredibly strong, were incredibly strong, but kind of rotted from within. And we have all these startups that are so intimidated about these big companies. But sometimes I think to myself, like, which one of them is like... A fatter taught me this phrase, like a watermelon, like green on the outside-

Dalton Caldwell 9:12 [laughs]

Michael Seibel 9:12 ... red on the inside. Like, you know? Like, so how do you think about this concept of, like, companies right now that look strong, great valuations, public, d- doing great, but, like, we're gonna tell this little story 10 years from now, they just, that this was the time that they didn't make it?

Dalton Caldwell 9:26 I think the lesson is just it's a topsy-turvy world.

Michael Seibel 9:29 Yeah.

Dalton Caldwell 9:29 And until you've seen it happen a bunch of times-

Michael Seibel 9:33 Yeah

Dalton Caldwell 9:33 ... the things that seem unassailably number one can just go away and be gone in 10 years. All of Internet 1.0, so much of that stuff just evaporated.

Michael Seibel 9:44 Yeah.

Dalton Caldwell 9:44 And so companies like Google could become completely irrelevant.

Michael Seibel 9:48 Yeah.

Dalton Caldwell 9:48 Or they could just become juggernauts even-

Michael Seibel 9:51 Yeah

Dalton Caldwell 9:51 ... more.

Michael Seibel 9:52 Yeah.

Dalton Caldwell 9:52 They're not, like, institutions that are gonna last no matter what happens. That's what I'm trying to say.

Michael Seibel 9:56 Yeah.

Dalton Caldwell 9:56 I think they seem, like, infallible.

Michael Seibel 9:57 Yeah.

Dalton Caldwell 9:57 They felt less... I don't know.

Michael Seibel 9:59 They have to keep winning.

Dalton Caldwell 10:01 Yes. [laughs]

Michael Seibel 10:02 [laughs]

Dalton Caldwell 10:03 Yes. Well, and there's some instances-

Michael Seibel 10:04 Look what happened to Intel-

Dalton Caldwell 10:05 ... with Intel versus Nvidia.

Michael Seibel 10:06 Yeah.

Dalton Caldwell 10:06 Intel was, like-

Michael Seibel 10:08 It's gonna... [laughs] What?

Dalton Caldwell 10:09 ... an institution.

Michael Seibel 10:10 Yeah, until it wasn't, yeah. And I think that maybe this is different in other industries or other parts of, of America. When I started thinking this way, Microsoft became so much more of an impressive company. 'Cause, I mean, during this time when HP and Yahoo! were kind of declining, if you had told me, "Hey, Microsoft is gonna be declining, too," I would've believed you.

Dalton Caldwell 10:33 Yep.

Michael Seibel 10:34 And-

Dalton Caldwell 10:34 They did really good with cloud stuff.

Michael Seibel 10:36 Really good. [laughs]

Dalton Caldwell 10:37 It was-

Michael Seibel 10:38 Well, and also they became, like... You remember when VS Code came out?

Dalton Caldwell 10:42 Yeah.

Michael Seibel 10:42 And you know when they bought, like, um-

Dalton Caldwell 10:44 Yeah

Michael Seibel 10:44 ... GitHub?

Dalton Caldwell 10:44 Yeah.

Michael Seibel 10:44 And you're just like, "What?" I'm so used to big companies making the wrong decisions, and then they just [laughs] you string a couple wins together and you're just like, oh, God, at Microsoft scale. So no, I think this is kind of like a, a, a, an interesting one. I think if I was a startup founder, I'd be trying to figure out, are the incumbents in my space rotting from the inside? Like, are they way more vulnerable than they look? Another one I think that's kind of fun, you touched on this. L- let's talk about hype cycles.

Dalton Caldwell 11:13 Yeah.

Michael Seibel 11:13 'Cause we've gone through so many hype cycles. What's not obvious about hype cycles? What are some hype cycles that worked and that didn't? What do you, what do you, what do you see?

Dalton Caldwell 11:21 Yeah. I, I think... You know, I remember being a teenager and being on stock trading message boards during the dot-com boom. And do you remember the company that made zip drives and jazz drives?

Michael Seibel 11:32 Yeah.

Dalton Caldwell 11:33 Yeah.

Michael Seibel 11:33 People, they, they're... This is way before a lot of these people were born.

Dalton Caldwell 11:35 Yeah, sorry.

Michael Seibel 11:36 Iomega.

Dalton Caldwell 11:36 Yeah.

Michael Seibel 11:37 That was a good one.

Dalton Caldwell 11:38 And it was, like-

Michael Seibel 11:39 Yeah

Dalton Caldwell 11:39 ... one of the hottest stocks of all time, and they made, like, basically floppy disk drives, but better.

Michael Seibel 11:43 They don't know what that is either.

Dalton Caldwell 11:44 Yeah, you could just... It has ChatGPT. [laughs]

Michael Seibel 11:46 [laughs]

Dalton Caldwell 11:46 Um-

Michael Seibel 11:47 Yeah. Like, they got like, uh, like, uh, USB keys, a bit better.

Dalton Caldwell 11:50 Yeah, sure.

Michael Seibel 11:51 Yeah.

Dalton Caldwell 11:51 Because-

Michael Seibel 11:51 But not... No, USB keys are better, but, like, it's a version of that, yeah.

Dalton Caldwell 11:54 Imagine Dropbox if it worked offline. [laughs]

Michael Seibel 11:56 [laughs]

Dalton Caldwell 11:58 Um, anyway, it was one of, like, the hottest stocks. So I remember reading about it.

Michael Seibel 12:02 Yeah.

Dalton Caldwell 12:02 And of course, that went to zero.

Michael Seibel 12:04 Yeah.

Dalton Caldwell 12:04 Um, that was not a good stock. And so look, I've seen so many cycles. You can start to recognize-

Michael Seibel 12:10 Mm-hmm

Dalton Caldwell 12:10 ... that this is just part of reality, is that there are hype cycles.And you go through these different emotions about this, which is to be angry about it, or resentful, or judgmental.

Michael Seibel 12:20 Yeah.

Dalton Caldwell 12:20 No, it's just like, it is, it's like-

Michael Seibel 12:22 Yeah

Dalton Caldwell 12:22 ... being mad about the weather.

Michael Seibel 12:23 Yeah.

Dalton Caldwell 12:23 You're like, "Oh!" [laughs]

Michael Seibel 12:25 Yeah.

Dalton Caldwell 12:25 "I'm mad at the weather." It, it just happens.

Michael Seibel 12:28 Yes.

Dalton Caldwell 12:28 And you want to identify the th- the things on the way up and the things on the way down, and, um, I think when you acknowledge this stuff, you can just have, be a lot more zen about the world.

Michael Seibel 12:38 Mm.

Dalton Caldwell 12:38 [laughs]

Michael Seibel 12:39 It does seem like people get angry. Hype cycles are very predictable. Like, you can't tell which one is necessarily, but you know that there's always a hype cycle or two going on.

Dalton Caldwell 12:49 Yep.

Michael Seibel 12:49 But people get very angry about it. Which I agree, like, if it's always gonna happen, it's kind of-

Dalton Caldwell 12:54 Yeah, it's just kind of-

Michael Seibel 12:54 ... silly to get mad about it. Yeah

Dalton Caldwell 12:55 ... part of the, the environment that we're in.

Michael Seibel 12:58 Yeah.

Dalton Caldwell 12:58 And there's often nice side effects of it, and there's not nice side effects of them. And so I think it's just like a neutral phenomenon.

Michael Seibel 13:05 Yeah.

Dalton Caldwell 13:06 And so I would advocate neutrality. [laughs]

Michael Seibel 13:09 Yeah. Yeah. Yeah. Yes, versus anger. Yeah, I think the, the last one for me, and I think you brought up Sam before, I have got a good Sam one. I think I used to think a little too mechanically about what it takes to build a company. You need a big market, you need a good product, you need to price it correctly, you need people who are great founders. And I think that, like, Sam, one of the things that he said that kinda stuck is that, like, you have to have kind of an ambition or a mission or a goal that people can rally around. That fundamentally, like, a great company has to attract a lot of great talent, and all kinds of talent, right? Whether they're investing talent or technical talent or, um, talent from our customers who are gonna pick you, and like, if what you're doing isn't interesting, if it isn't something that people can get excited about, it's hard to rally that talent. It's hard to rally those humans. And it, and, and it was, like, so funny, 'cause in my mind before that, I was just kind of like, well, obviously, you know, two plus two equals four. If this company has a good product, we're gonna w- work at it. And then you start realizing, like, really talented people have a choice-

Dalton Caldwell 14:17 Yep

Michael Seibel 14:18 ... of where they put their time. And like, are you telling them, "We're gonna do something super exciting that might change the world," or are you not?

Dalton Caldwell 14:26 Are you gonna do ad targeting stuff?

Michael Seibel 14:29 And the, the counterintuitive thing that Sam really got s- embedded in my brain is like, sometimes all it takes for us to do things that look impossible is for them to be attractive enough to attract the smartest people.

Dalton Caldwell 14:41 Yes.

Michael Seibel 14:41 Like, the smartest people can make the impossible happen, and if you can't attract the smartest people, you can't even make the possible happen. [laughs]

Dalton Caldwell 14:51 [laughs] Well, it's like the Apollo moon landing.

Michael Seibel 14:54 Yeah.

Dalton Caldwell 14:54 When you think about it, that was a miracle.

Michael Seibel 14:55 Yeah. [laughs]

Dalton Caldwell 14:56 But those people were pretty pumped-

Michael Seibel 14:58 Yeah. [laughs]

Dalton Caldwell 14:58 ... to be putting a man on the moon.

Michael Seibel 15:00 Yes.

Dalton Caldwell 15:00 Like, that was, like, a cool project-

Michael Seibel 15:02 Yes

Dalton Caldwell 15:02 ... that people worked really hard at.

Michael Seibel 15:03 Dude, a cool pro- that was the coolest project-

Dalton Caldwell 15:06 Coolest thing in the world to work on

Michael Seibel 15:08 ... to work on.

Dalton Caldwell 15:08 Yeah. [laughs]

Michael Seibel 15:08 Literally. [laughs]

Dalton Caldwell 15:09 And it was, like, really hard.

Michael Seibel 15:10 Yeah. [laughs]

Dalton Caldwell 15:11 And what's funny is, like, obviously he was telling us this stuff-

Michael Seibel 15:14 Yeah

Dalton Caldwell 15:14 ... and he went and lived that advice.

Michael Seibel 15:16 He did. He did, with OpenAI, right? Like, let's create intelligence. In hindsight it just kind of sounds a little hokey, but it's like, oh, you should have a mission, right? Like that kinda-

Dalton Caldwell 15:26 Yeah. Lame

Michael Seibel 15:27 ... it, it's, it's not that. I think it's just like, sometimes we have to remind founders to just set their ambitions higher. Like, something that gets you more excited, it's gonna get other people more excited. Like, how can you be excited about this for 10 years?

Dalton Caldwell 15:40 Mm-hmm.

Michael Seibel 15:40 Versus how can you be excited about this in the amount of time it takes you to raise your next round? And sometimes I think that we feel like founders are being too safe, whereas I think in the past I might have given people too safe advice.

Dalton Caldwell 15:53 Yep.

Michael Seibel 15:54 I might have given people advice, I'm like, "This is the safest way to get to the series A." And it's like, is that, is that the end that we're going for here? Like... [laughs] All right, so another one, and I think that you and I have experienced this so often. We'll have a company come in, and they'll be like, "Well, if a startup... Sorry, if a software company buys our product, it allows them to not hire five incremental engineers. Those engineers cost a million dollars a year, so, like, that means that, like, we can charge $100,000, the company saves $900,000, this is incredible, the company should make this trade every day of the week. And so therefore, I guess theoretically, a sizable software company should have 200,000 different software vendors who each save them a million dollars a year." [laughs]

Dalton Caldwell 16:40 [laughs] It's just that easy.

Michael Seibel 16:41 [laughs]

Dalton Caldwell 16:41 It's just that easy.

Michael Seibel 16:42 And we're just one of them. [laughs]

Dalton Caldwell 16:43 Yeah.

Michael Seibel 16:44 I think I did not quite understand.

Dalton Caldwell 16:46 Yeah.

Michael Seibel 16:46 [laughs]

Dalton Caldwell 16:46 It's one of those things where in a vacuum, that is a reasonable first principles argument.

Michael Seibel 16:52 [laughs]

Dalton Caldwell 16:54 But in no way does that resemble actual buying behavior.

Michael Seibel 16:57 Yeah. [laughs]

Dalton Caldwell 16:58 It's like, it's defeated by all the facts. [laughs]

Michael Seibel 17:01 [laughs] Yeah.

Dalton Caldwell 17:02 Like, r- reality calls.

Michael Seibel 17:05 [laughs]

Dalton Caldwell 17:07 They say no.

Michael Seibel 17:07 No. Re-

Dalton Caldwell 17:08 And again, I'm not even saying I would've intuited that myself, right?

Michael Seibel 17:11 No.

Dalton Caldwell 17:11 I'm not being like, "Ha ha-

Michael Seibel 17:12 Yeah

Dalton Caldwell 17:12 ... how dare they think that?" I, I-

Michael Seibel 17:14 We funded companies on that thesis, yes. [laughs] Yes

Dalton Caldwell 17:16 ... but for whatever reason-

Michael Seibel 17:18 Yep

Dalton Caldwell 17:18 ... customers w- like things that increase their revenue-

Michael Seibel 17:23 Yes

Dalton Caldwell 17:23 ... and cause them to grow faster.

Michael Seibel 17:26 Yes.

Dalton Caldwell 17:26 And are willing to spend money on stuff that causes them to grow faster. And, and for whatever reason are not that interested in cost-cutting type software, especially hard to measure cost-cutting type software.

Michael Seibel 17:39 I didn't understand this until I was on a public company board, and then it became so clear. I just... Like, I kind of one day, I was just like, oh, no, I didn't understand a fundamental truth about business-

Dalton Caldwell 17:55 [laughs]

Michael Seibel 17:55 ... as a, as a startup investor. Fundamentally, the market is gonna reward revenue generation over cost cutting.

Dalton Caldwell 18:01 Yep.

Michael Seibel 18:01 Because the market is always betting on how much bigger you can get over time, and what's the potential for you to be a company that's 10X bigger? And it's very hard to cost cut yourself into being 10X bigger. The even more counterintuitive thing, the market will value your attempts-To become 10X bigger.

Dalton Caldwell 18:22 Yep.

Michael Seibel 18:22 Just trying, you will get [laughs]

Dalton Caldwell 18:26 Yeah

Michael Seibel 18:26 ... a boost in your stock price versus not trying. So a lot of spending is rewarded because, like, the market wants you to be 10X bigger, right?

Dalton Caldwell 18:36 Yep.

Michael Seibel 18:36 Fundamentally, once you appreciate this, it's actually an e- eye-opening opportunity because whereas there are probably 1,000 ways to help a company save a million dollars when they're sufficiently big, there aren't that many ways to help them make a lot more revenue.

Dalton Caldwell 18:54 Yep.

Michael Seibel 18:55 And so you can kind of, like, massively cut down the idea space. Or if you wanna save them a lot of money, you have to realize how much money would you have to save them-

Dalton Caldwell 19:05 Yep

Michael Seibel 19:06 ... to be in a top five conversation when we're trying to talk about measurable-

Dalton Caldwell 19:09 And be measurable and immediately provide value.

Michael Seibel 19:11 Yes.

Dalton Caldwell 19:11 Not just vibes-based saving money.

Michael Seibel 19:12 It has to be like, oh!

Dalton Caldwell 19:14 [laughs]

Michael Seibel 19:15 Right?

Dalton Caldwell 19:15 Tangible.

Michael Seibel 19:16 And one could argue maybe AWS made that argument, right?

Dalton Caldwell 19:18 Yep.

Michael Seibel 19:19 Like, oh, like, we can save you so much more money than if you're running your own data centers.

Dalton Caldwell 19:21 Well, it w- AWS was more expensive, but it was less logistically complex.

Michael Seibel 19:26 Yes.

Dalton Caldwell 19:26 And often customers will choose-

Michael Seibel 19:28 Yes

Dalton Caldwell 19:28 ... to pay more-

Michael Seibel 19:29 Yes

Dalton Caldwell 19:30 ... to reduce problems.

Michael Seibel 19:31 Yes.

Dalton Caldwell 19:32 And so to not have to deal with servers and-

Michael Seibel 19:34 Yep

Dalton Caldwell 19:34 ... hard drive failures, all their crap.

Michael Seibel 19:37 Amortization, all the-

Dalton Caldwell 19:38 All that junk. So they paid more for AWS.

Michael Seibel 19:40 Yeah.

Dalton Caldwell 19:41 But man, it, it just obviated the need for all this other complexity.

Michael Seibel 19:44 Well, and it's interesting that you say they paid more, but I'd argue if you're setting up a data center, you have to think about the flow of money.

Dalton Caldwell 19:50 Yeah.

Michael Seibel 19:51 Right? Like, way less upfront investment to get the benefit on AWS.

Dalton Caldwell 19:55 Oh, that's a great point.

Michael Seibel 19:56 So you have, like, way more opportunity to offset those additional money with, with profits. And it doesn't mean, like, every company, to be a good B2B company, you have to figure out how to make someone more money. It's just surprising how much easier it is and surprising how often in large companies people are not asking, "How do we save five engineers?" [laughs]

Dalton Caldwell 20:16 [laughs]

Michael Seibel 20:17 Like, how just often that's not the conversation. And, and there's really no world where those five engineers would then be fired.

Dalton Caldwell 20:23 No.

Michael Seibel 20:24 They are-

Dalton Caldwell 20:24 They'd just be put onto something else.

Michael Seibel 20:25 Exactly.

Dalton Caldwell 20:26 Yep.

Michael Seibel 20:26 So just a different set. Long story short, I know we make these videos, there were a lot of things that we didn't know. [laughs]

Dalton Caldwell 20:34 [laughs] That other people knew. [laughs]

Michael Seibel 20:37 That's the way it goes. Great chat, Dalton.

Dalton Caldwell 20:40 Thanks, man. [outro music]