An Angel Investor's Secrets For Rapid Growth - Andrew Chen

1. 0:00 – 1:49

   Intro

   1. ACAndrew Chen0:00

      There is a secret to the products that have been built out of Silicon Valley, which is that many of the largest products that have ever been built, whether these are social media apps, whether these are marketplace companies, whether these are collaboration tools like Slack and Zoom and Dropbox and Airtable and Notion and so on, what Network Effects tells you is, it- for this style of product, these are products where the more users that use them, the more valuable the products become. (whoosh)

   2. CWChris Williamson0:25

      Andrew Chen, welcome to the show.

   3. ACAndrew Chen0:27

      Thank you for having me.

   4. CWChris Williamson0:28

      Man, we were just talking, how did you find the time to write a 400-page book with all of the other stuff that you do?

   5. ACAndrew Chen0:35

      (laughs) . Uh, well, the, the, the fun part about it was, it was just like having two jobs, um, at once, and this was also one where, um, having, having the COVID, uh, you know, break actually, um, made it so that when you're stuck at home, it's like having your own, uh, Wal- Walden Pond, uh, you know. You're, you're just stuck in your office, and you're like, "Well, what am I gonna do? I'm just gonna, you know, write this whole thing." Uh, but no, a- actually, um, I, I ended up, um, doing a bunch of really funny things just to force myself to write, and so I not only put everything in my calendar, I actually, um, uh, turned on all the... I had a separate computer with just the apps for writing on it, and I turned on all the, like, kid protection, safe things, so I blocked, you know, Twitter and Reddit and all my favorite websites, uh, you know, from the thing. And, uh, and then, and then, I just, I just tried to write as, as, as much as I could. Um, so anyway, it was, it, it took three years, but, but now, now I'm here, which is great.

   6. CWChris Williamson1:28

      Big lift, man. It's so funny now that, um, our habits on particular machines mean that we need to create our own, like you say, walled-off gardens that are these little oases of work. And these stupid games, you've got a time box-

   7. ACAndrew Chen1:43

      (laughs)

   8. CWChris Williamson1:43

      ... which I use as well to lock your phone away.

   9. ACAndrew Chen1:46

      Yeah. Exactly.

   10. CWChris Williamson1:46

       I know that you've got one of those. Um-

   11. ACAndrew Chen1:47

       Yes.

   12. CWChris Williamson1:48

       Yeah, man.

2. 1:49 – 7:10

   How to Become a High-profile Angel Investor

   1. CWChris Williamson1:49

      How important... Obviously, so your, your job advising companies, investing is m- an executive role. Like, by definition, it's an advisory role, but you do a lot of writing, so how important has having a, a public-facing communication channel been for someone whose main job is kind of a bit more back of house?

   2. ACAndrew Chen2:07

      Yeah. Well, I think, um, one of, one of the big things that, um, that, that people think about as, as an investor, if you break down the skillset, you basically can say there is a sourcing part of the job, right? That's getting, that's, that's making sure that all the most interesting startups come to you and you're, you're meeting them in the first place. There is a picking part of the job where you try to make sure that, um, you're picking the right startups, and that is very, very hard. It's very random, especially because you're often, um, in, in, in the case of, uh, you know, Clubhouse, for example, I met the team when they were two people. They had 500 daily active users when we led the investment. I was one of the first 100 or so, um, u- users on the product. And so it's, it's so early, it's so random, um, so how can you make sure that, that you're picking the best ones? There's a third, uh, dimension, which is winning, um, which is making sure that the, the startups that have a lot of options for investors, that they pick you over, over others. And then there's operating and making sure that you're actually helping the companies after the investment. And so the nice thing about writing a book is it actually touches a lot of different aspects of those four skills. And so, um, when, when you, when you write a book, it's obviously, uh, you know, number one, um, kind of an, an advertisement of your, of your, of your skills and your expertise out in the world. That's very, um, you know, helpful, and people, um, k- know me, uh, uh, partly from my blog and from my social media already, and so the book is kind of an extension of that. Um, writing the book forces you to, uh, refine your thinking, uh, down on, on, on, on a piece of paper that you're trying to describe to people. And so that has actually been really helpful for, from a picking standpoint, 'cause now I'm like, okay, yeah, what retention rates do I think about? How do I evaluate if a company actually is- has momentum or not? Um, and then, and then for winning, um, you know, the, the... it's, it's b- by being an expert in a space, it's great, and then operating, um, it's so... It's gonna be very, very helpful once the book is out, um, in, in six days to be able to actually hand the book to entrepreneurs and say, you know, "Hey this is, this is how I think about things." Um, and, and, and, uh, you know, and have a high density way to convey a lot of, uh, information.

   3. CWChris Williamson4:07

      Is there a Matthew principle going on here with the best known investors then? Surely the startups that think that they've got the best opportunity of succeeding want to be attached to the investors and the advisors that are the highest profile because they think, "This person's going to make me be more successful." So if you've got this very well-read blog, this Twitter, this book that's going to be hopefully successful, that means more people come to you. Are, are you starting to see, or has it already happened that it's stratified out into the haves and the have-nots a little bit in the investing world?

   4. ACAndrew Chen4:37

      (laughs) It's just changing so much. Okay, so there's a great book actually that I'd love to recommend which is, um, uh, called Valley Boy, and it's, uh, by, um, uh, Tom Perkins who started Kleiner Perkins, one of the, one of the oldest venture capital firms. And if, and if you go back to, to that period of time, he was literally driving around, um, the Midwest knocking on the doors of insurance companies trying to get them to, to, to back, you know, venture capital. And so, and, and so because of that, that whole early period of venture capital, which was in the 1960s, 1970s, was very much about how do we even raise money from, uh, pension funds and insurance companies and things like that to even go invest? And so what that's tended to select for in many of the early years is even if the initial VCs were, um, operators and folks who had really built companies, by the second or third or fourth generation, they tended to actually get people that were more, like, kind of finance backgrounds, um, you know, in all this. And so we've gone through this long evolution and this circle back where now I think, um, you know, social media and Twitter is just such a huge part of, uh, of, of, of being, um, uh, of being an investor, because now capital is plentiful. And so folks that are, um, uh, amazing on Twitter like my friend, uh, Turner Novak, who all he does is post memes, um, you know, on, on Twitter, or you have, uh, you know, Ryan Hoover and you have a bunch of these folks that just have amazing, um, uh, you know, um, uh, social media followings, are able to raise money and are able to deploy. So I, I always joke that, you know, a, a lot of what we've done over the last 10 years of, of, uh, startups has been to give anyone credible $2 or $3 million, um, you know, to, to, to, to, to pursue their dream, which I think is amazing. It's great for the world. Um, but now what we're gonna do is we're gonna run another experiment, which is to, um, give all the social media, um, uh, you know, influencers and give anyone who's, who's... all, all the CEOs that have a lot of influencers $5 or $10 million to invest in-... people, they think they're smart, and we're gonna see if that creates even more startups. Um, and on one hand you could say, oh, is that, is that, you know, is- is this a good use of money? I mean, but look, I mean, startups are- are- are- are really the core source of innovation, um, in the economy and, um, and- and- and I- I for one am excited to let anyone pursue their dreams, um, on this even if I think they're- they're- they're ridiculous because sometimes they turn into amazing rocket companies (laughs) and electric car companies and, you know, things like that, um, and- and I certainly invest in many things that are- are- are for kids and teenagers that nobody understands either. So, um, so I- I- I think it's a great thing.

   5. CWChris Williamson7:08

      Given the entire,

3. 7:10 – 12:48

   Is it a Good Time to Be an Investor?

   1. CWChris Williamson7:10

      uh, lifespan of startups and investing, are you happy that you're here right now? Would you have found it really cool to have been driving around in the '70s or do you think that in 30 or 40 or 50 years' time there's going to be something incredibly interesting, or is this a- a hockey stick sort of inflection moment that's a pretty cool time to be an investor?

   2. ACAndrew Chen7:31

      I think it's an awesome time to be an investor, but I- I always loved, I always love the idea of being able to hit the fast-forward button, um, (laughs) if- if I can. I think if anything what we're gonna, what we're seeing is, um, a rapid, uh, decentralization and removal of gatekeepers in the startup industry overall, um, and- and, you know, going- going back to that original example, it, in- in the '70s or '80s it was a very, very small group of people who were investing. It was one street, Sand Hill Road, right next to Stanford University, and it was literally, um, you know, operators and former professors investing in the top grad students at Stanford. It was a very narrow, uh, you know, group that you're talking about, and- and through that narrow group we got great companies like Cisco, like Oracle, like, uh, like Google, like, you know, many of these. But I- I think, I think what we're seeing now is just this incredible decentralization, obviously driven- driven a lot actually by the pandemic, driven a lot by, um, you know, the prevalence of remote work, uh, driven by, uh, Web3 and the decentralized, uh, community that has formed around it. And so I think more and more we're gonna see, we're gonna think about, um, this idea of Sand Hill Road as almost being kind of... And- and Silicon Valley is- is- is, you know, no longer exists. I mean all- all the companies, all the really interesting companies for the last 10 years have been formed in San Francisco, not Silicon Valley anyway, not next to Stanford, all- all, everything in the city, all the Airbnbs, all the Ubers, all the, um, all the Slacks and so on have all been in San Francisco. So I think a lot of this is- is- is now I think slowly translating into more of like a state of mind, um, it's the Silicon Valley state of mind as opposed to, um, thinking about it as if it's- it's, uh, um, it's- it's this fixed thing. So I'm- I'm- I'm very excited about the trend and I think that, um, we're- we're gonna, we're gonna just continue. And- and- and I think that it's- it's the same thing that's happening in entertainment. It's the same thing that's happening in entertainment where- where if, uh, um, uh, where- where having blogging software and social media means that, um, you, to put something out you don't need to talk to, uh, a- a media corporation, you don't have to get a book deal. Um, it's the same thing that's- that's happening in music. It's the same thing that's happening in, um, in- in- in- in many, many industries throughout. And so it's- it's a really exciting trend.

   3. CWChris Williamson9:42

      It's kind of dumb that people were still constrained geographically in the age of the internet and it took a global pandemic to liberate those chains a little bit.

   4. ACAndrew Chen9:51

      (laughs)

   5. CWChris Williamson9:51

      It feels like it was probably a little bit overdue.

   6. ACAndrew Chen9:55

      Way overdue, and I think a lot of the- the hubs that, uh, that have formed especially in, um, in Europe, in the UK... I was just in London a couple months ago and, um, it could... There- there could not have been a stronger moment, uh, for- for the startup community there with the number of VCs and investments that are happening there. There's a lot happening in Latin America right now. Um, there's a lot happening in- in Asia, Southeast Asia for a long time, and obviously in China. And I think what- what a lot of it, th- the reason why this, a lot of this existed was when I moved to the Bay Area in, uh, 2007, if you wanted to learn about these kind of really interesting esoteric, uh, topics, if you wanted to learn about, okay, how do I build a product that takes advantage of viral marketing features, um, how do I measure virality, okay, oh, there's this viral factor thing, how do I measure retention, oh, well, these- there are these things called cohort curves, you had to literally talk to the people. Like, you literally had to go talk to the operators that were building the companies and ask them, um... I- I originally met, for example, Eric Ries, um, who wrote The Lean Startup many years ago and, um, and- and that company was doing a lot around retention curves, and nobody- nobody had written it down. Nobody had written it down. So you, so I literally just talked to Eric and just asked him how they were doing things and we just talked- talked about it and how- how he was building the idea around Lean Startup and I thought it was really interesting. Um, but these days it's like that's all being pushed out into the world, you know. We have, we have endless, um, uh, you know, we have podcasts, we have, uh, we have social media, we have, um, we have books, we have all these things and- and I think, um, what that means is that's enabling a much, much broader set of, uh, individuals from any country, um, and- and I- I think, I think it's fantastic. It's- it's- it's a really, um, uh, amazing time for- for, to be a founder.

   7. CWChris Williamson11:41

      What do you think most people don't understand about network effects?

   8. ACAndrew Chen11:47

      Well, I- I- I wanna... One- one of the case studies that I use in the book is, um, is Google+ versus Facebook and I use this story because it's such a fascinating one and we see it all the time which is a bigger company sees a startup being successful and tries to just add a bunch of features and tries to, uh, copy it, clone it, you know, try- trying to make it, trying to make it happen. And we're seeing it actually right now with, uh, with- with Twitter and Spotify and- and, uh, Clubhouse, you know, for example, um, you know, this year and we're also seeing it with, um, um... I- I- I- I predict that we will start to see a lot of, uh, sort of cloning behavior happening for larger companies who want to get into

   9. CWChris Williamson12:28

      Sorry, is Spotify creating an equivalent of Spaces and Clubhouse?

   10. ACAndrew Chen12:32

       They, they have, yeah. They, they have, they have built one and-

   11. CWChris Williamson12:34

       Motherfuckers.

   12. ACAndrew Chen12:35

       ... they've been- (laughs)

   13. CWChris Williamson12:37

       (laughs)

   14. ACAndrew Chen12:38

       It's fine. I love those guys and, and they should take their shot. Uh, and, and... and it's great. Um, but, but I would say is, um, what you see in a lot of these is,

4. 12:48 – 24:52

   The Power of Online Networks

   1. ACAndrew Chen12:48

      and I use Google+ as the example, is that when Google saw that Facebook was so successful, they also started a social network project to take it over. And the way they did it was they quickly built a ton of features, they made it a huge priority inside of the executives, and in order to get growth, what they did was they just put the Google+ link on the google.com homepage, okay? You could put any link on the google.com homepage and it would have 100 million users, like, immediately, right? And that's exactly what happened, right? If you go back and you read the news reports, what happened was Google+ had, you know, 20 million users and then 50 million users and 100 million users, and it looked like it was gonna work. And then within two years, it was, like, over. They, like, shut it all down, right? Even though it was, you know, successful. And then, and I think the reason is because when you get into, into network effects, and I think this is maybe a good time for us to cover the definition a little bit, these are, there is a secret to the products that have been built out of Silicon Valley, which is that many of the largest products that have ever been built, whether these are social media apps, whether these are marketplace companies, whether these are collaboration tools like Slack and Zoom and Dropbox and Airtable and Notion and so on, all of these pieces of software ultimately connect different people together for an activity, right? And so Airbnb is connecting hosts and guests for a travel-based activity. Clubhouse is covering listeners and content creators for, for, for, for a social media-type activity and so on. And what network effects tells you is for this style of product, these are products where the more users that use them, the more valuable the products become, right? And the telephone is a good example of that. A telephone by itself is useless, and there's an amazing quote by Theodore Vail, who was chairman of the American Telephone and Telegraph Company, AKA AT&T, um, that basically says, "Look, telephone's worthless. The only, its value completely depends on the number of connections that the network allows you to have." And I think that's true. And so what that means is, on one hand, um, that means that if you have a product that has a lot of connections, has a lot of users, it's very powerful. It can grow on its own. It can tap into viral growth. It can use its network to acquire more customers. It will increase its retention and engagement over time. It will become a better business model over time because more people will upgrade when their friends are using the product. But simultaneously, and I'll get back to Google+ now, it also means that if you use a product and none of your friends are on it or they're only lightly engaged, then the product is just not valuable. It's not interesting to you. And that is the cold start problem, right? That is the cold start problem because a product that is, uh, valuable, more valuable when more people use it, the converse of that means that it is not valuable when no one's using it. And so the funny thing about Google+, to go back to this example, is when you're inside of a big company, and thank God people think this way, when you're, when you are inside of a big company, you want the biggest numbers as fast as you can. You want to do a big launch, you want to do the Steve Jobs turtleneck thing, um, and get up on stage and announce this amazing new thing that you've done. But what it means is you often just get a spray, random spray of users that aren't really densely connected with each other versus, I think, that this is the whole theory around The Cold Start Problem, the book, lays out why it is that so many of these products often start in this small niche and tend to grow from there. Um, that's why so many products grow, start from high schools and colleges, like Snapchat and Facebook and Tinder all started in colleges and high schools and grew from there. That's why a lot of the new B2B products we see grow from individual teams inside of a company before growing and taking over the company, like a Slack or a Zoom or a Dropbox. You know, that's how, that's how they grow. Um, and marketplaces like Airbnb start out in Austin, Texas at South by Southwest, a particular moment in time. And Uber starts out in San Francisco and then grows city to city to city. I think it's really the fundamental explanation for why it is that these products tend to grow in this way.

   2. CWChris Williamson17:06

      Does this mean that some growth marketers and companies are perhaps not realizing the value of small individual types of interactions when they're first starting out because they're potentially not going to scale over a longer period of time, that everyone's looking at where can I apply the maximum leverage? When can I look at scaling? But I imagine that getting a product from 0 to 10,000 users or 0 to 100,000 users is very different to getting a product from one million to 100 million users.

   3. ACAndrew Chen17:42

      That's right. That's right, exactly. And I think you have to divide it into these individual phases. And Paul Graham, who is co-founder of Y Combinator, had an amazing essay many years back called Do Things That Don't Scale. And I want to read just a sentence or two from this essay because I think it's so fascinating. And he's, he's espousing kind of the merits of just doing these wildly unscalable things that don't, just don't sound like they make sense. And this is the first one that he talks about. "The most common unscalable thing founders have to do at the start is to recruit users manually. Nearly all startups have to. You can't wait for users to come to you. You have to go out and get them." And then he goes on to talk about Stripe and how they literally would individually try to recruit people in the Y Combinator, uh, you know, class in order to use the product. And, and I think it's, it's, uh, when you're at a larger company or when you come from a mind of broad-based marketing, you think about reach, you think about breadth, you think about building an impact across-... a, a huge, a huge amount of, uh, of, of, of airspace. And the problem is, that's just not how startups, um, should create network effects-based companies. You have to be very, very manual. You have to start and build very stable, uh, what I call atomic networks. These are networks that are stable on their own. You have to know how many, um, users you need to get an atomic network going. So, so, so specifically, um, a product like Zoom, if... One of the guys I interviewed for the book is Eric Yuan, who's CEO and, and, and co-founder of Zoom, and I asked him, "How many users do you need for Zoom to be valuable, for people to use it over and over and over again?" And I think we all know that it's valuable with even two or three people, right? Um, you, you can, you can have calls and it's great. You can have meetings, it's fantastic. Something like Slack on the other hand, is better when it is being used by 5 or 10 people on a team together. Um, that makes more sense. But if you zoom out, something like Airbnb or something like Uber, I mean, you, you talk to the early Airbnb people, they say, "You need at least 300 listings in a city before Airbnb is useful for that city." For Uber, you wanna be able to hit a button and get a car in under 15 minutes, and what that means is you probably need a couple dozen drivers online at any given time in order for it to work. And so that concept of an atomic network, what is the smallest network that you can build that's stable and can grow on its own and people can use the product successfully, is a really important concept, because if you can build one atomic network and you can build a second atomic network and a third atomic network, well, you can probably build 10 or 20 or 30 or 50. Now, that doesn't mean that you can build 1,000. That doesn't mean that you can build 100,000 of these networks, because once you get to that, you start to need to not do things manually and you need to start thinking about scale, and that's when growth marketing becomes really important, that's when thinking about referral programs, that's when you start hiring many, many thousands of people, um, to build these companies. But, but here's the funny part, Chris, which is that for, in a larger company, what ends up happening is, it's almost like the companies become so successful that they forget how to solve the cold start problem-

   4. CWChris Williamson21:02

      Yeah.

   5. ACAndrew Chen21:02

      ... in the first place.

   6. CWChris Williamson21:02

      This is exactly what I had in my head.

   7. ACAndrew Chen21:04

      (laughs)

   8. CWChris Williamson21:05

      So when you've got someone like Google who decides, "We're going to launch a social media platform," the presumption is, "We're basically too big to fail. We've got all of these network effects already in place because we have access, passive access to..." I, I don't know how much, but an absolute terrifying amount of traffic that you can just put onto the Google homepage, but you forget that these atomic networks need to be in place, that also it's not just about adoption, it's about use, it's about ensuring that use is congealed around particular groups of people. It's pointless having 100 million people all disparate and not connected as opposed to if you had one million people split up into 1,000-person friend groups.

   9. ACAndrew Chen21:45

      That's right. That's right. And, and so thank God these big companies think this way, otherwise my business of startups and venture capital would not, uh, would, would, would, would, would not exist. Um, and then, and then just to add to that, um, I think the other asymmetry when you're a, a big company trying to build a, a new product is that, um, ultimately, every one of these networks, once they get too big, they start to face really, really severe problems that are just hard to solve. One of the big problems is, how do you deal with market saturation? You've been tripling, quadrupling, quintupling for so many years that eventually you just run out of people. You know, if you have a product that's being used by a billion users, how do you double or triple or quadruple that? At some point-

   10. CWChris Williamson22:28

       What's an example of that?

   11. ACAndrew Chen22:30

       Well, I mean obviously all the Facebook platforms are like this. I mean, Facebook has, has something like, uh, two billion daily active users and so (laughs) , you know, what do you, what do you, what do you, what do you do? How, how do you, how do you grow that, right? And you can grow engagement, but it becomes much harder to grow your total user base. Um-

   12. CWChris Williamson22:45

       Population encouragement, that's what we need.

   13. ACAndrew Chen22:46

       Yeah, yeah.

   14. CWChris Williamson22:46

       A br- a breeding program.

   15. ACAndrew Chen22:47

       Yeah, that's right, that's right. (laughs) A breeding program, yes, that's probably what they need. Um, and, which is why they're starting a dating app actually. Um, that, that's, that, that's maybe the, the secret plan in there, um. And, and so I think when you, when you, when you look at that, um, uh, that becomes one issue. Another issue is overcrowding. Every single one of these products, you know, uh, when, when, when you, um... Email's a great example. Email is amazing when you're just at a smaller team and you're just emailing a couple people, it's great. As soon as you're somewhere where, um... And many of your listeners will have this, have, have, uh, a personal experience with this. If you work at a company with 10,000 people or 50,000 people, your corporate email is like a disaster. Like, there's just too much. Um, and, and that's true for social media and that's true for, you know, any one of these. And I think that's why, um, for, for many of these products, what happens is as they, um, build their networks to become much, much, much larger, they actually start to hit the ceiling that really limits their ability to, to grow, um, you know, be- beyond that point. And, and I think what it means is that there are these larger companies that we think of as invincible. You know, we often think of a product, uh, uh, like, um, like Facebook to be invincible. Inevitably what happens is actually you feel like when you use the main Facebook app... Chris, I don't know last time you, you, you went on there, it's mostly, um, uh, you know, dog pictures and birthday, birthday parties at this point. It's, it's almost like there's actually just too many people, you know, on, on, in the Facebook platform, and so you actually want to segment it down so that you can just talk to your friends, right? And, and no one wants to use the same social network as their dad, right? And so you get to this very interesting point where these companies that we think of as invincible many times actually are very weak at their core, and that's what provides the opportunity for startups to go zoom in to one piece of functionality in these companies and just pick it off and just do that one part really, really well and build their own atomic networks and scale their own atomic networks to just make that happen. Um, and so, and, and, and so I think that, that's another important conclusion, um, out, out of the theories of the book.

   16. CWChris Williamson24:51

       It's a weird

5. 24:52 – 33:02

   Creating Platforms in the Information Era

   1. CWChris Williamson24:52

      situation to get into where for almost all of human history, we've wanted more information. So a scarcity of information has been the limiting factor for acquiring wisdom, wealth, health, happiness, partners, whatever it is that you want. And within the last decade, that has flipped from it being a scarcity to it being an abundance.

   2. ACAndrew Chen25:10

      (laughs)

   3. CWChris Williamson25:10

      And now the main skill that you need is no longer being able to forage for information, it's being able to filter information.

   4. ACAndrew Chen25:15

      Yeah, absolutely.

   5. CWChris Williamson25:15

      That's, that blows my mind, man. Ten-

   6. ACAndrew Chen25:18

      Well, I, I, I was just gonna say, I went to, uh, the, the Getty, uh, Museum in, in, in LA and one of the things that they had that I loved was, um, these, you know, the manuscripts that the monks would, uh, copy directly and that's how you manually would make these books. And these books, if you go and you, you know, look at, look them up, I think that there, it's something crazy like each book was a, was a luxury item, because it was like $50,000 of modern day, you know, history. So then if you had, like, a library, that meant you were just, like, loaded because you had, like, 100 books. That was like, oh man, you're like a, you're, you're like-

   7. CWChris Williamson25:50

      70 lifetimes of monk work that's gone into your library.

   8. ACAndrew Chen25:54

      (laughs)

   9. CWChris Williamson25:54

      Exactly. Yeah, exactly.

   10. ACAndrew Chen25:55

       That's right, that's right. And now we ... Yeah, exactly. Now, now, we're, now we're inverted. Now, now it's like we have so much, uh, you know, to deal with. But that's exactly what creates the opportunity. That's why you see social apps. Like, if you told me that, like, TikTok could build a social platform and all it was, was just gonna be dance videos and they were gonna be able to go from that to, you know, all these other things, I think a lot of people would say, "Well, why doesn't, why doesn't, uh, YouTube just own this?" You know, it, it's their videos, right? But it turns out that actually these niches, if you can build the proper networks around them, if you invent a new media format, it becomes really, really powerful.

   11. CWChris Williamson26:32

       Uh, that's a really interesting point. So it's not necessarily about having the widest access to potential audience or the widest access to the market. It's about having a particular type of person on the same platform that creates a, a magnified network effect. So you, you mentioned it before that Facebook now just feels like the most boomery platform ever and it's, uh, I don't... I use it for work. That's it. It's just to keep up with people. And you think, why has that happened? Well, because of how widely it's been adopted, some of the reasons that made it cool in the first place have been selected out.

   12. ACAndrew Chen27:12

       That's right.

   13. CWChris Williamson27:12

       And now you start to go forward into a more selective, uh, sort of social media, something like Twitter where you don't have to be ... On Facebook, you're expected to be friends with the people that you are friends with. I, I don't follow my mum on-

   14. ACAndrew Chen27:27

       (laughs)

   15. CWChris Williamson27:27

       Or, or my dad on Twitter.

   16. ACAndrew Chen27:29

       Why don't you not? (laughs)

   17. CWChris Williamson27:30

       On Twitter. I'm friends with them on Facebook, but I don't follow them on Twitter. So, you know-

   18. ACAndrew Chen27:34

       Yeah.

   19. CWChris Williamson27:34

       ... I don't ... That's ... Sorry, Dad. Um, and the same thing kind of goes for each social, social media network and each individual product. But it's so interesting to think about the fact that someone may look at ... Let's say someone looks at TikTok, right? And they say, "That's, that's cringe. What are these people doing, doing these dance videos?" It's like, it's not for you. That platform-

   20. ACAndrew Chen27:51

       That's right.

   21. CWChris Williamson27:51

       ... isn't for you and it doesn't need to be for you. So this presumption that platforms should aim to grow at any cost to just acquire users doesn't really make sense. It's acquire the right users as p- as well as you can.

   22. ACAndrew Chen28:08

       That's, that's right. And, and, and, and I think, um, you know, the funny thing is maybe it's just the natural life cycle of these things that they all become boomery, um, over time.

   23. CWChris Williamson28:16

       (laughs)

   24. ACAndrew Chen28:16

       And, and, and, and then that's the life cycle, you know?

   25. CWChris Williamson28:17

       Dude, when they start saying it becomes millenially-

   26. ACAndrew Chen28:20

       (laughs)

   27. CWChris Williamson28:20

       ... I'm going to feel, I'm gonna want to throw up in my own mouth. Though I'm still in the, the beautiful grace period where millenially isn't too bad, but, and boomery is, like, a slight. When that pivots, God, I'm gonna hate myself. I'm gonna look back on this conversation and go, "You self-righteous wanker. What were you doing?"

   28. ACAndrew Chen28:36

       (laughs) Nice. Yeah, as a, as a, as a fellow, uh, el- elder millennial, I, I, I, I feel you on this. Um, yeah, I, I, I think that the, um, one, one of the concepts that, that, um, that exists in all of these networks is that there's often a hard side of a network and an easy side of a network. And what I mean by that is, um, if you take a network like Uber, we would pay $500 to get a driver to sign up on the platform, but we maybe would only pay 10 or 20 bucks to get a rider to download the app and, and try it. And the reason is because the drivers just do more work. They're just more important, you know. They, they actually do, they actually do a lot. And, and that, and, and this concept is true no matter what product category you're looking at within, within these, um, network products. Content creators on YouTube are just more valuable than an individual viewer. Uh, that's why all these companies are paying millions of dollars to content creators, and, and that's, that's all happening right now. Um, and, because the, the content creators are the hard side of the network. Um, funny enough, if you talk to the Tinder folks, online dating, the attractive members of the, of, of, of, uh, an online dating platform, they're the hard side of the network. They're really hard to get, they're really hard to retain. Everybody wants them. And so because of that, I think to, to, to go back to the, the point that you were making, Chris, when you build a new product, you need to have some new innovation that makes the hard side of the network even more ... it needs to be really compelling for them. And, and what that means is if you're building Instagram, you need to make it so that the photo filters make the content creators on there make their photos look amazing. Um, Tinder, they're ... I actually have an amazing story, um, in, in the book about, about Tinder, which is I sat down with Sean Rad, who was, um, a early co-founder and he was the CEO of the company for many years. And, uh, shout out to, to, to Sean, um, who also, by the way, had a major, uh, court, uh, uh, win today over his ... It's a very contested early, um, uh, history of the company, which we can, which we can talk about briefly. But, um, but he talked about starting Tinder in the very, very early days, that before Tinder, it used to be y- It was more like a, uh, like classifieds listing is like what match.com was, was set up as. So basically you'd have Bob. Bob would put his, uh, profile up on, on match.com, and anyone could message Bob.And the problem is, let's say that Bob is just, like, a very attractive person, very well-educated, very successful. Um, the experience for him actually sucks because, uh, the way that Sean described it to me, he said, "Look, you go to work all day and you answer email. And the last thing you want to do is, um, you know, open up your, your, your dating app and it's just full of messages for you to go and, and answer." That just sucks as an experience.

   29. CWChris Williamson31:17

       More email at home, yeah.

   30. ACAndrew Chen31:19

       Yeah, more email at home.
6. 33:02 – 43:47

   How Clubhouse Incentivised Good Conversations

   1. ACAndrew Chen33:02

      in that way.

   2. CWChris Williamson33:02

      Let me, let me stress test the, uh, the Clubhouse idea a little bit then. What is it that is helping the hard side of the problem in Clubhouse? Because presumably there are low-value conversations where 16 people just shout at each other.

   3. ACAndrew Chen33:17

      (laughs)

   4. CWChris Williamson33:17

      And there are high-value conversations where you accidentally get Elon Musk, Naval, and Eric Weinstein talking about Kanye West's new album, and there's, you know, that, that's, uh, people share it and pirate it onto YouTube like some old school sort of, like, radio station. How do you on Clubhouse incentivize the high-quality conversations?

   5. ACAndrew Chen33:38

      Yeah, yeah. Well, I, I think that, um, uh, uh, Eugene Wei has an amazing essay, and he was, um, uh, he's-

   6. CWChris Williamson33:45

      Oh, Eugene Wei is an unbelievable writer.

   7. ACAndrew Chen33:48

      Such an amazing writer, yes. And this is his, like, kind of bread-and-butter kinda area. Um, and he has this concept that I love which is called, he calls it Old Money, okay? Which is if you are a video creator, one of the reasons even if you produce high-quality content that you may not be that excited about getting on YouTube now is that there's too much old money on, on YouTube, people with millions and millions of followers, and how are you gonna compete if you're gonna do something from scratch? And so in many ways, you're incentivized to actually find a new platform, a new network to join that, um, is, is just getting started. And if you're just getting started, maybe you have a better chance to get to millions of subscribers. So, every new network, uh, has this inherent attraction to it that if it works, you can reset the order, you can reset the hierarchy of success, and you can climb to the top more easily rather than

   8. CWChris Williamson34:40

      So creators have the opportunity for first-mover advantage as well?

   9. ACAndrew Chen34:43

      Correct, correct. Exactly, exactly. And so I think what's happening is in the podcast world, which, which, Chris, you, you know so much about, one of the reasons I've been reluctant to actually start a podcast has been I'm just like, "Oh, man, there's, like, so many podcasts out there. It's so hard to build an audience." By the way...

   10. CWChris Williamson34:58

       Who the fuck am I up against Tim Ferriss? Yeah, exactly.

   11. ACAndrew Chen35:00

       Yeah, yeah, exactly, right. And then you have like ... So, and then, and then tools are so, you know, clunky, uh, and the whole thing is just annoying and, um, and, and what should I be doing instead? And so I think the, one of the most interesting things on Clubhouse is that most of the content creators on Clubhouse, most of the people that start rooms, most of the people that, um, are, are, are sh- creating recurring shows are not podcasters, for the most part. They are brand-new content creators that are not interested in spinning up the whole stack to build a podcast, um, they have no interest in, um, uh, you know, trying to build a podcast audience from zero against all the other people, and instead they're joining a new hierarchy, um, where they can, they can just build a new show. And, um, and if Clubhouse makes the tools very easy, if Clubhouse is able to continue growing, um, their audience as they have, then they can, they can build a new network and, and go from there.

   12. CWChris Williamson35:55

       It seems to me like the trend is going from more sophisticated to easier and, uh, more frictionless. So, if you were to take YouTube and compare that with TikTok. So, TikTok has in-built editing, it's got music there ready to go, you can, everybody expects you to do it with your iPhone. In fact, if you do it with something that's more sophisticated than an iPhone, you almost look a little bit like you're trying too hard.

   13. ACAndrew Chen36:18

       (laughs)

   14. CWChris Williamson36:19

       Um, you compare Clubhouse with podcasts, you've got this disgusting RSS feed backend thing with how it distributes. It's a, uh, it's archaic and insane and medieval and primitive. Uh, and then you've got press a button on your phone and it, it streams live to the entire world and people can tune in and watch it.

   15. ACAndrew Chen36:39

       (laughs)

   16. CWChris Williamson36:40

       Um, do you see ... That trend can't continue forever or else you end up oversimplifying a product out of existence and you just end up with nothing.

   17. ACAndrew Chen36:47

       That's right.

   18. CWChris Williamson36:47

       Uh, where do you see in terms of trends that moving next?

   19. ACAndrew Chen36:52

       Yeah, I, I, I think, I think just to zoom out kinda historically, right? You have to ask yourself, why did this focus on quality and curation, where does it come from in the first place? And, and, um, and this is true, you know, we were talking about books. This is true for radio stations. This is true for starting up a TV show, um, right? These are all u- th- these things were all very, very hard, and the reason is because, um, in the pre-digital world, it was all about, uh, finite self-shelf space. It was all about having finite numbers of channels, finite number of time slots. And so if you are gonna have a retail store that has a limited amount of square footage and a limited amount of shelf space, every single book should be the best book. And so what that does is that affects everything down the chain, right? It means that then the publisher wants to select for only the most credentialed people. They wanna select for only the, the, the topics that they think are gonna sell the best. And then as an author, you end up going in the same thing as well, and again, you can, you can, you can make similar, um, analogies for all the other, uh, media types. And I think the, the most amazing thing about the internet is there's no shelf space, right? You can just do whatever you want, and because you can do whatever you want, that means that the very first thing, in my opinion, that gets filled is all of the casual content that is... has, has never had a place, uh, to, to, to exist in the world. That vacuum needs to be filled right away. And so I think that that ease of use, um, uh, as, as you say, everything is, like, you, you publish a, a content, you know, you publish text to the internet using, you hit a button, publish text. You hit a button; you publish video. You hit a button; you, you publish, um, audio, and off you go. And, and that, and that's fantastic, and I hope that continues. Um, on the flip side, though, I also hope that, uh, the internet and this, in this ever-burgeoning market also provides a, um, ability for the top-end, highest-quality content to also be successful. And I think we're seeing it already. We're seeing it because we're in the golden age of, uh, you know, dramatic streaming, uh, you know, television right now. And the fact that Netflix has infinite shelf space, they can just recommend different things to different people, means that they can create, you know, these, these massive budgets to go fund televi- the television shows that we've all wanted to watch and, uh, and make a lot more sense there than streaming. Similarly, I'm, uh, a board member of Substack, um, where, where, you know, they're doing the same. You know, they have, um, a, a program called Pro where they've been able to get, um, some of the most amazing authors and writers, um, from, from all over the place to join Substack, um, and this new business model of having customers actually pay directly into newsletters to directly support writers has meant that writers who are making... You know, writers are horribly underpaid, um, in, in, in, in the world. And, um, you know, you get some of the best writers. You can pull them out. We have writers on Substack that are making five million-plus per year now. I mean, just amazing. Um, and, and the reason for that is because the whole market for that is, is just wildly inefficient. And so I also hope that, um, uh, all of this internet stuff also makes the highest-end content, long-form content, serious content also grow as much as all the short-form silly stuff, um, that we see. All, all, all the cat memes and all the, um, (laughs) you know, all the dance videos that are out there.

   20. CWChris Williamson40:17

       Yeah, the two biggest success stories... I'm aware Substack is an absolute monster, but the two that have been closest to my heart or that I've watched the most closely was, uh, Matthew Yglesias, so co-founder of Vice.

   21. ACAndrew Chen40:29

       Yup.

   22. CWChris Williamson40:29

       Um, you know, you think Vice is just pretty big-time, had its own TV channel, huge YouTube, huge website, blogging, writing, et cetera, and he decides to leave to go and do his Substack. And the other one was Scott Alexander, uh-

   23. ACAndrew Chen40:43

       Yeah.

   24. CWChris Williamson40:43

       ... moving from Slate Star Codex to Astral Codex 10, and that is... that, that we- that blew my mind. Um, you know, he mentioned... Scott's quite open-door, and he breaks the fourth wall with a lot of this stuff, and he was talking about just how amazing the team had been at Substack, the fact that they'd helped him to port over some disgusting amount of blog posts.

   25. ACAndrew Chen41:04

       (laughs)

   26. CWChris Williamson41:04

       It was like 10,000 articles or something that was all gonna be ported over, um, and he's now liberated to do his psychiatry stuff as he wants in a new location, and that was all as a middle finger to the New York Times. It's like, "Okay, you're gonna, you're gonna dox somebody. Well, the internet's gonna Brazilian jiu-jitsu that around, and you're gonna end up being the genesis of this person's new life."

   27. ACAndrew Chen41:28

       That's right. That's right, exactly, and I think that, that's exactly the point about, um, uh, having infinite shelf space, is that it means that any... as long as there's market demand, um, in, in, in, in these, in these networks that are being formed, um, all of a sudden, you're gonna see, um, uh, the hard side of the network emerge, um, and, and start to supply, whether it's content or it's video or it's, you know, in, in the case of, uh, you know, uh, B2B, um, you know, products, it's, it's, it's, uh, you know, meetings and conferences and all of that as well. Um, and so I think, I think that this is, um, one of the, one of the really important trends that's happening in, in the market, which is that, um, rather than thinking about big, monolithic networks that are everywhere, everything's open, everything's public, increasingly, a lot of this is going towards these private communities, private networks. Web3 is obviously a very interesting, you know, trend as well, because what it's gonna do is it's gonna allow these communities to actually support themselves and to monetize. You look at these projects like Friend with... Friends with Benefits. You look at these, um, NFTs like, uh, uh, you know, Bored Apes and so on. It's very much the idea of network effects baked into, uh, crypto and Web3 all together in one, and I think we're gonna see a lot of new, um, business models that are gonna, uh, uh, um, emerge here, and, and it's, it's gonna be really interesting.

   28. CWChris Williamson42:50

       Are you familiar with Shiny Object Social Club?

   29. ACAndrew Chen42:53

       No, I'm not. Tell, tell me about Shiny Object Social Club.

   30. CWChris Williamson42:56

       So my buddy is one of the main guys behind it. I've got a couple of friends. Tom is a big part of it and, um, they have (laughs) created... It's a Discord server and now a, a, a bigger, bigger community. Conor, my designer, has been a big, a big part of pushing it as well, all around the NFT space. Um, but they've, like, reverse backwards integrated themselves with creaters. They've forwards vertically integrated themselves with, uh, the people that actually want to buy. They've horizontally integrated themselves into designers, into people that supply, into people that understand coding, into people that have got different NFT projects and different... And it's just, it's cool, man. You've got, um, a network effect project that has had a community of people create a network around it that is a social club.
7. 43:47 – 49:00

   How Bitcoin will Impact Online Networks

   1. CWChris Williamson43:47

      here was a question I had for you. So we're talking about Web3 and the internet becoming increasingly decentralized. Is that going to change the nature of network effects moving forward?

   2. ACAndrew Chen43:57

      Yeah, it's, it's, it's, uh... I, I struggled so much in writing the book, um, on how much crypto, how much Web3 to put in, um, because as you know, it's changing every week. So I'm like, "Oh man, if I write something, uh, and I put it in there, it's gonna be outdated in, in, in a month. And so, you know, what, what am I gonna do?" So I, I have a smattering of things in there about, uh, about Bitcoin and Ethereum, um, but I kind of kept it high level. So we'll have to wait for the, the, the revised second edition for me to add all the Web3, um, examples, uh, you know, in, into all this. But, but, but I think, I think that's right. I think, I think it is, it is maybe the most interesting, um, aspect of, um, writing this book about network effects and seeing Web3 kind of intersect at the same time, because to, to, to, to, to, to go to the example of just Bitcoin at, at, at the most, you know, basic, people value Bitcoin because other people value Bitcoin, right? And it's circular in that way. And in the same way, if you were to start a, uh, a, a different type of, uh, coin, an altcoin, and no one was interested in it, even if you forked the Bitcoin code and you were running all the same code and everything, um, you could have all the software exactly the same, but if you don't have the network, uh, then it doesn't work. And so, so at its core, Web3 has this cold start problem in all of these different, um, uh, you know, uh, uh, ways, and NFTs in the same thing. And, um, uh, crypto gaming is the same thing. If no one's playing Axie Infinity, it wouldn't be as valuable as what it is. And so, so I think what, what we're starting to see is first that all of these theories, um, I think are gonna apply to Web3, number one. And then I think number two, I think what's gonna, what's gonna be very interesting is we're just gonna see new creative ways that weren't possible in, um, in, in the Web2 era. I'll, I'll give you an example. In, for Uber, um, one of the programs that I ran at Uber was the give $10 get $10 referral program at Uber, and this was an amazing program. We spent $300 million a year on this program when, when I was there, um, and this was a period where we were adding 3% of the world's population to Uber, um, as, as, as the app, and it was just growing. It was just, it was just hockey sticking, um, but in the end, we, it, we would not be able to give shares of Uber to the drivers or the riders. You know, that's very hard, right? There, you have the SEC, you have all these things, you have all these regulatory issues, um, and, and, and so on. Um, and, and so it was all about just giving people credit inside of the rideshare system. What's amazing about Web3 is that, um, it's, it's really unlocking the ability for the network participants to own a piece of the upside, right? A lot of Web2 is about maybe you can get a revenue share, maybe you can get kind of, like, um, you know, some discounts, um, it's very cash-based, but there's no ownership. And so I think by having ownership, well, what happens? Well, then you kind of have like a super referral program. You have like an amazing referral program because it means that, um, you, your users actually own a piece of the network and they are heavily incentivized to promote their part.

   3. CWChris Williamson47:00

      It's ethical multi-level marketing on steroids.

   4. ACAndrew Chen47:03

      (laughs) That's right. That's right. Yeah, exactly. That's right. And I, and I think that we are just in the very, very earliest stages. We're gonna see, we're gonna see very complicated, you know, referral kind of contracts, models, if you refer one person, this is what you get. If you have five people, this is what you get. Um, if you're one of the first 100 people versus the first 1,000 people, you're gonna have, you're, you're, you're gonna have various kinds of, you know, and I think we're, we're gonna do a wild amount of experimentation, um, and iteration on making this all work. And so I'm, I'm very excited from like a growth marketing, um, kind of user acquisition lens that we're gonna have to try all of this, um, all, all, all of this stuff out.

   5. CWChris Williamson47:38

      Talking about metrics that companies follow, what do you think are some of the most useless metrics that people have focused on?

   6. ACAndrew Chen47:45

      Oh, yeah. Well, I mean, the, the whole lens of, um, of, of this theory is that the top level numbers are the most meaningless. Um, your total number of users, you know, your total amount of revenue, you know, those are, those are what, um, what, uh, uh, are often referred to as these vanity metrics because they make you feel good. They're the biggest numbers in the whole business. But in the end, the question is on a given... Like, I'm a lot more interested for Substack, um, what the top writers are making and are they happy and what's the churn rate on the subscribers on an individual basis? I'm a lot more interested in that than the overall revenue of the business. Um, for Clubhouse, I'm a lot more interested in, um, how many recurring shows are they seeing? How many content creators are coming back and creating show after show after show, and are they getting the audiences that they want? Um, that's a lot more interesting than the total number of daily active users. And so I think, um, the more operational you are, the more you're focused on that authenticity, the more you need to dig in, um, from, from the user's perspective and figure out what it is that, that they're into as opposed to the, the, the top level numbers.

   7. CWChris Williamson48:59

      I've just realized-...

8. 49:00 – 53:20

   Utilising Invites for Atomic Growth

   1. CWChris Williamson49:00

      the original way that Clubhouse launched, with that text-only invite mechanism, that's a structural way of creating atomic networks.

   2. ACAndrew Chen49:10

      That's right. That's right. Yeah, exactly. Yeah, and then, and, and, and, uh, and maybe I'll talk a little bit about invite mechanics for, for a little bit. Um, so what ends up happening that's so interesting with invites as opposed to buying a user off of Facebook or Google, right? I ha- I ha- I hate it when startups pay Google or Facebook. I, if, if I can avoid it, I, I, I try to avoid it. Um, and the reason for that, the reason why inviting is so powerful is because it means that every user that it's joining probably already definitely knows at least one person that's already in the network. Definitely knows that. That's just, you know, fact. But very likely knows multiple people on the network. And so what ends up happening is, um, one of the case studies I cover, I, I interviewed Reid Hoffman, um, who was a co-founder and, and originally CEO of LinkedIn, and he talked about how in the very, very earliest days, what they found was there's a structure in the professional market which is that it's very, very hard to get Bill Gates to sign up for a professional network product because everyone wants an intro to Bill Gates, he doesn't need to talk to more people, so he just, he, he's fine. Um, but, uh, there are tons and tons of people that are kind of still operating, they're still in the mid-level, they're still very open-minded, they still want to connect with a lot of people, and they are the entrepreneurs and the founders and operators. And so what LinkedIn did in the earliest years was they basically said, um, "Okay, we're gonna launch and we're gonna give everyone in the company a ton of invites and we're just gonna invite all of our friends and all the people in the tech community." And what they found was that very quickly started to grow rapidly just on its own. And they eventually made it so that once they got enough users, they could actually remove the invite constraint because just based on word of mouth, on average, most users would join and already know a couple people on the platform. Um...

   3. CWChris Williamson50:57

      But there's an exclusivity element here as well, which adds a sense-

   4. ACAndrew Chen51:02

      That's right.

   5. CWChris Williamson51:02

      ... of prestige to being invited.

   6. ACAndrew Chen51:05

      That's right. That's right, yeah. And it obviously, you know, LinkedIn is, is much more diffuse now, it's much more, you know, it doesn't have that. But like in the earliest years, I think that's right. I think, I think all of these apps, um, one of the things about invite-only is, there's a lot of reasons to do, do invite-only. One is, I think the most important and, and understated reason is, is exactly the one that you put your finger on, Chris, which is making sure that people already have connections. The second is, honestly for a lot of these products, they just don't wanna scale their infrastructure that fast. If you're growing, you know, at one point, Clubhouse was growing 50% a week, you know? It's like very hard to keep your servers just up and running when you're, when you're, when you're doubling, more than doubling, um, every, uh, every, every month, you know? That's very, very hard. And then, and then the third is, you definitely do get a lot of buzz just from people thinking about, you know, feeling left out. Now the funny thing is, that's not enough to sustain your product. Because if you get a lot of people coming in and they're all there for the buzz, and it turns out that their friends aren't in the product and it's not working, then it's just not gonna work, because these days, how many invites do we get into random apps? It's just not special anymore. And so I think you still need, um, you know, you still need, at its core, you still need, uh, you know, the, the engagement in the product to be amazing in order for it to be useful.

   7. CWChris Williamson52:20

      Are you familiar with Raya?

   8. ACAndrew Chen52:22

      Yes. Yes, the-

   9. CWChris Williamson52:22

      The celebrity dating app?

   10. ACAndrew Chen52:24

       Yes, I, I've, I've heard of it as a, um, uh, Instagram models dating, um, uh, uh, tech, uh, millionaires. Is, is that, is that accurate? I'm not on it, so.

   11. CWChris Williamson52:33

       Uh, no, ne- neither am I, but, uh, my buddy, my buddy who's a very famous comedian told me about it. Uh, two, two Netflix specials, very, very well-known, and (laughs) he said with a lot of aplomb that he wasn't accepted onto it and his, his invite's still pending.

   12. ACAndrew Chen52:47

       (laughs)

   13. CWChris Williamson52:48

       But with that, when you sign up, you, it, it connects to your phone book, and you go through and you see all of your phone contacts that are already users on Raya, and then-

   14. ACAndrew Chen53:00

       Yup.

   15. CWChris Williamson53:00

       ... you select the ones that you think will attest to you being a worthy member, and they receive a notification inside of the app saying, "Do you know this person?" Uh, th- so they're, they're looking for a, uh, almost like a referral scheme, uh, for quality, uh, to make sure that people are of the, of the correct caliber.

9. 53:20 – 57:41

   Tinder & the Science Behind Viral Growth

   1. CWChris Williamson53:20

      You had, um, you had some cool stories-

   2. ACAndrew Chen53:21

      That's right, I remember.

   3. CWChris Williamson53:21

      ... about how Tinder started as well.

   4. ACAndrew Chen53:24

      Yeah, that's right. Well, and, and, and I just wanted to add on to what you just said, which is, one of the fascinating things about viral growth in, in a case like that, most people think of viral growth as, you know, you put out a really cool video and everyone shares it and it's like, goes viral. That's, that, that, that's not what I mean. Um, what is really fascinating is there is a science behind viral growth, which is if, if you can get 1,000 users who use your app to then invite another 1,000 users, well those users are then gonna invite another 1,000 users, and so on and so on and so forth, and it'll just continue to grow. Now if 1,000 of your users only invite 500, then that group will invite 250, right? 'Cause it's about half. And then the 250 will invite one- 125 and eventually it'll kinda like die down. And it turns out that that ratio you can measure as a viral factor, and you can calculate that-

   5. CWChris Williamson54:16

      It's like the R0. It's the R0 for apps.

   6. ACAndrew Chen54:17

      Yes. Yes, well, that's right. Yeah, yeah. Well now we're all, uh, amateur epidemiologists, and so we actually know all these terms. Yeah, R0, exactly. And, and so what ends up happening is if, if you can calculate that, um, it means that then you can come up with clever ideas on how it is that you should, um, you know, increase that. And I think this whole references thing, it sounds like a very clever way for them to disguise an invite strategy alongside a, um, uh, you know, a- a- something that, that, that is aligned with their brand, um, and, and, and to bring it together. Um, yeah, and, and so, uh, and then may- maybe I'll, maybe I'll cover Tinder because it's such a, it's a such a fascinating, um, early story.... and on how they solved the cold start problem, um, as, as our, as our final topic. Um, but the, um... So, so Tinder originally was started, um, s- uh, Sean Rad, J- Justin Mateen, uh, and, and, and, uh, J- John Bedine. And John Bedine was the original iOS engineer on it, and he actually kept a, a, a bunch of cards, playing cards on his desk, and he'd kind of play with the cards. And when they built Tinder for the first time, originally, if you look at the original screenshots, there was actually a check mark and an X in order to pass and accept. There was no, there was no swiping, and then John actually added the swiping because, um, he just thought it was fun, and so he just went off and, and, and did it. And now it's this iconic, you know, thing. And so the funny thing is when they originally announced it, they just tried to get all their friends onto the platform. They would just text their friends and be like, "Hey, I'm starting a new dating app. I think you should be on it." And the funny thing if, if you think about it that way, that's kind of like an insult. That's like, "You seem like you're lonely. I think you should probably be on this dating app." You know, it's not the best sell. It's not the best sell. And so what they realized was, they were like, "Okay, how do we get, how do we get... All we need is we need a couple hundred really desirable people on the app at the same time, and if there's awesome people on the app, people will stick." And so they ended up actually, um, coming up with this amazing idea, which is they were going to sponsor and throw a party for one of the really popular girls on campus. It was her birthday party. But, and it was gonna be amazing. They were gonna, like, bus people from campus, and then they were gonna have, like, rent out this huge house, and... But they weren't gonna have bouncers in the front. It was gonna be very exclusive. And you have, you have to have installed the Tinder app, um, and, uh, and, and, and you'd have to have, um, set up your profile in order for it to work. And so they get 500 people to this party, and they had an amazing party, and the next day, people open up the app and they were like, "Wow, here's all these people that I wanted to talk to that I didn't talk to yesterday." And using those, that, that one party at USC, they were able to prove that they could take over an entire campus. And once they knew they could take over an entire campus, then they would try, they would be able to do this on a second campus and a third campus, and that became the core of the, the Tinder strategy was to go build atomic networks.

   7. CWChris Williamson57:06

      So they were finding the co- the cool person or the cute girl who had the big birthday party coming up-

   8. ACAndrew Chen57:11

      That's right.

   9. CWChris Williamson57:12

      ... run it, make sure everyone had Tinder.

   10. ACAndrew Chen57:14

       That's right.

   11. CWChris Williamson57:14

       There's an atomic network for this campus, this campus, this campus.

   12. ACAndrew Chen57:16

       That's right. And once you get enough of them together, then they start to join. You get USC and you get UCLA, then you get LA, right? And then if you can get LA, you get New York and you get San Francisco, right? And it kind of, um, you know, spread, spread from there. Um, but Chris, this is, this is so wonderful to be able to, uh, t- talk to you about, uh, about the new book, and I really appreciate, um, being, being on the podcast. I'm a, I'm a huge fan, and so it's great to finally be able to talk.

   13. CWChris Williamson57:40

       My pleasure,

10. 57:41 – 58:20

    Where to Find Andrew

    1. CWChris Williamson57:41

       man. Where should people go if they wanna check out more of your work?

    2. ACAndrew Chen57:43

       Yeah. So, um, the, the book, uh, all the pre-order links are on coldstart.com. Um, and then my main blog where I've been writing for over 10 years and I've been publishing, um, I'm up, up to almost 1,000 essays, is andrewchen.com.

    3. CWChris Williamson57:58

       Awesome.

    4. ACAndrew Chen57:58

       So, thanks, Chris.

    5. CWChris Williamson57:59

       Andrew. Thank you, man.

    6. ACAndrew Chen58:01

       All right. Thank you very much.

    7. CWChris Williamson58:02

       What's happening, people? Thank you very much for tuning in. If you enjoyed that episode, then press here for a selection of the best clips from the podcast over the last few weeks. And don't forget to subscribe. Peace.

Episode duration: 58:21