[MUSIC PLAYING] ALI GOLDSTEIN NORUP: Hi. Welcome to this Talks
at Google virtual event. My name is Ali Goldstein
Norup, and as the Head of Americas for our Google Cloud
for Startups program for VC relationships, I'm very
excited today to introduce you to today's guest, Andrew Chen. Andrew is a general partner
at Andreessen Horowitz, where he invests in consumer
technology, including social, marketplace,
entertainment, and gaming experiences. Today, Andrew
serves on the boards of All Day Kitchens, Clubhouse,
Envoy, Snackpass, and Substack. Andrew is a prolific writer
and a leading voice of mobile, metrics, and user growth. He's also the author
of "The Cold Start Problem," a book exploring
how new startups are launched. "The Cold Start Problem"
is now available wherever books are sold. Lastly, a quick disclosure for
you that none of the following should be taken as investment
advice from Andrew. And we're going to be
able to talk to him about a number of things today. So with that, Andrew,
it is my pleasure to welcome you to
Talks at Google. ANDREW CHEN: Awesome. Thank you, Ali, and it's
really a pleasure to be on here and to talk about the new book. It's actually the day after
launch day and also my birthday and so we-- ALI GOLDSTEIN NORUP:
Happy birthday. ANDREW CHEN: Yeah, thank you. Thank you. ALI GOLDSTEIN NORUP: Awesome. ANDREW CHEN: So we have
all these great things happening on the same day. ALI GOLDSTEIN NORUP:
You're welcome. ANDREW CHEN: And
again, really, really appreciative of being on here. And so what I wanted
to do is actually just to take a couple
of minutes, and I have just a couple
of short slides that just introduce the book
and the concepts in the book. And then we can just
kind of riff from there, if that works for you. ALI GOLDSTEIN NORUP: Perfect. ANDREW CHEN: So let
me share my screen. Hold on one second. So this book, just to give a
little bit of the genesis-- it's a book that
I've been writing now for actually three years,
which is really exciting. And the book is called
"The Cold Start Problem," and the subtitle is
"How to Start and Scale Network Effects." And the reason that I
started writing this was just that in the portfolio
of Andreessen Horowitz-- and we've been lucky to
work with some of the best companies in technology-- we
just found over and over again that, at their core, the
products that just seem to just completely
kick ass and just grow huge and are just awesome,
impactful products are often the ones that are just
connecting-- at their core, they connect people for
different reasons, right? But it's really about connecting
people that drives them. And so Airbnb, you're
connecting guests and hosts. For Figma and for
GitHub, you're connecting coworkers and
developers and people to work on projects together. For products like
Clubhouse and Instagram and Pinterest and some
of these other companies that we've invested
in, they're really connecting content creators
as well as consumers. And so really at the
core of all of this, it's really-- just to
extrapolate and to really sort of generalize, one of
the core driving forces for software eating the world
and for technology being as impactful and as successful
as it is, is this term that we use to describe these
kinds of products, which is, they have network effects. And of course,
literally, the product that we're using right now
for this presentation-- it's a way to connect people. It has network effects. A lot of the fantastic
Google products like Gmail and G Suite and everything
have network effects. And so anyways, we'll
talk all about that. But really, it's something that
makes all these products really powerful. And so you might ask, well,
what are network effects? And so I'm just going to
go through a really simple definition, which is built on
the invention of the telephone. So the phone is kind
of a magical thing, because when it was first
invented, of course, by Alexander Graham Bell
and then commercialized by a company called the
American Telephone and Telegraph Company, so A, T, and T, AT&T. ALI GOLDSTEIN NORUP: Exactly. ANDREW CHEN: Over a
hundred years ago, the chairman of the company,
Theodore Vail, actually had this amazing quote in it. And he said, "A telephone
without a connection at the other end of
the line is not even a toy or a scientific
instrument. It is one of the most
useless things in the world. Its value depends
on the connection with the other
telephone and increases with the number of connections." And to me, this
is a great quote, because if you were to replace a
telephone with a workplace chat app, or telephone with dating
app, or something like that, you would basically get a
sense of what it's about, which is that you
can build an app. You can have all
the right features. But if you don't actually have
the right people in the product at the same time
with you, then it's just not going to
be useful at all. And so you're just not going
to use a product like some of the products that
I've been discussing unless other people are also
using it in the same way. And so just to run through
a couple of examples of this, if you take a
product like Dropbox-- this is Dropbox Paper-- and if you are using it,
if you open it up at work and maybe use it a bunch
for your personal life, but you open it up
at work, and you notice that none of your
coworkers are on it. Or you open up Asana,
or you open up Slack, or you open up one of
these other products, and none of your
coworkers are on it, then you're much, much less
likely to use that product. You'll probably
try and figure out, what does the team actually use? OK, well, they use G Drive. They use Notion. They use Airtable. It's like, OK, well,
I'll go use those instead because that's what
everyone else is using. And same for a
product like Uber, where I worked during some
of the hypergrowth years and ran a bunch of
the growth team. And the thing that we were
the most worried about is when somebody opened
the app, and there was no cars available. And we called that a 0. That was just so, so
bad, because it meant that the network was broken. And same for a
marketplace company like eBay or same as many,
many products out there. Tinder's another great example. If you open up Tinder,
and there's not enough people
around you that you are the kind of people
you want to date, you're not going
to use that app. You're going to go use Hinge. You're going to
use something else. And so really, this is kind
of the core focus of the book. The idea is that
this is at its heart. This is the cold
start problem, which is the other side of the coin. It's basically, yes, when you
build one of these products, and you hear about how
whether it's Instagram, or it's Discord, or it's Slack,
or any of these products, when they have a lot of
users, if the products become more useful, and they're
going to grow even faster. But on the other side of
the coin, what it means is that if you don't
have any users, the product isn't valuable. It's not going to
work, and that'll kill your new startup or
your new product that you've been working on at work. And so the book is really
meant to try and talk through that whole life
cycle and how to solve it. And so I have this
five-part framework that I present in
the book, which is that all of these companies,
all of these new products, start with the
cold start problem. And to solve it, there's all
these different techniques I talk about using
atomic networks and forming atomic networks. I talk about the easy
side of a network and the hard side of a
network and where to focus. And then all of a
sudden, you should get into the
tipping point, which is when you're able to create
these networks on demand, and you're able to start
building the 2nd and the 3rd and the 5th and the 10th
one, and then off you go, and then escape
velocity, where you start to really professionalize
your growth marketing approaches and really
amplify your network effects. And then inevitably, as
all of these products become really,
really successful, there's various
ceilings that you hit. Going back to
Dropbox for a second, there's a point where
that company started-- and I was an advisor for
many years off and on, and Drew Houston is a friend,
and he's a fantastic guy. And one of the things they
saw was they got to a point where people were
using Dropbox as a way to share pirated movies
in the Philippines. And you're like, maybe that's
not a good use of the product, and if all of your money
is going towards that, it's not going to be
used for other things. And then there's
always, of course, the issues that are happening
in social media, where you have a lot of trolls. You have spammers. You have just this overcrowding. If you go to YouTube,
there's just too many videos. And so how do you solve that? Or a chat product like Slack-- it's an amazing product when
you have 50 people on it or 100 people, but I was using Slack
in a 20,000-person organization. And it starts
getting really hard because it's very overcrowded. And so you need to
start to really build features to solve that. And then finally,
in the framework, I talk about the moat, which
is, how do you ultimately build the defensibility
in your product such that you can compete
against new startups and new entrants
into the market? And so anyway, so
let me stop there. But that's kind of the
main topic of the book. And it was fantastic,
really fun to write. I was able to interview
hundreds of people from all the top tech companies. It took three years. I'm glad to finally be done. I also locked myself in a little
closet of an office for a week to read the audio book,
even though everyone told me you shouldn't do it. It's a waste of time. I figured that it would be. I'm just, I think this book
will be a one and done. And so it's great to-- I was like, I'm just going
to read it for real on there. So let me stop there. But yeah, that's sort
of the gist of the book. ALI GOLDSTEIN NORUP:
Andrew, I love it. We had a series of
questions we were going to go through to
potentially have you do it. And I may even have you come
and pull up a slide with it as well. So this is perfect, ideal to it. I'm going to take a
step back for a second. We kicked off, and
we talked about how you're at partner at a16z. But when you moved
to the Bay, you were an entrepreneur
in residence, and you started with
writing a blog post, and a series of them. You found writing as a way
to create your own network, to some of the parts of
the cold start problem, and you definitely saw
the additional effects. What was it specifically
that made it so that you were prompted
to write this book? ANDREW CHEN: Yeah,
well, I love writing. I was the kind of teenager
that kept journals and wrote about things that were happening
in my life all the time. And when I got to the
Bay Area, I absolutely had such an amazing
time meeting people because I was writing down all
the ideas that I was learning. And so some of the
concepts like viral loops and growth hacking
and thinking about how did this intersection
between user psychology and metrics and growth was
my favorite area to write in, and so I've written almost a
thousand essays on this topic. What I decided at
one point is, I just needed to bring it
all together and try to answer this question
that's kind of been in the back of my head for
a long time, which is just, what is it that's so special
about some of the, quote unquote, "Silicon Valley"-- of
course, none of these companies are actually built in
Silicon Valley anymore. But these, quote unquote,
"Silicon Valley" companies-- what is so special about
Silicon Valley companies that has caused them to make
such a big impact in the world? And the more time that I
spent thinking about that, the more I was like,
you know, I think I'm going to be able to
unify this into one core idea that, really, these products
are all about building networks. And that is the
thing that has been really special about
what's happened with them. And so yeah, so I wrote
the book to collect all of these theories
together in one place. And yeah, the result has been
"The Cold Start Problem." ALI GOLDSTEIN NORUP: I love it. So one of the
things that you say at the beginning of the
book is sort of like, "the network of networks." You reference Metcalfe's
law, the network effect. If you were to sort
of dial it up for us, what are some of
the lessons for all of the founders of startups,
the people in the ecosystem that are listening, that you
would love to share? I know there's the framework
of the five pieces, but if you were to
go a step further. ANDREW CHEN: Yeah, yeah. I think there's so much
lore in the startup world. You hear about how Snapchat
was started in high schools, and Tinder was
started in colleges, and you hear about these stories
like Slack and everything. And it just feels so random. It feels so random. What is it that
all these guys were able to do in the beginning
that made their product work and off the ground? And so I make several arguments
in "The Cold Start Problem" around this. I think the first
argument is, it's not an accident that all of these
startups begin in these niches. And they begin in these niches
because, ultimately, there's this idea of an atomic network,
which is how many people need to be connected at the same time
doing the same thing in order for that product to be valuable. And it turns out for
a product like Zoom, you just need two
or three people. And you can actually just
keep talking and talking and talking, and that's great. And there are products
that are like Slack that are more valuable when 5
to 10 people on the same team are using it. But then there's products
like Airbnb and Uber, where, in a city, you actually
need hundreds of drivers. You need hundreds
of listings in order for the product to be valuable. And so the first thing
is knowing and/or having at least a theory on what
that threshold actually looks like, I think is actually
really, really important. And so a very good
example of this is Slack in the early
days, if you actually go back to the story. I mean, first of all, the
whole thing is amazing. Like, Stewart Butterfield
after creating Flickr-- actually, he created a video
game first, and then stopped, and then was like,
what am I doing? And then he and Caterina Fake
and a bunch of other people all started Flickr together--
that was sold to Yahoo-- invented photo tagging,
and a lot of the constructs that we think about today. The second part of it was-- so he started a new
game called "Glitch." And I encourage everyone
to search on YouTube for "Glitch trailer,"
because it's so amazing. You're these
characters, and you're chatting with each other. You're learning about
underwater basket weaving. The levels are built exactly on
the heads of all these giants. Like, it's so fantastic. It's such a great thing. ALI GOLDSTEIN
NORUP: It's amazing. ANDREW CHEN: And after
raising tens of millions of dollars, hiring
dozens of people, it just completely bombed in
the market, just did not work. And Stewart saw
that immediately, and he did this wonderful thing
of actually continuing on. And he brought the team
down all the way down to-- I think it was six
or seven people. One of the people that--
a different Ali, actually, that I interviewed for the
book Ali Rayl, who's amazing, who now runs all product
at Slack these days. She's fantastic, and she was
one of the first seven people that rebuilt the whole thing. And the way that he rebuilt it
was after the-- first of all, they actually had a lot
of IRC-based chat tools that they were using already,
and they swapped everything out. And so it didn't
require IRC, so it was easy for nontechnical people. They made it all searchable. They made it so that new
company could configure it. And they sort of knew
that because they were a team of just
a couple of people that if the chat product
was working for them, so meaning that team
was an atomic network, and they were able to get one
of their friends' companies also on board and another
set of people to onboard, then they should be
able to then build a 2nd and 3rd and 4th and
5th and 10th atomic network. And then they could basically
create this wait list and then onboard
teams at a time. And I think that's a very
important approach, as opposed to just announcing
on TechCrunch or whatever, and then a bunch of
random people show up. And then it's like, oh, none
of my coworkers use this, and then they're just going
to quit using the app. I think it's great. So I think just embedded
it within that lesson is, you start small,
and the reason why you start small is
so that you can build that density of the network. I think it's also the reason why
larger companies historically have been so bad at this. There's a lot of companies
that, over the years, have tried to compete with
TikTok and with-- actually, right now, one of my
companies, Clubhouse, has a whole bunch of
missiles pointed at them. And historically,
larger companies have not been as good at
this because they basically just take their huge
audience, and they basically say, hey, you should all try
this new shiny little app. And the problem is that
new app doesn't have time to actually coalesce
and those networks to build organically bit by bit
by bit in order for it to work. And instead, you
get a lot of users, but you get a lot
of users who are not connected with each other that
aren't talking to each other, and then off you go. So I think that's
one part, and then if you'll humor me for
one other quick story. ALI GOLDSTEIN NORUP: Absolutely. ANDREW CHEN: One of
my favorite interviews that I had in the book is-- so I was an advisor
to Tinder back in the day, back when Sean Rad
was still running the company. He's one of the cofounders. And one of the ideas
he talked about, which I thought
was just fantastic, is that you have to
make the app really, really amazing for the
most attractive people in the online dating market. ALI GOLDSTEIN NORUP:
I love this story. I was hoping you would go there. Yes, please talk about
the Tinder case study. This is fantastic. ANDREW CHEN: Yes, so
every network product has what I describe
as an easy side and a hard side of the network. And the easy side of the network
is like a YouTube viewer, or it's like a buyer
on eBay or if you want to use a new marketplace
like Whatnot or something like that. And they just do less
work, and their livelihood does not depend on it. If you ride Uber, you
just hit a button. You ride for five minutes. Like, it is what it is. But when you are on the
other side of the network, that means you're
a content creator. You're a meeting organizer. You're a seller. What ends up happening is your
livelihood is very wrapped up in your use of the product,
and so you are extremely picky. You're extremely picky. You are very concerned about
how much you're being paid. You have all these
different lessons and they're just
much more valuable. And so what happens is,
in the case of Uber, for instance, a driver,
Uber might pay $200, $300, $500 to buy a driver, versus to
buy a rider, using online ads or referrals or something,
might only pay $20, So there's a 10x difference
between the value of the two sides. OK, we're going to come
back to Tinder now. So on Tinder, the most
interesting thing on Tinder is that, historically,
online dating has been very focused
on just getting people to make profiles. And then if you go
back to the '90s, like the original Match.com
or eHarmony, it was just like, you're just trying to get
people to talk to each other. And the problem with that is
if you are an attractive member of the audience-- and, frankly,
it's skewed more towards women as well-- as the hard side of the
network, what ended up happening was they were just
inundated with messages left and right because, unlike
when you're at a dinner party or at a bar or
something like that, if one person is talking
to two or three people, you're going to talk
to their friend, right? ALI GOLDSTEIN NORUP: Exactly. There's others. ANDREW CHEN: Yeah,
there's other people. Yeah, it's fine. But online, it's all private,
and so that wasn't the case. And so if you were an attractive
member of the network, you would get literally
thousands of messages, and that's how it worked. And so what ended up
happening with Tinder that I thought Sean just did
such an amazing job describing is that we all think of this
swiping as kind of this fun thing, and it is fun. But more importantly, it
lets the attractive people in the desirable members
of the Tinder network-- it actually lets them
modulate how fast they're getting matches. So if they want to
get 10 matches a week, they can match with 10 people,
and they can stop swiping, and they can just manage their
10 conversations or their three conversations, or whatever. If they want to have 500 matches
a week, they can do that too. And so I think one of the
really key lessons to me in this is that if you understand the
easy side and the hard side of your network,
whatever it may be, that you need to provide
this additional functionality for this like highly,
highly valuable subset of your business, whether
that's making something that makes drivers happier or if
you're building workplace tools, like something that
makes your software developer leads happier. Like, you really have to
figure out something there to unlock it because
that's been-- And so just popping back up to
the high level, these concepts, like the hard side and the
easy side of the market, the atomic network, thinking
about come for the tools, stay for the network--
like, all these different-- this playbook of strategies-- my goal in writing them and
collecting them into this book-- and the book is
effectively 30 case studies on all these different ideas-- is to demystify all these
stories that would otherwise kind of seem random. Like, then you kind
of look at them, and they just kind
of feel like, oh yeah, it's just kind of
lucky that that happened, and that was why, versus
being like, oh, wow, OK, so Uber going from city
to city to city, Tinder going from college to college
to college, Slack going from team to team
to team actually have a really interesting
underlying thematic strategy for why that actually works. And in the same way, that's
why if you're a huge company, just blasting everything to PR
and putting links on your home page and doing all of that-- well, that doesn't let you
build highly dense network to highly dense network, and
it goes strength to strength. And so as a result, we've
seen that much less effective. And so yeah, so "The
Cold Start Problem" is meant to unpack a lot of
these historical patterns and ideas into a
cohesive framework. ALI GOLDSTEIN
NORUP: So I love it. You've done a couple
of things there, right? You're demystifying
some of these stories so that we can all take
the learnings from them. I think the other
thing that you do that's phenomenal is you
show just how disciplined these teams are, right? So let's go back to
Tinder for a second, your network of networks. They start with a small
party on a campus, but they understand-- and we'll
get to LinkedIn in a second because I love this as
a corollary example. They understand that
you have to have that quality of the atomic
network right at the beginning. So tell a little bit about that. So we'll do early and then mid
and late stage [INAUDIBLE].. ANDREW CHEN: Yeah, of course. That sounds great. Well, so Tinder is-- I do love that story
also because it's such an iconic product,
and it's just so fun what they've
been able to do. And so Tinder in the
early years, when it was a product that actually-- basically, the
first version of it had everything, all
the elements that you would think of as Tinder. They just, like, nailed the
product idea from day one. And sometimes, that happens. The first version of
Instagram just nailed it. The first version of
Tinder just nailed it. And so John Bardeen, who
was their iOS engineer, had a deck of playing cards
that he would kind of fiddle with while he was coding. And one day, while-- the very, very, very first
version actually just had an X and a check mark, and
that's how you would advance, and you didn't swipe. But then he was like, oh,
you know, swiping's fun, and it's a new iOS thing. And so he added it in,
and then, boom, off you go with this iconic thing. So they built basically
all the right features. The problem with building
all the right features is that then they
went, and they started to invite their friends. And they went on
their address books, and they started
texting their friends. Again, this is at a point
where online dating kind of is a little bit of a stigma. So imagine this-- you're
texting your friends, and you're almost
saying like, hey, you've seem kind of lonely. I feel like you need
a boyfriend, you know? It's a little bit
like an insult. And then importantly, I think
the Tinder atomic network is not two or three people. It's also not
thousands of people, but it's probably
hundreds of people, because you can
actually swipe through-- if you think about how many
swipes you can do each day, you can actually swipe a
couple of dozen people a day pretty fast pretty easily. And so as a result, you actually
need hundreds of profiles in order to make it interesting. And so that was the problem. That was their cold
start problem was, how do they get enough
people in at once? And it just turns
out, even though they had all the right
features, that even when they told their friends
about it, it was not working. And I think that that is
such an important thing, just to stop there
for one second, which is that sometimes you actually
have all the right features. You just don't have
the right network. ALI GOLDSTEIN NORUP:
Exactly, exactly. Yeah. ANDREW CHEN: And it's
very easy for them to potentially have
just stopped right there and just have said like,
OK, this isn't working. OK, let's move on. But instead, what
they did was they realized that, well, how do
we get everyone in the app at the same time that's
all in the same geography and do it all in one go? And what they realized was they
could throw a birthday party. They were going to go
and sponsor this birthday party from one of the
really popular people on the USC campus, where
they'd gone to school, and they had one of
their younger siblings was still in school there. And so they ended up throwing
this party and sponsoring it. But funny enough, it
was at an amazing house. They bussed people from the
campus and the whole thing. But then they
actually required you to install Tinder,
show it to the bouncer in order to get to the party. And you wouldn't use
Tinder at the party. But what happened was after the
party was done the next day, there was a bunch of
people that maybe you saw from across the room
that you didn't have a chance to talk to, and so they
would just check the app, and off they went. So they saw that if they could
get 500 people out of party together-- and this was 500
of the most desirable people, this is like the Greek
system, super popular, hyperconnected people-- that then they could take
over the whole USC campus. And by demonstrating
that to themselves, then they were able to then
pick another school and another school
and another school. And the next school they picked
wasn't a tiny liberal arts school on the West Coast. What it was was they
actually started to go after some of
the schools that were in some of the southern states. And the reason is because the
Greek system is very powerful, very, very strong there. A large percentage
of all students are in the Greek system. And so they could kind of
do this top-down approach and go to the top
fraternities and sororities and sell into there
and then build it. And then what happens is once
you get USC and UCLA and Loyola and a bunch of
these other schools, eventually, it seeps
into LA, and you get LA. And the once you
get LA, then you get New York and San Francisco,
and then it goes from there. And so I think it's just
this really interesting thing where that is also why, to
something, Ali, that you just said, is that that's why I
don't think of Tinder's network as a super, super broad
monolithic network. It's a network of networks of
all of these individual schools and neighborhoods, because even
in San Francisco, for instance, you're not going
to necessarily date somebody that is from deep
South Bay in the San Jose. Like, that's just too far. That's, like, an
hour and a half. That's too far. Or you're not going to date
someone that's in Berkeley because that's, like, an hour. And so it's a very hyperlocal
kind of experience. And so you can win and lose
these hyperlocal networks, and it was important for Tinder
to be able to win piecemeal on all this. ALI GOLDSTEIN
NORUP: So I said we were going to go to LinkedIn. I may steal a little
bit of time and take us to Reddit as a case
example, but I just want to pull out a couple
of the amazing nuggets that you have there, which-- and I'll tee it up for you for
both of those case studies. So they sat down,
and they looked, and they had a killer product. They just needed that amazing
high-quality atomic network. And they sat down,
and they did the work to figure out how to do it. They manually did it, right? Teeing you up for
Reddit there, right? Like, they manually did it,
and then they found ways to operationalize it. To your point about
the zeros earlier-- I love this concept, right? If they had gone to a
network, and somebody wasn't in the Nordics, oh my
goodness, that's still-- they would not have the best
of experiences, and then the curation element
from the LinkedIn aspect. So I'm teeing you up
for a few more of them, but there's just so
many good concepts in the book with
these case studies. So-- ANDREW CHEN: Yeah. ALI GOLDSTEIN NORUP: Yeah. ANDREW CHEN: Yeah, well,
I'll start with this idea. So Paul Graham, one of the
cofounders of Y Combinator, has an amazing essay, from
years back, still very relevant, called "Do Things
that Don't Scale." So that title is
very compelling, but then he actually
has one line that I just want to read out, which is, "The
most common unscalable thing founders have to do at the start
is to recruit users manually." ALI GOLDSTEIN NORUP: Exactly. ANDREW CHEN: Nearly
all startups have to. You can't wait for
users to come to you. You have to go out and get them. ALI GOLDSTEIN NORUP: Yep. ANDREW CHEN: And I think
that's a really tough thing for a lot of founders
because it ends up feeling like, well, you know,
they're very product driven. They're engineers. They're maybe a little
bit introverted. That's why they're in
tech in the first place. And then all of a sudden,
you have to manually-- you have to throw
parties and get people, literally, manually, to like-- I mean, it's just
not a very fun thing. But I think what you see
in all of these stories and examples is that
at the very beginning, to get your first hundred
users or customers, it actually tends
to be very manual. And you're trying
to kind of put in-- the startup team,
the founding team, is trying to put in that
energy at the beginning to even get that to go. And so very quickly
on LinkedIn-- and I'll spend a little bit
more time on Reddit. But very quickly
on LinkedIn, when I interviewed Reid Hoffman for
"The Cold Start Problem," one of the things he
broke down is like, look, there's a
professional hierarchy. At the very top
of the hierarchy, you have folks like Bill Gates
that everybody wants to meet. Everyone would spend time with. And so someone like
that is not necessarily that interested in
a service that lets you network with other people. That's not really a thing. On the other side,
there's a bunch of folks that are not as
professionally successful and where they're
just breaking in, and they don't
have as much value to add into these
entrenched communities, and people need reinforcement,
or they need intros in order to get a hold of them. Neither sets of
those users are going to make for an amazing
initial community for a product like LinkedIn. And so what Reid
and the team did was they really identified
the set of the folks that had seen some success. He gave one example
at the time, which is Mark Pincus, who was
at the time starting Zynga and wasn't done with his
career, but he was still kind of in the scene, still
wanted to meet people, still needed to recruit people. And folks like that who
are still in the grind, and he was like,
well, let's build LinkedIn using that base of
users and get them going. And then after we
get them going, it'll attract everybody
else, because once you get enough of those people,
then some of the top folks will be very interested
just to meet them. And then some of the
people who are breaking in will aspirationally want
to speak with and connect with some of the
folks in the middle. And they literally manually just
told everyone in the company, let's all just send links. Like, let's just go
through our address books one by one and just
tell our friends they should be on this platform. And it was invite only
for the first week, and then they open it up,
and they went from there. Reddit is a really fun example
because in the Reddit case, it was-- original Reddit,
there was no subreddits. It was just one home page. And Steve Huffman and Alexis
Ohanian-- what they did was they just said,
well, if we don't post content to the home page,
no one's going to view it. So their hard side
of the network was the content
creators that put in-- and these days, it's the
moderators and the community people and everything. And what they
realized was, well, we need to actually get
content up there. Otherwise, there's going
to be nothing to do. On the flip side, the
problem was, if you just saw a million links all from
Steve or a million links all from Alexis, that's
not good either. And so what they did was
they did something that-- now it's kind of like a funny
joke within the thing, which is they basically just
wrote these scripts, and they would just make
all these fake users. And the fake users-- ALI GOLDSTEIN
NORUP: I love this. I love this. ANDREW CHEN: --would just go and
just put content on the screen and fill up the home page. And the funny thing was, first,
on the days that they didn't run this script, the
home page would be empty, and they would freak out. And so sometimes,
they'd go on vacation, and they'd check the
home page and be like, oh my god, Reddit
has nothing on it. Like, it would freak them out. And then on the other hand, they
were posting all these things. And it took them months
and months and months of doing this. And it started out with
just manual posting. Eventually, they added
all these scripts that would scrape the top
websites online and try to grab cool headlines from
CNN and try to put them in and headlines from Digg and
headlines from other places and put them all in. And then eventually one
day, one of the things that Steve talked about
is he opened up Reddit, and he had forgotten to
run the script that day. And right there, it was
completely full of links, and he knew that
it was out there. Anyway, so this whole
chapter is actually the case study for a
concept in the book I call Flintstoning, which is-- you know, Fred Flintstone. Fred Flintstone, if you
remember the old cartoon "The Flintstones,"
they had a car. And if you got in the car,
you just use your legs, and it was a human-propelled
sort of automation. And really, this is just
another way to say it, but these were all kind
of human-in-the-loop-type bootstrapping methods in
order to solve the cold start problem. And you only use it
for a while, and then eventually, you
get enough users, and the product gets
far enough along that, then, you can let go, and
your community takes it over for you. And so I love the Reddit
example for that reason. ALI GOLDSTEIN NORUP: I
love it, and it's so-- the Flintstoning--
I was hoping you would get there and just
sort of call it out. What a great terminology
for thinking about that manual to the operational
to the algorithmic, as you called it in the book. And then even more
so, you touched upon it and we can use-- we call it Workspace, but
G Suite and Gmail to it. You use the example of sort
of finding that atomic network and then using it to be
able to have just a killer product to it. You can't just have
the killer product and then hope the
network follows. But if you have
the atomic network, then the killer
product can go in. So it is a Google Talk. I would be remiss
if I didn't ask you to talk a little bit about
the original invite story, as it goes to Gmail
and all the rest. It is in the book,
so I'll [INAUDIBLE]---- ANDREW CHEN: It
is with the book. Yes. ALI GOLDSTEIN NORUP:
It is in the book. ANDREW CHEN: Yeah. Yeah, I think--
well, invite only is such a funny mechanism,
because first of all, it definitely works. I mean, even as of a year ago,
Clubhouse came out of the blue and got millions of users
primarily based on invites. And it just tells
you that works, and Gmail is kind of
the quintessential story for all of that. So yeah, so I think there's
a couple really interesting lessons there, which is
first that as a mechanic, it still works. It works. I think people end
up implementing it for a bunch of different
reasons, and many of them are really good. One is literally
just making sure that your infrastructure is
ready for all these users that are bound to come in. And you can always, for example,
in the Clubhouse case, the way that they actually
issued the invites I thought was very clever,
which was every week, they would go and calculate
who are the top 25% most active users. And you would just drop in
the invites there, right? And so that way,
basically, you're giving the most active users,
the best users that you have, more and more juice to be
able to bring in other people potentially like them. So I think that's really
important of a concept. The other thing is FOMO,
right, and the fact that there is sort of a
status and signaling thing kind of associated with it. And I think people
maybe overascribe it, but that is actually why. I mean, I do love that. For instance, one of my
friends, early at Google, invited me to Gmail,
and so my email address is voodoo@gmail.com. And I got one of
the short usernames, and I'm so proud of it. I'm so happy about
it, even though it's kind of a silly thing. And so I think all
of these products kind of have that type of-- that invite only can cause that. But I think really importantly,
from a network effect standpoint, the
reason why invites are so powerful is because when
you are invited into a product, that means you are
already connected with one other person. That's very important,
because if you know these-- kind of going back
to atomic networks again, if you know that
somebody needs at least five connections, well,
if everyone that comes in has at least one connection,
then what you've done is you're already
20% of the way there. And then whoever
did the inviting is also up one as well,
which is fantastic. And then also
importantly, really, invites let you copy your atomic
networks over and over again. So if you have an atomic
network of, like LinkedIn, all these professionals,
or in the case of Gmail, it was kind of alpha nerds that
were running around, paying attention to every new project
that Google is working on at the time, then
what that meant is it was going to be more
likely that it would propagate within the same community
and kind of saturate the same community since it
could be viral in that way. And so I think invite
only is fantastic. I think there's a lot of
other playbook elements that I talk about. There's coming for the tool
and staying for the network. There's using subsidies
to build a lot of these. And so I think the
point of all this is not to argue that every
single product should launch in colleges and use
invites or that kind of thing. But you have to kind
of pick and choose what makes sense
for your products. And if your product is
a social product, then maybe you would
lean more colleges and that kind of thing. And if your product is more
B2B and workplace oriented, then you would do
something else. I was going to
mention, by the way, I think one other example that
I use, Workspace-- so thank you for correcting me there. I have to get all
the branding correct every time there's any updates. ALI GOLDSTEIN NORUP:
Well, I'll let it go. Yeah, yeah, yeah. ANDREW CHEN: Yeah, yeah,
exactly, yeah, so thank you. But the thing I was
going to say there is it is really interesting if you
start with a product that has no network effects. Like, it's not clear
that Microsoft Word has network effects. Like, it kind of does because
you can copy the files, and you can email them
around, and there's, like, Track Changes. Like, that's kind of where
the network effects sit or the actual file format. But really, at
its core, it's not built to be
collaborative in any way. And so it's amazing to think
about how documents have gone from that to being
able to add commenting in real-time collaboration. And then, frankly, there's now-- and then now actually
taking those documents and wrapping
DocuSign around them, or wrapping presentation
layers on top of it gives you the next level of
collaboration and presentation on top of that as well. And so I think for
a lot of products, I also think that some of
the most interesting kind of upgrades in
their capabilities comes from taking products
that don't have networks and asking the
question, could you make this a
network-driven product? Hotels are like this too. Like, imagine if you're
a hotel, and you've been selling rooms for decades. And then all of a sudden,
your main competitor, Airbnb, is basically, like,
doesn't have any hotels, doesn't have any rooms. You know, it's a very different
way to approach the problem, but I think a lot of the
opportunity is there. ALI GOLDSTEIN NORUP:
You're reading my mind. I was just pulling up the
question on Airbnb and moats, and I was hoping
you would do exactly that, which is talk about
the existence of it. And then there's a moat that
can be completely disrupted through, and so tell us a
little bit more about that one. ANDREW CHEN: Yeah,
well, so first, the good news is that lodging
is just a existing market. People just know
that it's a thing. And a lot of-- kind of using some
of the terminology that we've already built up in
this conversation, the issue is that there is a huge
opportunity, in particular, if you could build
hotels anywhere. You could build it in the
remote parts of Yosemite Park, if you could build it in
all the best neighborhoods, but you often can't. And so first, it was
incredibly interesting to me to learn that Craigslist,
actually, for many, many years has just had a shared
housing category, and people were actually
transacting on there. That was a real thing
that people were doing. Now, the problem
is, at the time, no pictures, no
inventory, no booking. You literally would
just email them, and then you'd kind of
just go back and forth. It was very kind of an
internet 1.0-type experience. And so I think the very first
thing that's interesting is the way that Airbnb
solved the cold start problem for themselves. It was a combination of
taking things like South by Southwest in these
conferences and saying, let's get enough inventory
just at this one point in time and get-- because we
know all the guests are going to be there. We can get all the hosts. We can get this block of time. And let's just get it
off the ground that way, and that's super interesting. A lot of the early employees
and team-- of course, they would just
Airbnb all the time. There was a credit,
and so you had kind of this Flintstoning aspect
of people just doing that. You had also a really
interesting set of tools. Like, could actually
build an Airbnb listing and then just post
it on Craigslist, and you could grow
on top of Craigslist. That's the other interesting
kind of viral growth thing I was going to talk about, is that
almost every big viral growth story is growing on some kind
of pre-existing platform that already exists, so like Facebook
was growing on top of the .edu email systems or
same with LinkedIn. That was all professional
emails, versus the Yelps and Zillows of the world-- they
grow on top of Google's SEO kind of platform. You can talk about that way. And then, of course,
all the mobile apps grow on top of the
Apple ecosystem. And so for Airbnb, it turns
out that they could really supercharge a lot of
their early growth by growing on top of Craigslist. And if you had
this tooling, that was one way that you could
really accelerate as well. And so in the early
years of Airbnb, as I was doing the
research and speaking with a lot of the
early team, there was this amazing
period where they had grown to a fairly
good scale in the US. And all of a
sudden, this company called Wimdu appears in Europe. And it's funded
with $90 million. It has hundreds of people. It has more people than Airbnb,
more funding than Airbnb. They announced that they have
more inventory than in Europe. And this was a team
that was put together by Rocket Internet, which
is a little bit-- they're kind of like the boy band
creators of internet companies. Like, they put together
an eBay competitor and a Groupon
competitor, and they continue to put together
these competitors, and they were going
to do that for Airbnb. And if you were to do this
based on-- if you were to analyze this situation based
on the traditional network effects thinking of Metcalfe's
law, just the bigger network wins, the first mover
wins, what you would say is like, Wimdu wins Europe. Game over. They're just bigger. They have more funding. Like, it's just over. But the amazing
thing with Airbnb is that they really
showed that actually the quality of your network,
the density of connections, matters a lot, and they actually
just had better inventory. They had travelers from the US
that wanted to go to Europe. And so they could leverage
their pre-existing network to try to go to Europe as well. And within a couple of
years, Wimdu was dead. It was sold off in
pieces eventually. And Airbnb, of
course, is dominant and doing very
successful business, and this has very successful
business in Europe, and off you go. And I think that kind of
tells you the nature of these. And versus when
I was at Uber, we didn't have that
global network effect. If we were successful
in San Francisco, it did not help us in
London or in Paris. And so unlike booking and Airbnb
and these travel, these kind of global networks,
and so in our world, we could win one city
but lose another city that was next door. And so I think that speaks to
why Uber is just a much harder business in that way and why, if
you're-- and then just to jump over to a whole wholly
different sector, it's also why it is
that, if you're Slack, it's so helpful to build
connections between companies, not just within companies,
because then you can build an industry-wide ecosystem. And so those are
some of the things that I think are relevant from
a competitive dynamic situation. ALI GOLDSTEIN NORUP: I love it. We're about 10 minutes
out with the rest of this. So I know that speaking
about network effects and building networks upon
existing networks-- you have some thoughts on Web3. Raoul Paul has come
out and said that he loves applying the
network of networks to Web3 and to blockchain. We'd love for you to give a
little bit of your thoughts on the space, whether it's
gaming, or if it's NFTs, or whatever it may be. Yeah. ANDREW CHEN: No, I
got lots of thoughts. I mean, Web3 is certainly one
of the most exciting new areas in tech. I really think of it as like-- Web3, kind of everything
related to games and metaverse, is kind of the other big area. The other big one is sort of
creator, economy, and next-gen social. Those are some of the
big investment areas that I've been working on
at Andreessen Horowitz. But for Web3 in particular-- look, the thing that
is awesome about Web3 is I think it's going to teach
a new generation of founders and entrepreneurs about
how to build networks and to build network
effects in a deep way. And the reason for
that is-- let's just start with cryptocurrencies
as kind of the base case. You could take
Bitcoin's source code and the pre-existing
blockchain and fork it all and build your own thing, and
you could call it Fitcoin, and off you go,
building this new thing. And it wouldn't be as
valuable as Bitcoin because the reality
is that Bitcoin is inherently valuable-- sorry, to say the
other way, Bitcoin is valuable because
everyone else thinks it's valuable, right? ALI GOLDSTEIN NORUP: Exactly. ANDREW CHEN: And it's
very self-referential. And in the same way,
now jumping to what's been happening over the
last couple of months, if you have a family of
NFTs that you've created, a lot of what makes
it valuable is you need to solve the cold start
problem of what Discord groups, and what subreddits, and
who on Twitter is also going to buy this thing
and talk about this thing and give it value,
such that then there's enough people that
want to buy it that your 10,000 NFTs
that you're going to issue are going to be
widely held by people? And if you can't
solve that, then-- you know, there's so
many NFT projects. The vast, vast majority of
them aren't going to be valued. I mean, it's going to
be like art, right? It's going to be
like art in the sense that, why is the "Mona Lisa" the
most popular and famous thing in the world. It just is. It's self-referential. Actually, there's a funny story
about the "Mona Lisa," which is that it was
stolen at one point and that it became really
famous because it was stolen [INAUDIBLE]. ALI GOLDSTEIN NORUP:
Stolen, exactly. ANDREW CHEN: But why that
instead of something else? Is it actually
the best portrait? Maybe, maybe not, right? And so I think that ends
up being very interesting. And then I think the other
thing that we're starting to see is this next layer
of applications that are being built.
And in particular, I've gotten very excited about
Web3 and games together. So you can think of this
as the "Axie Infinities" and the "Zed Runs" and
many of the companies that we've invested in at a16z. And the reason why
they're so exciting is because they are both
games that you'd want to play, and that gives that utility. And games is already an area
where people are spending billions of in virtual goods. And so the leap
from virtual goods are something that
I do in video games. You already have that. And so then the leap
from that to, by the way, these are nonfungible, is
just much, much more clear. But in the same
way, all these games all have cold start problems. Like, if you're going
to build a new game, and it's going to be
the next "Minecraft," but no one plays it, none
of your friends play it, they all want to play
"Minecraft," then that's not going to be a thing. If you decide to build the
next first-person shooter, that's amazing. But everyone else is
playing "Call of Duty." Everyone else is
playing "Fortnite," and they're building
leagues and different things that help lock in that network. Then they're not going to be
as excited on the new thing that you're doing. Even if the tech is better,
even if the graphics are better, even if the content is
better, these new types of multiplayer games have an
inherent stickiness and network effect to them that just
give them a huge advantage. And so I think a
lot of these ideas are going to translate
very well into Web3. And in fact, if anything,
because of the decentralized nature of all of
this, you'll have to think about
networks a lot more because the answer to
everything can't just be, OK, yeah, that
central authority or that central server is just
going to solve everything. You actually have to think
about incentives and how the network actually
wants to interact with each other over time. ALI GOLDSTEIN NORUP: I love it. We'll get into it
at a different time how "Axie Infinity" has built
in their tech infrastructure [INAUDIBLE]. Some is on prem. Some is on a blockchain. They built [INAUDIBLE]. It's interesting. But what I love about
how you talk about all of that is sort of knowing what
is the user, what is it that, once again, being
disciplined about it, building a killer product,
but realizing also that a killer product without
that atomic network is nothing, right? ANDREW CHEN: Yes. ALI GOLDSTEIN NORUP: Like,
it will just cause a zero. So with about 5
minutes left, we've got some fun rapid-fire
questions for you at the end, some a little bit related
to "The Cold Start Problem," some just
general because it is 2021. So once it is safe to
travel-- this is a fun one-- once it's safe
to travel, where do you want to go to first? It's your birthday. Imagine that there's a ticket
that is literally waiting for you outside that door. ANDREW CHEN:
[LAUGHS] Well, I have a board with a company
called Sandbox VR, which does these amazing
retail VR experiences. And you can shoot zombies,
and you have a haptic suit. The whole thing is amazing. It's amazing. It's like "Ready Player One."
it's like the Holodeck, is kind of what they're aiming towards. And I visited them
before COVID, and I was able to jump through
Taiwan and Tokyo and Kyoto and then spend a bunch
of time in Hong Kong, and it was just fantastic,
and I'd love to go back there. I was actually also able to
head out to London and Iceland earlier this year when the new
variant had not yet appeared, and that was a blast. And so, yeah, I definitely
miss going to Europe as well. So I think those
are both on my list. ALI GOLDSTEIN NORUP: Somebody,
for birthday present for you, many plane tickets at
some point in the future. Yes, I love all of it. All right, so picking
on you on your birthday, fun fact about you that
some people might not know? ANDREW CHEN: Yeah, well, I'm
from Seattle, originally. And my early, early-- actually, my academic history
is really unique and fun and-- ALI GOLDSTEIN NORUP: It is. ANDREW CHEN: Yes,
and so I actually went to the University of
Washington as a 14-year-old. I tested, I took the SAT,
scored high enough, went in, and then I ended up actually
living in the dorms. I told everyone I was four
years older than I actually was. I mean, I don't know
why anyone believed me. By junior year, I had a
college-age girlfriend that was almost four
years older than me. She knew, of course-- everything was great. She became an early Airbnb
employee, and she's great. And so, yeah, at the
very early, early years, that was such a defining
part of who I was. And then now it's a fun fact. Now it's like, you know. [LAUGHS] ALI GOLDSTEIN NORUP: I love it. Yes. You know, only
14-year-olds go and learn about certain laws and meerkats
and the behaviors around them and all of it. It's fantastic. OK. ANDREW CHEN: Yeah, it's great. ALI GOLDSTEIN NORUP:
Favorite well-being activity? ANDREW CHEN: Oh, oh. Well, I recently have actually
been splitting my time in LA, and so I'm kind of 50-50 here. And one of my favorite
things to do-- and I'm spending all my time in
Venice on the west side in LA. And one of my favorite
things is actually to convert all of my Zoom
calls into phone calls, so going retro, and then just
like walking around and walking along the beach, walking
through the canals, walking through
Abbot Kinney, walking through all these
different places rather than feeling
like I'm locked in at my desk for all of that. So I feel like that's
the way to free-- that's the way to convert
5 hours of indoor time that you spend on meetings into
5 hours like out and about, which is just so great
to be able to do that. ALI GOLDSTEIN NORUP:
Well, [INAUDIBLE] I'll come down to
the Venice office and not have you in the office. We'll just go for a
walking meeting instead. It would be-- [LAUGHS] ANDREW CHEN: Yes, I walk
past the Google Venice office all the time. Yes, it's great. ALI GOLDSTEIN NORUP: All
right, I've got two more-- ANDREW CHEN: [? Blue bottle ?]
is right there, so it's great. ALI GOLDSTEIN NORUP: Exactly. I've got two more for you. All right, since, yes, you're
here with us at Google, I have to ask, any products you
can't live without on our side? ANDREW CHEN: Oh, oh,
that's such a good one. Well, I definitely
do all my work in Workspace in Google
Docs in particular. And I think the
reason for that is-- it's funny. So even when I wrote
the book, every time that I needed to actually
do any collaboration, I just went directly into the
app, and so that was huge. And then, of course, I
live inside of Chrome. I usually dual wield
an Android device. And so every six months or
so, I swap back and forth also as which one's my primary. I'm actually using a-- I have a Samsung Fold phone. Have you seen one of those? ALI GOLDSTEIN NORUP: Yeah. ANDREW CHEN: They're so cool. They're so interesting. Yeah, yeah, and
so they're great, and they basically
convert into a tablet. But when they're folded,
they're actually nice too. So anyway, so I met the Samsung
team a little while ago. They gave me a Fold. I was like, oh, this is awesome. ALI GOLDSTEIN NORUP:
That is totally awesome. I love it. Early birthday present-- we'll
just keep referencing it. ANDREW CHEN: [LAUGHS] ALI GOLDSTEIN
NORUP: With that, I know it's one of those
things with the book, and it's phenomenal. I have my copy here. It was great reading over
the last couple of weeks. It's definitely going to
be one of those things that's attached to you, but
what's your personal motto? Like, what do you
want to leave us with as sort of the last
bit, especially as it relates to such an amazing book? ANDREW CHEN: Yeah, well, I think
that the biggest thing that you have to believe when
you work in technology is that the future is going
to be better, that you have to believe that, right? And I think we're in a
world where we are honestly overexposed to negative things. Actually, Steven
Pinker has a great book that talks about the fact--
let me get the exact title. But what he does is
he talks about how-- when you look at anything, you
look at the statistics for war or for health or for
technology and productivity and everything-- the book
is called "The Better Angels of Our Nature-- Why Violence has Declined"-- that just the amount of progress
in the last couple of decades has been amazing. And I'm so excited about what's
going to happen in the future. And all these things that
people are worried about-- like, people are worried
about, what if the metaverse makes us just want to become
like Wall-E-type people or whatever? I'm like, yeah, but that's what
they said about video games. That's what they
said about computers. Like, these things are awesome. And so in general, I have a very
positive view on where it's all going to go, and so that's
part of my personal motto, is to be involved in as many
of these things as I can. ALI GOLDSTEIN NORUP: Well,
my day job here at Google is working with a lot of
our VCs in the startups, and I tell our team all
the time, the positivity, the optimism for our
startups and the ecosystem-- it's infectious. Come work with us. Come see about all the amazing
things that they're doing. Andrew, this is phenomenal. For all of you that are
listening out there, this is a really great book. I am a consumer behavior
and Metcalfe laws nerd, so this is fun reading for me. I have all sorts of
terminology that's already been shared with our team. We'll be coming and asking
you some questions about zeros and all the rest of it. So with that, Andrew,
just thank you. Thank you so much for it. This has been a
true fun, and I hope the book is going
to be phenomenal. It is already, and we're
looking to having you more here, talking about all of this. ANDREW CHEN: Amazing. Thank you for hosting me. ALI GOLDSTEIN
NORUP: Our pleasure. [MUSIC PLAYING]
