Max Brun advises early-stage founders to think about data from day one, even though most businesses don't start as marketplaces due to lack of liquidity. He cites Johnson & Johnson's Causal Science Center as an example of how companies use experimentation and causal inference to solve matching and multi-sided liquidity problems as they scale.
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We have lots of earlier stage founders and teams here. So I guess, could you maybe share more about, you know, at what stage founders should start to think about data and maybe some of the kind of key considerations when doing so?
Yeah, actually. Okay. There's a couple of things that I want to say. One of them is that I kind of hinted at some of this in the podcast with Lenny too, that like, so on one hand, Every business is a platform today. You know, so I mentioned Johnson& Johnson. One reason I specifically mentioned them is that I run a center, I co-direct a center here called the Causal Science Center. It's focused on experimentation, causal inference. And we have a number of tech companies that we work with, but one of the companies we also work with is Johnson& Johnson. And that's sort of interesting because, you know, nobody thinks of them as like naturally a digital platform business. But even if you're J&J, You're thinking about the digitization of reaching your consumers, of marketing your goods. So what that means is like, if you're a founder, it doesn't matter what you're starting in 2024, you are in a data-driven business. It doesn't matter if it's a marketplace or not. Okay? So I think when should you start thinking about data? Day one, you should start thinking about data because that is the distinguishing feature of building your business using digital technology. There's a lot of challenges that, you know, come into that and we can touch on some of those, but I wanted to separate that from what it means to think of data as a marketplace. And so I think 2 things that maybe will sound contradictory but are both true. One of them is that no business is a marketplace when it starts. And the other is that every scaled business is eventually a platform or a market. And what do I mean by this? No business is a marketplace when it starts. And what I mean by that, if you want to be like sort of drill into that comment is I think most of the interesting aspects of thinking of a market only happen when you actually have scaling on both sides of the market, not just one. When you start, you almost never have that liquidity. You never have both buyers and sellers scaled up from day one. That's very rare. There's exceptions when there's like subsidiaries, for example, that start or spin out, you know, of a larger parent organization. But otherwise, if you're just, you know, a founder starting out, Probably the way you're starting out is you're first getting users on board or you're first getting suppliers on board and then hoping they'll attract the other side of the market. So when you start, you're not a marketplace. I think it's really important because you do want to be thinking of yourself as a data-driven business, but you probably don't want to be obsessing about things like how do I build the best matching engine because you just don't have enough liquidity for that to be a first-order problem. So no business is a marketplace when it starts. What about the contradictory statement? Every business is a marketplace when it scales. Well, why am I saying that? I'm saying that because digital supply chains are almost never completely vertically integrated today. There's a very, very small number of companies, literally you can count on one hand that look that vertically integrated, right? The FAANG, basically companies like Facebook, you know, or Meta, Amazon, I guess, MANG now, Meta, Amazon, you know, Netflix, Google, et cetera, right? So there's a handful of those, but you're not that if you're starting out. And even if you imagine what scaling looks like and when you're scaled, that because the digital supply chain you're a part of is not going to be just you, it's gonna involve you with multiple inputs and outputs. Those inputs and outputs are gonna treat you like a platform, right? Now, sometimes it's explicitly a market like Airbnb, but even if you think about a company like Johnson& Johnson, they work with a large number of suppliers. enable their products to get made. And they of course are selling to consumers, to businesses. And so that's the sides that they deal with. And that problem of intermediating between suppliers and users doesn't look actually that different than the kind of problem that all of you who are, you know, marketplace founders are thinking about. So I think the hard thing is to know, well, when have I gotten to a place where dealing with the challenges that come along with scaled liquidity on multiple sides is the right thing for me to spend time on. And we could talk a little bit about that. I have some sort of evolved thoughts on that, that, you know, I'm hoping we'll be able to touch on as we go along.
