How companies become generational

Well, Rob, welcome back, man. How you doing?

Doing good. Doing good. How about you?

Doing— I would call it hanging in there at the moment. Yeah, we've got right now in my business, I am in the middle of executing like the biggest contract that we've sold so far. It's like a 16-episode series. And basically I think what we've run into, we're about a quarter of the way through And I'm saying scope like expanding. And I think what happened— if I— Rob, I'd love to riff on this with you for a moment. Maybe it's helpful for somebody. Basically, I think what happened is I misunderstood demand at the point of sale and what I thought— if I were to articulate what I thought they were buying, it was a series of programs that were more aligned to furthering the educational mission and getting word out about materials that this organization, it's a university, had had available for families and for teachers. It's actually, and then that was going to be adapted for schools, for school use. And I think I flipped it. I think what they actually wanted to purchase is materials and curricula for school that also happened to be podcasts and are happened to be media programs. And so what we're seeing is that because the priority for them, the demand is actually unique school materials. I am finding myself accommodating our media to a bunch of demands that they have in order to accomplish that specific goal. So I don't know if you see these, like, if you have reflections on this or if you see this in other instances or other like iterations with other clients you work with.

And this is like super normal. It's, it's Um, you know, you get a deal done and you're like, holy cow, right? If, if it's a big deal, an early deal, like it's, it's just like, wow. Oh, like, and, and both sides are super excited, but you are kind of like, what's in your head and what's in their head is totally different or, or at least subtly different.

Right.

And any sort of difference there is like, it really influences the shape of the product, the shape of delivery and like, well, what, when you typically wind up finding this out is when you present the first thing to them, whether that's like you've onboarded them to your product or you've given them the first report or deliverable of, of whatever it is. And it's like, they're like, you know, it's, it's a little off or you get, or you get requests that are like, that feel like they are left out of left field. And the cool thing about this is that like, you're never going to know exactly what they want at the moment of purchase. It's just like, yeah, I mean, eventually you might, if you get to something that is highly repeatable and it's just like this, you know, kind of like machine where everyone gets the exact same thing every single time. But early on or with big kind of like big deals, there's always a little bit of, uh, of non-standardness or, or, or kind of even maybe ambiguity in their minds about what exactly they want. And so when they see the first piece of it, they, it kind of like triggers something in there. Oh, it wasn't exactly that. It was kind of more of this thing. And so that's super helpful for you because, right, if you're like, imagine that this is what other people want, right? This is, this is everyone's demand. It looks kind of, kind of like theirs versus what you thought they should want, right? Or what you thought they did want. Well, you're now, you're currently pitching something that is not quite right. And so it's likely not hitting them in the soul when you're talking to other potential customers. And it's, and you know, this customer might've just misheard you or might've just kind of like formed something in their own mind about what they were getting that was different than the words that you were literally saying. And so other people aren't doing, you're getting kind of closer and closer to real demand by just kind of paying attention post-sale here.

Yeah, well, that makes me feel better about the, some of the pain at the moment. But yeah, we had a couple of things. I do think, I think what you're saying about they weren't sure what they needed or what they wanted from this project, I think is true. One other reflection on that is we had written out pretty explicitly, like, here are the deliverables, like, and it's, you know, that is in the contract, everything like that was— that sort of doesn't matter because there's— it's like, yes, we will do them, but the way that we do them changes based on like what the actual priority is. But yeah, you're, you know, your last point on demand is actually different than what I anticipated was something I was reflecting on this morning, which was like, okay, is this Is this the type of customer that we should be targeting? And we definitely— the messaging should be adjusted if that's the case. Or is it actually we just need to go away from like working with universities that have more of like, you know, a public school system focus toward organizations that are going to be more oriented for demand around marketing. And those are— they're very different, you know, outbound, very different pitches.

Things.

Yeah.

Things like that.

Yeah.

And this is like, like to zoom out, this is just how learning happens in the real world. Like we could sit and whiteboard this out. We could have sat and whiteboarded this out in advance and we would've been wrong. Like we would've been totally wrong. We wouldn't have, we, there was, there's like no way to know this kind of stuff in advance. It's just like literally impossible. And so it's the only way to learn is just to do things to get customers to try to deliver. And you're always going to deliver the wrong thing and you're going to sell the wrong thing. And that's just how the world works because you can't know what the right thing is in advance. And so we often are in this state where we beat ourselves up, stupid, stupid, right? Like I'm so stupid when we do this.

Yeah, but Rob, I actually am stupid. So in this case, it's justified.

But it's just like,— this is the, this is a post that I have been working on for a while and I just can't find a way to articulate it. But like, it's the, the, the world is unknowable in advance. Business is so complex that this is literally unknowable. The world, and it's, and, and so the only way to operate in this environment is to do something that is almost guaranteed to be wrong and to to kind of iterate, to loop on it based on the ways in which it turns out to be wrong. And that's, and you can only trust, you cannot trust what's on a whiteboard or what makes sense in your brain. You can only trust the, the actual reactions of human beings that you are trying to sell to and deliver to. That's the, that's like the only source of data that, that, that is actually usable.

Yeah. Well, great segue. The intro for this particular post, which is called How Companies Become Generational and How to Build One. Well, my context, totally just irrelevant to generational companies, but—

Hey, no, no, no, no, no, no, no. That's not true because, right, like Larry Ellison at Oracle started out He started a consulting company because he was too lazy to work for corporate. He was too unambitious. He got divorced because he was so unambitious as a person. And so I'm not saying you're unambitious, but it started— or that you're going to get divorced or anything like that, but it's, it's— you can't— there's no, there's no physics reason why you are not building a generational company right now.

Yeah, yeah. Uh, generational in the sense maybe that we serve multiple generations down to 3 years old. But, um, let's— I'm gonna start out with a, uh, a quote that you have actually at the end of the, uh, of the Substack post, which we'll, we'll link to in the, in the show description. This one's from Paul Graham, uh, entrepreneur, founder of Y Combinator. Um, he, he wrote, or wrote— is this from a blog post of his, Rob? Yeah. Um, One of the most valuable exercises you can try if you want to understand startups is to look at the most successful companies and explain why they were not as lame as they seemed when they first launched. That's a little bit of a hard sentence because they practically all seemed lame at first. Not just small lame, not just the, not just the first step up a big mountain, more like the first step into a swamp. Rob, that I think that really captures the spirit of what you're writing about here. We're going to talk, you know, in your, in your post, you talk about Microsoft, you talk about Oracle, you talk about Salesforce, several others that include a consumer with Nike and Starbucks. But Rob, why don't we start off here with, you know, why is— could you define what you mean by a generational company and why is this particular one on your mind?

Yeah. So, um, I just kind of, uh, I rage at— there's this kind of like, there's this thinking out there that to build— that the distribution of successful companies follows a power law by which it's like a couple— there are a couple of trillion-dollar companies and they are like, they're the only things that matter in the economy, right? Like they're roughly. And so yes, there are a lot of other companies. Yes, there are small companies, but, but the outcomes of companies follows a power law. It's like, okay, based on that, there is a kind of like theory that, okay, because the outcomes are so wildly distributed to build one of those power law generational, massive trillion-dollar successful public companies, you need a diff— a totally different playbook. You need to to— you need to think about everything totally differently or to build a deep tech company, right? Where we're, where we're, or, or hardware company where we're physically building something. It's not just some kind of like incremental SaaS product, right? Some, some kind of like just a slight improvement on what already exists and, uh, you know, vibe coded in a weekend, da da da da, right? Like to build a real company, you need a totally different playbook. And so I, this is basically the number one critique that my ideas get. So it's just like, yeah, that's fine for, for building something small in a lifestyle business and a da da da da da. But I'm trying to build something generational here. And so I'm following a different playbook. And that playbook is almost always the same thing of like, I'm envisioning a future and I'm gonna build, you know, I'm gonna build what I think the world's gonna want and I'm gonna show the world what it should want. Right. And that's, that's, it's kind of like there's this kind of line of thinking out there that's, that says to build this kind of company, you need to operate totally differently. And I don't mind if an individual founder does that. Like, obviously I tried that. A lot of us have tried that. It works horribly, but whatever, right? Like, go run at it for a couple years and reality will teach you. The problem that I have is that there are a lot of people who talk as if this is true and teach entrepreneurs and entrepreneurship as if this is true. And it, and so it's confusing if, 'cause as an entrepreneur, I don't want to build something small necessarily. Like I want to build something awesome. And so why not swing for something generational? Why not swing for something really, really cool, powerful, awesome, world-changing, right? And if you're of that mindset, it's like, cool, I have one life. Why not swing for, well, if in my mind there's this separate playbook for generational companies that seems to require ayahuasca retreats and envisioning and turtlenecks or whatever, like whatever the things are.

Huge seed rounds often, like kitchens. Yeah.

Yeah. Like all of this, there seems to be that, right? Like if that seems to be the way to build a company, then I'm like, I'm going to be experiencing cognitive cognitive, like a ton of cognitive dissonance, not having real clarity on what actually matters and usually winding up LARPing, uh, as a result, like that's, you realize a couple years in that you're like, what the heck have I been doing? I just sat in a room for 2 years building out, whiteboarding a product, thinking about da da da, like all these kinds of things. I have very little to show for this.

Yeah.

And so, so yeah, anyway, that's the, that's the kind of like framing of this. That's the critique. That's a critique my ideas get, which is fine. You can critique my ideas. I don't care. There's a variety of ways, variety of attack vectors on them. What I want to focus on specifically is like, so when I got this, this critique, like a couple of years ago, I was like, oh, that's interesting. I probably should get really deep into the histories of these generational companies to figure out what, like what actually happened in the early days, what they actually looked like, because I must be missing something. And it turns out no, right? Like, it turns out that if you actually read the stories and hear the histories of successful companies, they don't— there is like, there are patterns. There's, yes, there's obviously a lot of variation across them, but the pattern is the same pattern of building a normal company. Yeah.

Yeah. That's interesting, Rob. But maybe before we jump into like, uh, some of those ideas, more deeply. What one reaction I have just having listened to that is it's actually I think I misspoke on like where the financing comes from. It's more about the LARPing point that you made, like identifying demand and like selling early. Is that the— is that the like key that's missing in the I think I need to start with the huge thing is or like how would you make like what's the seed like where is that kind of like foundational misunderstanding?

Yeah. So the foundational misunderstanding is in two pieces. One is on sell then build, right? Sell then build can't possibly work if you're building a generational company. And two, focusing on somebody's need right now. Hmm. Right? Like there's no way that can lead to a generational company. Customers don't know what they want or like, well, you can think of all the different, right? Like different permutations of that. It's basically those two ideas. Plus the third one probably is like selling services early on versus selling a scalable product.

Super interesting. Well, let's jump into a couple examples, but any other thoughts on who this one is for? Like who this is going to speak most deeply to?

Yeah. So this will speak, so this should speak to the people who, are building tech companies, software companies specifically. And, um, you are, you are like in the back of your mind, uh, I, I have this too of like, but like, I wanna build a big company. What's the path to building a big company? And is it different from building a small company? Because I see a bunch of VCs out there saying I need to go from 0 to $500 million ARR in 14 hours. And that there's a different playbook and da da da da da, right? Like, and so, and so this is, this is for you and it, what I hope it does is I hope it encourages you weekends, evening reading or whatever to like actually dig deeper into some of these companies' histories to, to get a, to get a feel for what actually happens early on and what they look like early on.

Yeah, fascinating. I actually, I like that you said that. For in my case, when I was reading through this one, I was thinking about an episode of Founders that I listened to recently about Michael Dell and the history of Dell and also seeing some of these similar, like very early sales, struggling to deliver, understanding what exactly, you know, he started with a very niche group of basically kind of like computer hobbyists as and now I don't know what he's worth. He's probably one of the 50 wealthiest people in the world. His company does all these crazy other things. But yeah, similar. I'm sure there's just dozens of these examples that you could have chosen from. But why don't we, why don't we jump into, you know, maybe a couple of them, Rob, that you're most like fired up about, which from the ones you wrote about, which ones stand out?

Yeah, I think so. I think Microsoft is like the classic one. And I'll touch on Oracle a little bit. And then I want to touch on like one of the, one of the like deep tech, hard tech ones. Cause that's also a, that's also a common like line of, but deep tech is different. It's like, yeah, no. So, so Microsoft's story is fascinating because basically when they got started, there was the thing. So Bill Gates was in school at Harvard. Paul Allen was, I think, working somewhere in Boston. Uh, I don't remember for who or for what, but they had, again, I'm, I'm, I'm gonna misremember this slightly, but, but the, they had basically built a software company before called, I think, Trafo Data that was, that they tried to sell to municipalities. It didn't work out super well, but that was while they were in high school and they were like, yeah, we like this computer thing is awesome. They spent all their time doing that. They had been kind of like consultants for, mini computer companies out in Seattle before then. And, and so, uh, basically they, they were of the like mind while, while Bill was in school, he was like, I want to build a company. That, that was it. He was like, I want to build a company. I want to build a computer company, a software company, something like that. Um, at the time there were no PCs, like the PC wasn't a thing. There were like, I think they're called mini computers or something where you had to kind of like rent time from them and they're still Mini is a, is a, uh, you know, anyway, it's like, it wasn't actually a mini, it was a quite a big machine, but the kind of like, like the kind of hobbyists, the computer nerds were all like hungry to, to like have something to tinker on at home. And so in, uh, Popular Electronics magazine at the time, there, there was a, they were like, hey, these like these like home computers, these like computer kits for hobbyists are going to be a thing. We need to like, I don't know, let's put out a call to see if anybody's building one. And they got a couple people reaching back out to them, but like, nope, nobody really had anything except for one company based in Albuquerque called M-I-T-S, MITS, uh, I forget, I forget the actual acronym. Right. And so at that point they, they said, hey, we have something like, we'll show it to you. And, and, and so, uh, it didn't actually work at that point. Uh, and, or like maybe it barely worked, but Popular Electronics was like, screw it. Let's put this on the COVID of Popular Electronics magazine and just show it to the world and allow people to preorder it. And, um, and so that magazine cover, I think Paul Allen saw it. And was like, oh my God, this is the thing. This is, this is what's, this is like the future. This is what's going to happen. I don't remember if it was Paul or Bill. It doesn't matter. But basically they're like, hey, this, this kind of like computer kit needs a way for you to be able to use programming languages on it. There's the BASIC language. If we can, but like, it's, it's for a microcomputer. It can't fit on one of these things. And so they called the CEO of MITS. And they were like, hey, we have software that can do, you know, that can put BASIC on your Altair, on the, on the Altair computer. And he was like, cool. I've gotten like 17 of these calls. So if you come to Albuquerque and show me, good. And then they started building after, then they started coding after that conversation. Couple pieces of this that are interesting. One, the market size at that point in time was literally one company. Two, they didn't literally sell before they built, but they got a customer commitment before they started coding. Yeah. Like, how does that—

yeah. How, what's the equivalent of that second one? Today on, uh, like a customer equivalent before starting to build.

Yeah. Customer commitment before starting to build it. You could, so I think they probably wanted him to pay them before they built it, or they wanted him to pay him, pay them in advance. Right. And so they probably would've asked for money or said, hey, here's the con— let's get the contract and let's get the kind of like agreement and whatever. But he was like, listen, I've gotten 17 of these calls. Already. And so come prove it. Right. And so I've seen companies get actual customer commitments today, AKA like contracts signed, money, money sent across prepaid for a product that they are then building. And so the, the point here, the kind of like pattern that you see across multiple different companies like this, even SpaceX, for example, right? Like, SpaceX building a rocket almost certainly tried to pre-sell NASA on it. And they're like, listen, we're just not, we'll, this is a hard thing to do. We're gonna, we'll get everything contracted and ready to go, but you have to prove that it works before we actually get the contract across. Yeah.

And that, and that's your point that within 2 months they had, uh, like announced the, the contract that does anybody that does government contract, it took me, it took me 6 months to do, you know, 3 orders, 6 orders. I have no idea. Or some number of orders of magnitude smaller than that.

And yeah.

Yeah. Yeah.

So that's, and so the point, the pattern here with Microsoft is like, one is that, oh, that, by the way, they were a languages company. They, they sold literally like, just like language interpreters or whatever for, for years. Gates, I think, I'm pretty sure was the only salesperson up to like $10 million plus revenue. Right. And so they were based in Albuquerque for a while. And so it's just like everyone kind of like misses that part of the story. And then the operating system DOS that people might've heard of came about through a random chance, like a random opportunity fell into their lap that caused them to provide DOS to the, to IBM. And, and that took off and they went from being a language company to being an operating system language. And then they kind of like evolved from there. Yeah.

What do you do with the— you bring up random chance. One critique I can imagine is, okay, what— all right, Rob, that's not helpful. Like, how do I optimize my company for random chances? And like, what would you say about that?

Yeah, I mean, like, there is some element of just like, Things happen and you take advantage of the things that are put in front of you. You, you are going to have random things happen to you and it's all about just taking advantage of what is in front of you. The opportunity that drops into your lap, it might be something massive. It might just be the thing that's gonna get you from $1 million to $10 million, right? But in the process of getting from $1 million to $10 million, another thing is going to happen. That's going to contain the seed of what will get you to 100 million.

Yeah, me. But one other reflection I have that that gives me is like the, like surface area basically that you're covering, like the number of interaction. If you are locked in building a product isolated from, from real customers, from real life, there's fewer opportunities for those random things to be happening. And in Microsoft case, they were selling, they were working with a growing number of customers. The IBM opportunity came in. Was it chance? Yes. But was it chance? Was there a better chance of them getting it because they were doing, you know, they were active in the market also? Yes. Like actively building products and learning.

Yeah, totally. Totally. Yeah. And it's, it's, you know, it's just the things to take away are like the market size was like zero when they started., but they, by doing things, by serving customers, yeah, they were early, but that's not necessarily like, that's not, again, across the other examples, that's not, Google was like the 47th search engine. So it's not necessarily about being early. It's just about getting, getting something working and finding, and, and like we were talking about earlier, doing something that is slightly the wrong thing to learn what the right thing is.

Yeah. Let's hit another one. Rob, would you like to hit Oracle or NVIDIA or?

Let's start with Oracle because Oracle's a fun one because the story, so I always assume that you actually have to start and want to build a generational company and like that, you have to kind of like plant your flag in the ground and say, I'm building a trillion-dollar company or I'm going to die trying and I'm going to run through every wall and I'm going to be the most intense. Human being ever. I'm gonna be a jerk to everyone. Right. And it like turns out Larry Ellison started Oracle as a consulting company. It's called Software Development Laboratories, I think. And, uh, and basically it, he started that company because in his words, he was like too lazy to work a normal job. He was so unambitious that his, he got a divorce with his first wife. And, and, um, and like, they just, you know, they, they were just a consultant, software consulting company, but software consulting, he says, was like, it was just too much work for him. And so they were like, all right, like, you know, and, and, and then I think in their case, and a lot of these cases actually, there was like, I think it was Xerox PARC, uh, so Xerox think, you know, like a copier printer company, whatever. Um, so they basically had this amazing research arm that was behind like the graphical user interface that was, it was behind basically everything that Xerox just failed to commercialize. And, and so it was just like, they just, you know, you know, entrepreneurs would just like, go look at what they're doing and say, okay, yeah, I'm going to do that. I think Xerox, I think they actually developed the first relational database there, or like the, the thinking behind it. And so, you know, Ellison was working on, I think, databases at the time and kind of like was, was pretty good at that. And he was like, oh, maybe we should build a relational database. Right. And, and once, like, it, it sounds again, the way he tells the story is that basically there was this like dog in him, right? Like, and he was just, it, but it was, it was asleep. And the moment the relational database like actually worked, he was like in an elevator. He describes the story and it's like, It clicked and I was like, oh, I'm going to like, I'm going to take over the world. And the dog awakens. And then his second wife divorced him because he was too focused on work. And so it was just, that's just a funny part of the story.

Yeah. Well, we'll have another, uh, post sometime in the future, hopefully about how to not lose your significant other in the course of starting companies. But yeah.

Oh yeah. I hope to be an expert at that.

Um, and so not with the losing, uh, not from experience, but from the retaining of relationships.

Yes.

Yes.

Yes. And so, so, okay. The interesting thing there is that he literally did not set out. He set out to be a kind of lazy bum, basically. It was just, and, and by incrementally trying to be lazier, he stumbled on something that wound up being huge. And so, but it's like, you start, you start and, and started with a services company. Too, right? Like nobody wants to start with a services company these days because it's not scalable. Well, it turns out Oracle started that way and I think they were bootstrapped till IPO, right? Like I think they were bootstrapped for quite a while. It's like, okay, cool. So they just retained a ton of money. That's why he's a billionaire today is because we're like, he didn't back in those days, you raise a seed round, you raise like $200K and the valuation's like $400K. So you give away 50% of your company just in the first funding round. It's like, oh, the reason he's a billionaire today is because they had cash. That they could build from and they, and they focused on sales early on and right. And so other stories like this more recently are like Atlassian, for example, the company behind Jira. Sorry everyone, but like they, they started as a consulting company, um, uh, as did like Basecamp started as a consulting company and, and that's how they were able to be bootstrapped.

Yeah. That's, that's interesting. What's, what's going on? Or maybe before getting into that, do you see companies that you're working with, founders that you're working with that are taking the approach? What does it look like to start as a, to start as a services or as a consultancy in some way?

Yeah. So again, I don't know that I necessarily recommend this. This is just like a, a pattern that I have seen, which is, which is if you don't actually know what the product needs to be, guessing is not a great way to get there. And raising a bunch of money plus guessing, you, you'll have to build a kind of pitch for why this is the future. You'll feel pressured to, to kind of like build something and da da da. And so like that, that path is not a path that I would strongly recommend if your goal is to one, survive and two, have the chance of building a generational company. And so, yeah, what I've seen is like, hey, I don't actually know what it is to build yet. Just being honest about that and saying, cool, I'm just going to go and sell something, sell some sort of a service to customers. And in that process, I'm going to figure out what the product is. Another one, more recent one is called Fixer. It's a, it's a, super popular, really fast growing AI startup that like, I think handles your emails and stuff like that. FYXCR, they started as a service company.

Hmm. Hmm. And the, um, and it's the lessons that you learn by being embedded in these, uh, companies, like working with customers that, uh, reveal the thing that can be a product that can convert into or translate into a, into a, a software product. Um, other, uh, other ones, Rob, that we want to hit, uh, maybe one of the deep techs.

Let's talk, let's talk NVIDIA, the hottest company in the world right now. Right. Um, uh, you know, I, I've done some stuff in deep tech world. I've, I've kind of like, I've actually worked with Harvard and MIT's kind of like deep tech professors, uh, and, and kind of like accelerators. And what I hear from the leaders of those is that people are not selling early enough. They, they're like, listen, the pattern of successful deep tech startups is that you try to sell early on because the development cycle is so long. You want to make sure develop, like customers are there and ready. And so that you don't waste a ton of time building something that might not work. And so that's, that's what I heard from that. It's like, okay, that's, that's interesting. And I've seen a kind of like quite a few examples of that where it's like, cool, We're going to take a PhD who has this idea, who's been kind of working on something for like a year, has a rough shape of it. Let's have this person talk to customers and try to pre-sell something to figure out what they actually need and direct the research from that moment. And that has been extremely successful when you do that kind of thing. So the case of NVIDIA, right? I would— so if you, if you just told me NVIDIA, like, how do I think NVIDIA started? My intuition would've been, well, they got the smartest people and they built the right product. They put their heads down, they, and then they sold it to a market because it was the superior product. Right. And that eventually happened, but the way it actually started out was they were one of a ton of graphics card makers at that, at that stage. Like that was, that was kind of like the hot thing. I think it was around when, when the Doom Doom computer game came out or the Doom video game came out or something like that. I don't know. I was, I was like 0 years old at that point.

I did that one. Might've even predated me on this one, Rob.

Yeah. Yeah. But, but basically Jensen tells a story about how they pre-sold a, a big contract to Sega to build a graphics card for their some sort of console that Sega was building that they literally made all of the wrong technical decisions on this and realized years into trying to build this, which they had pre-sold, they had gotten a bunch of money, they had gotten millions of dollars in multiple installments. They realized there was no viable path to make the thing that Sega actually wanted them to make. Hmm. And so they, the, he tells a story about going to Sega and saying, hey, I have bad news and worse news. Uh, one, this thing you've already paid us millions of dollars for isn't going to work technically. And two, we need the last $5 million installment anyway, and I'd like for you to invest that in us. Right. And so the point there is that, that, okay, cool. They actually didn't just sit in a room. They had pre-sold something. And they sold the wrong thing. Like they sold something that wound up being them building the wrong thing and then eventually working their way towards building the right thing. And so through that process, right, they, they kind of evolved, unfolded what they wound up building. They kind of developed an intuition for the market, but the, like the way I would have normally thought about it, thinking of deep tech was they sat in a room, build a product. That wound up being the highest performing product on the market, and then they, they sold it, right? And like, that was the sequencing of things. And in fact, it was not at all like that.

Yeah. Like 30 years of, of, uh, you know, like selling actively to, to customers before then. Robert, how strong is this? Uh, the statement is not every company who sells early becomes a trillion-dollar company. Like, that is obviously wrong. Is it? And I also don't think it's every successful company originally started this exact way. Like, there's other ways. I think what you're saying is the— it is possible and it is stronger than that. The best way to potentially become a generational company is by selling early, you know, doing— being open to services before you have a product, you know, some of the other lessons that are embedded in this. Is that how you would characterize it or what, like how it, how strong are the lessons in, in this?

Yeah, I would say looking through these histories, the kind of pattern seems to be that everybody tried to sell early, whether they were able to, whether they, but most got customer commitments or, you know, close to customer commitments early. For something and wound up paying attention as they tried to deliver. Hmm. And used that process to figure out what the actual opportunity was.

Hmm.

And so the point is that the way that we are often told that these generational companies get built doesn't reflect what seems to actually happen at the beginning. And it actually is kind of counterintuitive that these companies, it's kind of harder to embrace that these companies start in the ways that basically most other companies start.

If you were a VC, Rob, would your approach be to look for investments in companies that are small serving a niche like Like, is it, is that the way that you would orient, like, there, is there evidence that they're already selling? Is there evidence of an existing buyer, like, bet on those? Is that the thing that you would be looking for? Or how, you know, how do we translate this into, yeah, investments that have potential to be asymptotic?

Yeah, I mean, I think I would basically, look, my sense is try not to predict the future. At all, like just ignore it entirely and focus on right now, is somebody pulling very hard for this? Is this somebody's number one priority right now? If it is and people are pulling very hard for it, even if it's a small number of people, just say, cool. That's, if you kind of like look into that, that's the evidence that I would need.

Yeah. Interesting. That, a good transition. Any, any other companies we want to hit before we get to the lessons that you kind of zoom out and generalize at the, at the end of the post?

I think the Starbucks one is just kind of interesting, right? Like Starbucks is a really cool example where Howard Schultz wanted to bring the Italian espresso bar experience to the US and turns out Americans hate the Italian or hated at the time, the Italian espresso bar experience. And so, What he did, he just, the way that he figured out what the Starbucks experience was, was he just observed people struggling to buy their coffee and interact with Starbucks. And so, and kind of is, he delivered the wrong thing and observed people struggling and reshaped the experience to be right. And you can think of that as a, he kind of did that in a compounding way. Time and time again until the experience was right, until he had that kind of hell yes customer base, presale, post-sale, total experience that then could kind of start to replicate. And so that's my, that's kind of like the, the story there of, oh, but you know, consumers, you have to tell them what to want. It's like, that's not that. Again, that doesn't follow the history of one of the biggest consumer companies or multiple of the biggest consumer companies out there. They, they, they still follow this kind of kind of observe, like sell something, deliver something, and debug it.

Yeah. Yeah. That's fascinating. It— your idea of demand applied to consumers and the idea of jobs to be done, like there's overlap. And I think my— I get— I look at it through your lens and I'm like, okay, there's the demand. Howard Schultz was observing customer demand for an experience. And I think if I were, if I were more in the like Clay Christiansen, like, you know, putting that hat on, I would say like the job that they are looking to be done or something like that in this particular case is, is— and I might go to like slightly different and different directions.

How would—

are they the same thing? Are they, are they different in this case?

Yeah, I, I think a job to be done is just a project, right? Like I think, I think those are basically the same things. I just wasn't smart enough to figure out what a job to be done is and how to think about it. But like you can, you can see, so if, if we think like a, a lot of people make the mistake that projects are purely functional. And so you think, okay, it has to be purely functional. It's like, no, it doesn't. It could be, it could be irrational. It can be emotional. It can be all these kinds of things. A purely functional project is basically what an infomercial is for a, like, if you think about an infomercial, are you struggling to do da da da da da, right? And that's purely functional. But as you kind of like, there's no reason a project can't be kind of emotional, status-oriented, memetic, like all of these kinds of things too. And so once you kind of understand a project that way, what basically what, what Howard Schultz was doing as he was observing people navigating the kind of V1 Starbucks is he was figuring out what their real project was. It's like, oh, it's not that I kind of want an Italian espresso bar experience. It's I want something that's, you know, there's something else that I really actually want here.

Interesting. How about— I think we're going to run up against time here in a couple of minutes. Do we want to go ahead and hit some of the takeaways? These are peppered throughout, but I think it'll reinforce a couple of them. How about I just read through a couple of these, Rob, and then we'll get your reactions? Yeah. The first one is figure out or— yeah, figure out some sort of market need by selling and delivering something. The second one is learn the shape of the real opportunity by selling and delivering something that's not quite right. I would cry myself to sleep reading that, uh, tonight. Um, avoid attempting to either predict the future or convince the market. The second one we actually haven't hit hard. Maybe you can, you can give a sentence or two on that in a second. And then at some point, benefit from waves or, uh, from waves or dams. And we can give like the, the short context on that. Rob, what would you react to here? What have we not not covered today.

Yeah. The thing here is the convincing the market piece that, that you, you mentioned that this is probably the last, last bit, which is you do not see a lot of stories early on of people convincing anybody. It's just, you find people who are already convinced they're, they're trying to accomplish something and blocked by their existing options. In that state, you do almost no convincing.

Hmm. I wonder why that, why, because after being exposed to your ideas, it's like you start to see this everywhere. It's like you just observe demand and you observe people not pulling where there's not demand and you see how much of a weaker force convincing is than people helping people accomplish what they're already trying to accomplish. Why is convincing the market like the, I don't know what the mantra, the zeitgeist, whatever it is of building businesses?

Honestly, I don't know. I think it's, I think we generally think we are more capable of than we actually are seeing the future. Is an example of that. Just if you just think of how, how like impossible it is to see the future, just like, why do I think that I have any reason to make a claim about the future? And, and then it's like, if I, if I do, I think I can convince a market of something. Just think of how I, I, I just don't think that was a concept that even processed for entrepreneurs before, I don't know, maybe, maybe the dot-com boom or something like that, right? Where it was, where it's just like, no, why would I try to convince somebody to do something they don't want to do, right? Like that, that thought wouldn't process. And one of my mentors who sold his company in 2000-something for, for like $350 million, right? Like he, he basically is like, Yeah, I think just whenever software businesses took off and the dot-com bubble took off, we all just collectively lost our minds on the actual basics of how business works. And we've never been able to think straight about building a kind of like software business as if it obeys different physics than just a normal business. And so we think, we tend to think that, wow, right? Like, because Steve Jobs wore a turtleneck and gave good speeches, that's what caused, like, I have to do that. Right? And I have to convince people and I'm, it's possible for me to do that. Like, yeah, I don't know. I think it's just, we think we're way more capable than we actually are. And when you're more humble about like, I'm not going to convince anybody of anything, then you, you actually can build a much more powerful company.

Yeah, that's, uh, I, I love that. Um, and maybe one thing to add before we wrap on the, on the last point, at some point benefit from Demand waves or dams, that, that can be something that we, we link to and recommend reading, pulling up the blog. But yeah, I'm just going to read what you, what you wrote here because this one struck me. These demand shocks, which is essentially what a wave is, or you write about dams that are breaking, these demand shocks are moments where hypergrowth is possible. Many people— this is the important part— many people have the same pull at once. This doesn't happen on day one. And it doesn't happen always with your first product or service. Most generational companies were normal companies that were in the game when the stars aligned on the demand side and they shot to the moon as a result. I thought that was— I thought that was great. Any, any other observations on waves or dams?

Yeah, it's just the, the interesting thing here is that they didn't— right now it's, you know, you have to get to 10 million ARR in 2 weeks kind of is the thinking and just, and that might be true now. That might be the way the world works now. I have a hunch that it's still not actually the case. And if you look at the stories of Microsoft and Oracle and they all had hypergrowth at some point, but it was not day one. And so it was just, they were, they were in, they were in a position they, they probably— it unclear that they saw hypergrowth coming, the opportunity coming. It just was there in front of them at a point in time when they recognized it and attacked it.

Yeah. Reminds me of a piece of advice you gave me way before, um, you may not have even left, or it was maybe shortly after you left your first startup. But it was, it was basically like I was struggling with like, what's our business model on this? And like, I think I was thinking about investing in some stuff or putting more money into stuff. And you're like, the first objective is stay alive basically, and like keep doing things. And, you know, if you— the only way that 100% you will not participate in a wave or dam is if you're not doing anything at all and you still might not—

we—

I might not ever, you know, ride that wave or hit that dam., but, uh, it's a surefire not going to happen if I'm not, if I'm not even like in the playing field.

Uh, yeah. And we can, we can look at the histories. Like, let's say your company takes off, right? The history will not be told as— yeah, yeah. And the history will not be told as you had foresight or, or it— sorry, it— the history will not be told as like you saw it coming, right? Uh, the history will be like, yeah, he, he, He, he sensed the market. He had a, he had a vision for where the market was going to go and it will seem like it was inevitable versus it was just like, it, it was there and you're like, huh, that seems like something. Let me play with that and see. And boom. Right? Like, or, or over time it like really compounds. And so like, that's the story's gonna be told wrong when you're a billionaire.

Yeah, that I would, uh, unlikely. But if it, if it were to happen, then yeah, you will be, will be told wrong. Maybe, uh, Rob, we can, we can write the book together and we'll tell it the right way for once. Um, or more likely when, when you're a billionaire. Uh, Rob, any other thoughts before we, before we wrap here?

No, I think that's that.

Awesome. Uh, you've got a PMF camp. This one, this, uh, episode will come out on like the 30th, um, you'll have a PMF camp that starts February 9th. We still have spots for that. I think, um, we'll put links in the description if folks are interested. Um, any, anything else to add? No, no, no. Awesome. All right. Well, hey, stay warm. Um, be safe in the travel that you've got coming up and, uh, we'll see everybody soon.

Catch you soon.