Transcript: (disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)

David: Oh, the market's got a nice bump today. You had a good feeling about Jerome?

Ben: Yes, and I get this vibe from him.

David: I want Jerome to wake up on his 2021 side of the bed one day and just feel like, you don't what? Time to get back then.

Ben: We caused cataclysmic damage that needed to get unwound at some point. While it was up, it was all good.

David: Do I really need to keep bringing down the hammer?

Ben: Let's take this FOMC meeting off.

David: I'm going to post a story on Instagram just on a beach with a drink.

Ben: Welcome to season 11 episode 8 of Acquired, the podcast about great technology companies have the stories and playbooks behind them. I'm Ben Gilbert, and I am the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

David: I'm David Rosenthal, and I'm an angel investor based in San Francisco.

Ben: And we are your hosts. Today, we are telling you the entire history and strategy of Stratechery. We are joined by the man himself, Ben Thompson on the eve of Stratechery's 10-year anniversary. Stratechery is innocently built on his website as the business strategy and impact of technology.

Stratechery, as Ben puts it, started as some guy in Taiwan with no access. Today, Stratechery is a powerhouse shaping the thoughts and conversation of the entire technology industry around the world at the highest levels.

Ben has interviewed Mark Zuckerberg, Jensen Huang, Satya Nadella, Sundar Pichai, Rich Barton, Meredith Kopit Levien of the New York Times, Pat Gelsinger of Intel, John Collison, and many, many more, many of which are regular readers.

He is the father of Aggregation Theory, the most important business framework developed in the last 20 years. Ben really pioneered the internet subscription newsletter business model. We sat down with him to talk about a bunch of his recent changes, going big into podcasting, bringing on co-hosts and expanding the empire, and even now launching a Stratechery property that he does not appear on at all.

David: Regardless of what your business model is, regardless even almost of what your content is, I don't think there's any creator, certainly not any business creator out there today, who doesn't directly or indirectly look to Ben and say, you inspired me, you paved the way for what I do. We certainly feel that way. I feel that way.

Ben: David, I even feel like you're and my friendship developed early on from reading Ben's pieces and sharing them with each other with our thoughts. We have these old email threads in 2014 of you and I discussing Ben's writing.

David: Totally. We might talk about that in the episode here.

Ben: For our presenting sponsor to this episode, we are back with Fundrise CEO, Ben Miller. We asked him to share with us what his inspiration was for launching the Fundrise Innovation Fund.

Ben Miller: Technology will disrupt every sector, including venture capital. I don't believe any VC would argue they're immune. It happened to commerce, happened to news, entertainment, public markets, et cetera. But just like every other incumbent, they may have trouble imagining it.

The mission of our company—Fundrise—is to bring about that sea change. How do we do it? In my experience, what happens, as an industry ages and the stories it tells itself, which were once true, become no longer true.

David: Did you see this play out in real estate?

Ben Miller: Yeah. Typically, in a financial industry, the essential story is about alpha. The incumbents raise money and create alpha. That alpha is usually about deal picking, making the best investments. In other financial markets, for example public markets, technology made those markets more transparent and more efficient over time, and that alpha went away.

Vanguard basically consistently beat the best hedge funds in the world. That's going to happen in venture capital. It'll start where I think we're starting, which is mid to late stage companies where there is a lot more data. That's what we're doing. The Fundrise Innovation Fund is a public mutual fund. It's like a Vanguard for the private technology markets.

Ben: If I can paraphrase, it's less about picking the winners to guarantee alpha, but more about increasing transparency and access so that more investors can just get the benefit of beta, these correlated returns where when the market goes up, you're invested in that asset class so you get to go up with it.

Ben Miller: Right. If you'd indexed into the cloud from 2012–2017, and you just said, I'm going to find the data that indicates the top 10% or 20% of companies with product/market fit, you would have done great.

I learned this in 2008. The cycle and the market is way more powerful than the individual. You think you're adding alpha, but you're actually writing these mega trends. That's going to happen to venture for sure. It's inevitable. It happens in every sector. I just want to be the one helping do it.

David: For founders, once you're at that stage, the actual natural best fit and form of capital for you is the equivalent of mutual fund public market capital, and that's what you're bringing for the first time to the industry.

Ben Miller: Exactly.

Ben: Our thanks to Fundrise. If you want to join the over 350,000 individuals investing with Fundrise, you can click the link in the show notes. If you're a founder, and you want to get in touch about having the Innovation Fund to participate in your next funding round, email, notvc@fundrise.com.

After this episode, come hang out with the other 13,000 smart, thoughtful members of the Acquired community at acquired.fm/slack. We'll be talking about it. Without further ado, this is not investment advice. This show is for informational and entertainment purposes only. Now on to our interview with Ben.

Ben Thompson, welcome to Acquired.

Ben Thompson: Thank you. Happy to be here.

Ben: It's great to have you with us. We've done surveys over the years of our audience. We say, what is the number one topic that you'd want to see us cover or a person we should have on the show, and your name comes up many, many times, so I'm excited to be doing this.

Ben Thompson: You promised me I was number one. Now you feel like there's a bit of a letdown going on.

Ben: We asked you the number one was, and you were very high in the rankings.

David: We have another number one, though, that is very near and dear to our hearts. Ben was searching his email today, and he sent me an image over text that was very sweet. It was the first email between us, and it was about Stratechery.

Ben Thompson: Okay, fine. I'll take that.

Ben: David and I think we got drinks, and we're talking about Uber. It was your don't blame Uber piece from 2014.

Ben Thompson: It's interesting in retrospect to think about that. I think that was about health care rights, workers, and things along those lines. It's pretty interesting, you could probably write a similar piece about easy money, the macroeconomic environment, and lots of pieces.

It's funny, I haven't thought about that piece in years and years. I usually have a very good memory of everything that I've written. But every now and then, I will encounter a piece where there's someone linked to it or come up when I'm searching for it. I'm the number one user of Stratechery Search.

David: You built that for yourself?

Ben Thompson: I completely forgot that. I wrote about that. Usually, I go back and read, I'm like, oh, that wasn't bad. Then I go back, like, I don't know about that one, but it is what it is. That is what happens when you've written thousands of posts over (approaching) 10 years now.

Ben: It's just prolific. It's interesting. I went back and just read the early days preparing for this. You imported from a Tumblr in 2009 that are all the way back in the back catalog.

Ben Thompson: I've started multiple blogs through the years. I thought they were relevant and interesting. Also, I think it's useful to have a back catalog when you launch. That's something that I do when I watch podcasts now. It's important to establish the first time someone encounters you that this isn't just a flash in the pan thing. It's something that is interesting.

Ben: You mean like doing 30 episodes of Dithering before you released a single one?

Ben Thompson: In that case, we really wanted to figure out what that podcast should be. And then also working with Johnny can be a bit of a perfectionist, so it took us that long to get the website looking to sell who wanted it to.

David: Guys, I don't know anybody else like that.

Ben Thompson: There was a technical component that went into that as well, but I think it's good for both sides. It's good for the creator because if you can't have the discipline and stamina to build up a back catalog, you're probably not going to have the discipline and stamina to keep going for a long time. It's almost good internally to get that done.

But then also when someone encounters it and then they feel wow, there's an excitement, not just an anticipation of new episodes that'll be down the road, but wow, there is already a whole bunch of stuff here for me to listen to. And if you like the first one, you can listen to the second one. I think that second one is super important.

This is a point I've made about writing in general. Anyone can come up with one really good post or one really good podcast. I don't mean to say that dismissively. I think there are a lot of people out there with very smart insights. I think it's a very distinct skill and capability to come up with interesting things consistently.

The sooner you can demonstrate that to someone, the sooner they are going to take advantage of whatever means you have to follow, to subscribe, or whatever it might be, because it's not just a promise of consistency, but it's evidence of that. I think that's really important to online businesses in general.

Ben: I think about that element a lot. I also think about every piece of content you create is a churn opportunity. David and I regularly look at each other mid episode, and we're like, okay, is this of Acquired quality or is it actually net negative for us to release this episode, because we've now reduced the average quality of a thing that someone comes to expect from us?

Ben Thompson: Thanks for putting the pressure on me right up there. I better make sure this is interesting. It's interesting because I would push back against that a little bit. This is why the consistency part is important. There's an ongoing discussion.

I think there's that new social network post, news, or something. I just saw a thing on Twitter. I'd actually follow through, but they want to do micro payments for articles, which I think are terrible. There's a tendency and a lot of things to get overly indexed on the consumer, which sounds wrong. Why wouldn't you want to give the consumer exactly what they want?

Just to take the most obvious example, if a creator is not making money, the consumer may get what they want, which is free content, but they're not going to get it for very long. There is a short-term perspective versus a long-term perspective, which by charging for this, I can do this over the long run. But from a micro transaction perspective, I think one of the issues is that creating the piece of content is very time-consuming.

Obviously, you get the free distribution in the back end. You have zero marginal cost on the back end, but the problem is you have a timing mismatch with microtransactions between when the payment is made and when the investment is made. You want to put a lot of time into an article and then hope it gets traction. I can not just make money, but also repay what I'm doing from there.

I think that the way to think about publishing online is, what are you selling? I think we do get in the trap of thinking you're selling a single episode or selling a single article, that's actually getting the incentives wrong. What I'm selling to my subscribers is consistency and, yes, certainly a quality bar.

When I write something that I'm not happy with, I'm miserable for the next 24 hours. Or if it's the end of the week, I have to wait till next week, and that really sucks, because I certainly have the drive and compulsion to make sure that what I put out is high quality.

At the same time, there's an aspect of what I'm actually selling to my subscribers. This is more of an implicit promise, but I think it's the reality, is the consistency, the regularity, and the knowing that if something happens, you're going to be able to get my take on it.

I think that's where subscription pricing does make much more sense for content production, because in this case, you're actually getting the money up front. The money is funding the work as opposed to the work being a speculative bid for the money. One thing that I've pushed over time, and I'm very happy about, is trying to get people to annual subscriptions. I think my audience at this point is 70% annual subscriptions.

Ben: At $150 a year, is that right?

Ben Thompson: It's $12 a month, $120 a year. You do get a $24 discount by being annual.

David: You save on the Stripe fees.

Ben Thompson: Yeah, it's like a $16 difference. That certainly makes a big difference. But then also, I just think it's good for me and it's good for my customers to know that, look, I have a chance to make it up to you.

David: Your internet media business about the business of technology is a very different business than our internet media business about the business of technology across a number of dimensions. There's obviously the business model. Your primary business model versus our primary business model, you being subscriptions, us being advertising. But there's also the periodic nature of content.

I think one of the reasons we feel such pressure on each episode is we're only dropping one, maybe two episodes a month. How many pieces of content are you doing a week at this point?

Ben Thompson: Well, less than I once did, believe it or not. Usually three written pieces, one interview, two Sharp Tech episodes, and two Dithering episodes. I guess that is eight pieces of content. When I first started the daily update, I was doing two free articles, five paid articles, and a podcast. That was eight.

I guess I'm doing more now. But revealing my secrets, podcasts are easier to do than writing. It feels easier today than it was back then. It certainly is a lot. I don't think that will always be the shape of it forever. But yeah, there definitely is a lot more than two per month. There's a fair push back.

Ben: All right. Because this is Acquired, and I'm playing format, please, David, I'm going to take us back to the beginning. We're going to try not to dwell too long, because Ben, I know you've told your story elsewhere, but I think it's important for context.

You get this inkling of an idea that you can do this, and you have an idea for a way to cover the intersection of strategy and technology in a differentiated way than has been done before, and you decide that you want to start doing it. I think you are still doing it while you're at Microsoft in 2014. Is that right, Ben?

Ben Thompson: I started tons of blogs over the years. In some respects, I felt I had missed out because I'm the same age as folks like Ezra Klein and Matthew Yglesias. I was a writer for the school newspaper. I started a blog and like, man, if I had kept with it, I could be doing what they do. Then John Gruber started doing Fireball around 2003. There was some aspect of like, well, it's a bummer, I missed out on that.

Ben: It's like the famous Marc Andreessen. You show up in Silicon Valley and you feel like, oh, darn, it's already all happened.

Ben Thompson: Without question. Certainly, people push me, you should write again. You should do what I think I did those Tumblr posts while I was at business school. Yeah, it was definitely something that I always wanted to do just from a personal self-interest perspective. But also, it's not enough to just want to do something. There needs to be a market, there needs to be an opportunity.

The way I always put it is there are lots of sites writing about the products. Wall Street is writing about the financial results, but there's a big gap in the middle there. What is the strategy that goes into the products? What are the margins and the business models that undergird those products that drive to the financial results? How does company culture impact decision making? Why do companies do stupid things?

This is a common question in business school, and you would do these interview prep. When you're first year doing second year students, then you're helping the first year students. My favorite question was always, what's a decision or a product this company has made that you think is a bad idea or you disagree with? Everyone always has an answer to that, but the more interesting question is the follow up question, which is, why did they do that?

What you would see is a lot of people, their answer really was because they're stupid. The reality is, no one at these companies is stupid. A very popular choice back then was Microsoft making the Zune player. It's like, that's a dumb idea, blah-blah-blah. Why did Microsoft do that? It's not just useful for critique, but it's also useful for saying where companies should go.

I think either Microsoft or Facebook are probably my two biggest successes as far as an analyst. Particularly Microsoft where I think I very clearly articulated what their issues were. Also by understanding those issues, the organizational they were, the capabilities they were, and not just the weaknesses that entailed, but also the strengths that entailed where they should go, and the strategy they should adopt. That's basically the strategy they have adopted. Obviously, it's tremendously successful. But there's no one writing that stuff back in 2013.

David: One of the things we thought about a lot was we are not journalists. We came at this from having worked in the industries that we're talking about, and obviously, you did too having been at Microsoft, Apple, and plenty of other places. Was that in your mind? Everybody you mentioned, Ezra Klein, Gruber is different—we'll talk about Gruber later—but they were journalists. They came out of the media, whereas we were all coming out of the industry.

Ben Thompson: It's interesting. I wouldn't classify either Klein or Yglesias as journalists. They were bloggers. That's what they were. They ended up as somewhat journalists. Although I would say both of them, their best work has always been more analysis than journalism.

Maybe it's a stupid classification, but I think about journalists as writing about what is happening at best, uncovering facts. Analysis is explaining why it happened, and opinion is some aspect of saying what you think should happen. Those have certainly gotten conflated over the years. That's probably a different discussion.

Analysis and opinion (I think) do go together to some extent. It's actually a line that I'm actually pretty careful about. I really try to not break the news. That's actually an explicit choice on my side. It was an easy decision to make at the beginning because I knew no one. I had 400 Twitter followers when I started. Everything that I wrote was self-generated. It was just my own insight, my own view of the situation.

David: You didn't have any particular access?

Ben Thompson: No access. I had negative access. I felt like in part, because I couldn't write about Microsoft, because I was some pea on there. I think that of my work experience, the Microsoft bit was certainly the most impactful, not just because of what I learned about Microsoft, but just what you learn about big companies (I think) in general. It's very easy on the outside to anthropomorphize these companies, a single entity making decisions and doing what you want and doing what you don't.

The reality is it hits thousands and thousands of people. There are massive coordination problems. Everyone has a different take different opinion, which is why the culture stuff is so interesting, which is why the broad shared understanding of what a company is and is not capable of is so important to understanding why companies do what they do, because actually, it tends to be much more impactful than single individuals and definitely single individuals below, like the CEO level.

Even then, what constrains the CEOs actions is a pretty significant thing. They had to build a team to get apps for Windows 8. I was responsible for social media other than Facebook and Twitter.

David: So I guess, blogging.

Ben Thompson: I was responsible for publishing; the book publishers—Amazon, Kindle, things along those lines. I was responsible for lifestyle. You really got to know the publishing industry very well, both on the magazine side, the newspaper side, book publishing side. All that was certainly useful learning for writing about those industries, but also very useful for understanding app store dynamics, developer dynamics.

It was super fun, very busy, very high, trying to get stuff out the door, working with built SDKs, flying all over, and working with developers. Then Windows 8 launched, and it sucked after that, but it was up until then.

I was at Microsoft. I remember my wife and I, it was our first ever trip to Hawaii. I think this was the winter of 2012–2013. We sat down and talked about it. It's like, yeah, it's probably going to be time to move on pretty soon.

Any of Microsoft was always a bit of an upset. I was always an Apple person. That was my obsession, and I wanted to work at Apple. I had the good fortune of being able to intern there. I was at Apple university when Apple University had just started.

The original vision for Apple University was that it's going to be really focused on Apple having this notion of the top 200, although I think it's actually today more like top 300 or something. They go to this big company retreat. They're the ones that know all the future plans and other things that's going on. That's really the decision makers at Apple.

It's not necessarily by management position. There are ICs that we have no manager responsibility, but are part of that core. That was an amazing experience. And really trying to figure out what makes Apple Apple, defining the culture. It did seem problematic that it's very hard to write culture down, because then that's a recipe (I think) for ossification and getting locked into something.

What is interesting is it was written a lot about as this is sort of Steve Jobs initiative. I'm sure he okayed it, but he had basically no involvement at all. Tim Cook was very heavily involved. The whole Tim Cook doctrine thing that folks talked about together in an earnings call, that was that Apple University first.

Ben: Did you coin the Cook doctrine?

Ben Thompson: No. I think Horace Dediu did from Asymco. The reality is, culture comes from doing, and it doesn't come from saying. There's an issue. If you make decisions based on data, it's inherently backwards looking because the data has to be generated first. I think there's an analogy to culture along those lines. The concern about writing it down and getting focused on that is, you're locking yourself in.

Cultures are very, very powerful. It's the way that you coordinate a massive company and keep it going in the broadly same direction because there are so many things that you can't articulate.

You can't articulate that this is the way we do things. If you did, you would be bogged down. The transaction costs of communicating, every little detail, are massive. Culture keeps you going in the right direction.

But culture is also very dangerous, because if you have to change direction, suddenly you realize you're in a straitjacket. I do wonder if writing stuff down and saying this is the way we do things is actually like sowing the straitjacket. I'm not sure how that pays off.

Ben: Right, culture and process accomplish the same goal in many cases. Either it can be done in a lightweight process because the culture facilitates it getting done. But then, you have no processes to change something if the culture is no longer facilitating what you want to do.

Ben Thompson: I think that's an interesting way to put it. Culture is probably the process that can't be written down to some extent, because it's just an understanding of this is how we do it. I left that summer feeling like this is not the right thing for me. You get to business school, and you have to get a job. Everyone else is getting jobs, and you feel it. It was pretty tough for me.

David: Did you feel like what you do immediately after business school, like has this such weight to that career decision, and now you're just like, yeah, whatever, it's like a job?

Ben Thompson: I was hell bent on being in tech. I had lots of opportunities and offers. Obviously, consulting was an option. It's interesting, because I had a very non-traditional background. Being an English teacher in Taiwan, I built a distributed presentation system for a group of schools here. There was some tech angle, per se, but really, I was just looking to go teach from Taiwan.

David: Back to Ezra Klein, Matt Yglesias, you were cut from that cloth before getting into tech, right? You were a poli sci major, right? You worked in politics?

Ben Thompson: Yup. Honestly, a lot of that was my background. I grew up definitely blue collar, but my parents were ministers. You're in a small town of 2000. The pastor is the most educated person around, by and large. There's that as well.

The alternative to working in the factory or on the farm is you go to college and you'd be like a professor or something. There just wasn't even any awareness of any opportunities.

I think this is very not well understood by elites in general and people on the coasts, where it's not a lack of opportunity. It's a lack of even knowledge that there are opportunities elsewhere. For me, going to the University of Wisconsin was this big act of rebellion. I'm like, oh, I'm not going to go to a Bible college or I'm not going to go to whatever. In retrospect, I had the grades and test scores to go somewhere. Wisconsin is a great school, but I probably could have gone to an Ivy League school, but I didn't even apply.

David: That just wasn't on your radar screen.

Ben Thompson: Not even on my radar screen, not on the radar screen of anyone around me. I think this is a perspective that is probably not very well understood by a lot of our audience, I think to say the least. I actually love tech. I was very into it. I was the first person I knew around me who got an email address to be online.

David: Did you get the Internet at home before you went to college or was college your first experience with it?

Ben Thompson: No, I pastored and pestered my parents to get internet. I think we started out with a Juno account, which is just email only.

David: Wait. Was Juno the one that was a DE Shaw spin out?

Ben: Yes. That was an incubation of DE Shaw when Bezos was there before Amazon.

Ben Thompson: Yup. It was like a standalone client that was email only.

David: And then emerged with NetZero.

Ben Thompson: Yup. Even in college, I was super online. Me and my group of friends stayed in the dorms an extra year just because of the broadband connection. Broadband is used very loosely here. I think it's two megabytes up and down, because I worked at the student newspaper, which I loved.

One of the things that I did at the newspaper was, I took over the editorial section in my senior year. We sat down. We had five things that we wanted to see happen.

First, we decided, number one, editorials will only ever be about things that affect students. What we did was, look, we're going to write an editorial every single day, Monday through Thursday. Friday, the whole page will be given away to guests columns. We're going to write an editorial every single day, no matter what, and we're going to write about these five issues.

David: Did that mean you writing an editorial every single day?

Ben Thompson: We had an editorial board, but it basically ended up me writing an editorial every single day. It's what it came down to do. Not every day for the vast majority. It's interesting because there's an echo of what I ended up doing with my career. This daily hitting points, having to generate content.

But it was, (1) just from a practical perspective, it was fun and interesting. It's something I definitely enjoyed, and (2) it worked. Of our five things, we had goals. We accomplished four of them.

Ben: I want to go forward to your leaving Microsoft. Give me the emotional moment where you're like, it feels like it could work. I think there's something here, I think I have content/market fit.

Ben Thompson: To go to the back of the Hawaii trip, there was an aspect about going to Microsoft. It's like, well, I should go to a place that is directly oppositional to everything I believe in. Can I make changes at Microsoft? Very sort of arrogant.

Really, I learned a lot from Microsoft as opposed to the other way around. I signed up for it knowing this is probably not where I was going to be long-term. After that trip is when I did Stratechery. I wanted to figure out a way to get back to Taiwan at some point. My wife is from Taiwan, and we enjoyed living here.

Also, again, I just felt like there was this whole opportunity. I looked at Gruber as someone that was like, well, he did it, but it was also pretty clear that an advertising-based model was probably not going to work. That was obviously a regular theme of mine about the centralization of advertising under Google and Facebook. That world of starting a blog and throwing up some Google Ads was not going to be a viable one.

David: What made you think that? To my mind, at least, there is a very viable and robust alternative history where Stratechery is an advertising business model.

Ben Thompson: I think that I would have to have started much earlier. I think Gruber's model is the right one. I think he is actually underrated. I think he actually invented native advertising, because you read every piece of content that he writes, and one of them just happens to basically be an ad. It's the same format, same content is what's there. I would bet that the rate of consumption to encountering it for his ads are higher than almost anything else out there.

Obviously, Facebook does that at scale, and it’s all automated, self-serve. When you scroll through, there are different pieces of content yesterday, and then some of them are ads.

David: But you didn't think you could do the same thing that John does?

Ben Thompson: I thought that was a possibility, a potential leg of the stool. But I didn't know that I could do the same format. What works for him very well is because most of his stuff are short snippets and wink out, it's very easy to check in and read everything. I ended up moving more towards longer pieces.

I experimented and played around with that format, and it didn't seem right to me. Also, just strategically, you could see where things were going, this idea that users are going to Google, going to social media. That's the best and most obvious place to put advertising because that's where the users are, there's understanding about them, and all those sorts of things.

Advertising is an ROI measurement. It's not just what’s your return, but also how much work you have to do to get it? Why would someone want to go to a small blog and put the effort of putting it out there? It didn't seem like a very scalable possibility.

Meanwhile, at the same time, there was this new company that was founded called Stripe. It seemed viable to me that if you thought through the idea, if I produced super highly differentiated content, that is something that is not going to appeal to the whole world, but to the people who like it, they'll really like it. If you have that audience, you should maximize your revenue per user. The way to maximize your revenue per user is to charge them a subscription. The tools were then becoming available to do that.

Ben: Just to validate the point real quick—and David, this might push back on there being an alternative history where Stratechery could have been ad driven—for anybody who doesn't read Daring Fireball and doesn't know who John Gruber is that we're talking about, quick lesson.

When Ben says that he invented the infeed advertisement, you go to daringfireball.net, yes.net, and you see the same exact website that's been there for 10, close to 20 years at this point. Most of it links out to other things. Some of it is long form, well-thought-through pieces, and some of it is sponsored posts. I consumed, just like many other people, the entire feed in an RSS reader. The sponsored posts would show up just like any other posts in an RSS reader.

Now, I think the set of people who are likely to use an RSS reader and who are likely to go directly to daringfireball.net as the place where they're intentionally typing in the URL or clicking the bookmarks bar and going to it, that set of Apple nerds is far more likely to do that behavior than anybody else in the world.

The world is shifting away from going directly to pages. A lot of your readers are like, I'm just getting my news from Twitter and wherever else at this point, and I'm not doing the RSS thing.

Ben Thompson: I think the more niche you are, interestingly enough, that does pay off in subscriptions. It can also work well for advertising. I think Gruber was at the right place, the right time for Apple, for sure, not just in terms of Apple's growth, but also the explosion of the App Store. There was a period where you'd have lots of apps as a feature thing, so it works great for him.

Again, I did have sponsored posts a little bit when I did go independent, because I figured I'd have multiple revenue streams.

David: I didn't remember that. How long did you do that for?

Ben Thompson: Six months. Again, the ROI wasn't there for me either. I couldn't charge that much. It was a big hassle and getting it arranged. Then also, there are a lot of complicating factors. Pushing people to email was not a good fit for that. I started Stratechery pretty clear that subscriptions would be the core model. I was going to try lots of things to monetize.

David: Clue to you, though, but you pioneered that. There was no Substack. I think in many ways, Substack was, I don't know the exact history, but probably modeled after you.

Ben Thompson: Substack's seed deck says Stratechery in a box. That was their pitch.

David: So this was a big innovation?

Ben Thompson: Yeah. I think the subscriptions did exist (I think) on Wall Street in particular, but they were generally like $20,000. You would get all the hedge funds to subscribe and the banks. That model still exists and is actually a very, very profitable one.

What I do think Stratechery innovated was subscriptions at scale, where you're charging a low price relative to $25,000 or $10,000. You're doing it on a self-serve basis. People sign up with their credit card.

Again, Stripe was a really important part of making this possible, but there were no real subscription tools. I had to actually hack it all together when I first started. There were WordPress subscription tools, then there was Stripe, and you had to glue them together. It was a big mess when I started. A year after I started, a company called Memberful then launched, which I switched to. That definitely made things much easier. Obviously, I have my own system now.

Ben: You've worked with an outside development agency to custom build software for which you are the only user to publish Stratechery now, right?

Ben Thompson: At the beginning, it was all me. I built my own page. I did all that integration myself. I'm not really a developer, so it was very hacky. Actually, one of my nightmares was when I launched the paid product. In Stratechery, I messed around the format a little bit at the beginning.

Actually, the real pioneer, who I should mention was Andrew Sullivan, had this manic posting schedule, like tens of posts a day. He didn't have a team to help him with the daily dish. He switched to a subscription when I think he left the Atlantic. It was successful. He quickly was doing a million dollars in revenue a year.

He maintained that manic posting schedule that made sense in an advertising driven world where you want people always coming back and getting lots of impressions. The paywall was super loose. It was like 30 posts, and then you hit a paywall or something. The reality is what happened was he burned out. I think he had some health issues, and he ended up leaving.

It was funny because when he left, everyone's like, blogging is dead, it's finished, it was a failure. I looked at him and I thought, I think this was actually a huge success. One of the problems was he had this posting schedule and system, and then he tried to drop a paywall on top of it.

When I thought about Stratechery, I wanted to do the opposite, where I wanted a subscription to not feel like from a customer perspective that I was taking stuff away, but that I was giving them more just from a psychological perspective.

Once I realized I definitely want to do the subscription model, I started becoming super disciplined about never writing more than twice a week. This was back in 2013 where I was doing Stratechery, because my plan was for subscribers, if they subscribe they'll get more. It would be like an exciting purchase as opposed to hitting a paywall, this sucks.

David: And your audience that you are building up before putting the paywall in would still keep getting the same.

Ben Thompson: That's right. My initial model was still Daring Fireball–like, where I figured, oh, I'd have big articles, and then if you subscribe you're going to get a whole feed of them. But the little stuff, my commentary on news articles, I built a new website, again as a not very good web developer.

The metric I was paying attention to was people who visited the homepage on days I didn't post, because to me, those were people that were hoping I had written, and they wanted more from me. I figured the classic if I get the XYZ of why. But I thought, if I get 10% to this audience, that'd be something that would be reasonable. That metric was pretty high.

I didn't appreciate then just how powerful social media was. Publishers bemoan social media, but those are publishers with old business models. If you have a new business model with a very low cost structure, social media is a godsend because you basically get free marketing.

What a lot of people don't understand is, I think a lot of writers give away way too much content on Twitter, and they're out there posting. It's like, why should I read your site when you're just telling me everything you think on Twitter?

The reality is the power of social media is that it gives you another platform. I have a platform, it's stratechery.com. What it does do is give all my readers a platform to tell other people, wow, this site is really great.

Ben: Look how smart I am for having a take on this thing that Ben wrote, which you can read about on his website.

Ben Thompson: Right. If you share something that's great, you get the likes, you get the retweets, and you get the status of people who think, wow, this person is sharing good stuff. That's really powerful. This is probably an angle.

You mentioned the Marc Andreessen quote, when I thought I was too late. In this case, it turned out I was early. I was the only person doing this model out there. There was still an era of 2013 Twitter, 2014 Twitter, where people would share links to something, and it would break through if it was consistently good. This is also where the principle of having the second article be good as super important.

This is (I think) unique to the social media era, where people follow a link to a site, and they pay no attention to what the site is. They don't even know what it is. It's basically a Twitter article for all intents and purposes.

I did want the site to be visually distinct. I did like a custom font, which back then was very rare. That was a new thing. I had the orange. There weren't very many orange sites back then. And I did a lot of these hand drawings, which were very visually distinct.

David: The Ben Thompson iPad hand drawing.

Ben: You're a good artist. The boats, even in the first post—the sailboats—it's quite good.

Ben Thompson: Thank goodness for iPads and the ability to edit endlessly. The reason for that is, what I was really thinking about was, oh, they follow an article, like, oh, that is a good article.

A day later, a week later, a month later, they follow another link. They're like, wait, I've been on this site before, it's triggering my memory. That's really (I think) the key moment. It's like, oh, yeah, I'm going to follow this guy on Twitter, or I'm going to put this site in my bookmarks, or I'm going to put my RSS reader, or whatever it might be. That's the key thing that I think you want to accomplish.

This is one of my big criticisms of Substack. It's interesting, because Subsstack (I think) is achieving some degree of network effects, where everyone's familiar with it that your payments are already on file. All that stuff is true, but nothing visually about Substack is memorable. Every single site looks the same. Also, they'll be reading post off to like, bring down the address bar and like, who am I reading again?

Ben: The kerning is also weird. This is a weird typography nit, but I'm like, it always looks slightly wrong to me when I'm reading the body text.

Ben Thompson: Yeah, I agree. The Stratechery, even the name. I know, in many respects, it's a bad name for a word of mouth site to be a name that no one knows how to pronounce.

David: But it's not an audio word of mouth aside, it's a...

Ben: Word of tweets.

Ben Thompson: It's super memorable for good or bad reasons. It's one of those no exposures, bad exposures things. More importantly, the URL existed, the Twitter handle existed. It didn't exist in Google search. There were pluses or minuses.

David: When did you come up with it?

Ben Thompson: The name that I've always been the most jealous of is Asymco. Again, to go back to Horace Dediu, it has all those qualities with the advantage of being pronounceable and easily spellable.

In retrospect, I always make fun of the Stratechery name because it's easy to make fun of, but I do think there are a lot of positive qualities to it that are under appreciated from this memorability aspect, but there is an aspect where it is hard to pronounce. People are afraid to say it because they're worried they'll say it wrong. If they say it, they don't know how to spell it, so it's not perfect by any means.

Ben: It is based on the Strategery movie bit, where it's supposed to be Stratechery?

Ben Thompson: Yeah. It's strategy and tech. Yes, there was the Strategery bit, so then I'm like, well, I should pronounce it stratikiri. That was a terrible idea. I think I did that for a month.

Ben: Didn't it even say on the website, it's pronounced stratekiri?

Ben Thompson: Yeah, at the very beginning. Then I quickly realized that was a very bad idea, because it is strategy and tech, so it should be Stratechery. Lots of poor decisions. It's very easy to look back and see all the good ones.

Ben: But this is how you build brands. The only way is to do this stuff. I feel like every single time we talk to someone who built something in their own image from first principles with their ideas in a super opinionated way about how they wanted to birth their internet child into the world, it has all these really rough edges for a while.

Ben Thompson: And that applied to lots of pieces. I had my people visiting the homepage of days I didn't post. In the meantime, I was really looking for a job at Microsoft where I could still blog.

Ben: Isn't that all jobs at Microsoft? You just chill and you have plenty of time to blog.

Ben Thompson: But I couldn't write about Microsoft. Also, it was getting a lot of attention. Again, I was surprised at how quickly it blew up. This is where the other Gruber story comes in, where appendicitis, I'm laying in a hospital bed and getting ready for surgery, and I'm waiting around for a few hours.

I had waited to email John for the same principles at the beginning. I wanted to have a body of content, not just like an introductory post and say, oh, check out my new blog. How many emails does he get about that?

I waited a couple of months or a month or so. I emailed him and said, hey, been a big fan. He had just been on a podcast telling his origin story. He also worked on the student’s paper and XYZ. I shared that. I'm really related to this. I regret not doing what you did back in 2003, but I'm giving it a shot now. Here's a few articles, hope you're interested, and I heard nothing back. No response.

I had my surgery. It was very successful, no problems. A couple of weeks later, I'm at Microsoft and I get an email from him pointing out that I'd made a grammatical error. I think it was something like Jai Jim Jive. I use the wrong one, and he's like, I make this mistake all the time. He's telling me the etymology of each one, and that's all the email said.

David: No closing, like I love your work or just full stop?

Ben Thompson: No, it was just explaining that I used the wrong word, what different words meant, and what I probably meant to use.

I thought he's probably going to post the link to the site, so I was very excited. I'm sitting on the analytics page, and I'm sitting during Fireball, and see what he will post. I was hoping for just a short link. He has all those short snippets. Instead, it's a full article. He starts out saying, all my readers should be reading this new site that I've discovered, of course. It's called Stratechery. It's the best news site I've encountered in years, and he wist three articles

David: That I've discovered with the help of its author.

Ben Thompson: Right. He's like, this article, this article, this article. It's like 500 words of just the most glowing praise imaginable, and he gets the end. He's like, but for the first time, I disagree with Thompson, and then he spends another thousand words saying I was wrong about something, which was fine. I think he was wrong.

David: And that was the start of a beautiful friendship.

Ben: Do you remember numerically what happened to your traffic after that?

Ben Thompson: The thing I always was indexed on was Twitter followers, because that was a very clear metric of people who had affirmatively decided that they wanted to know what I had to say. I don't think that's the case anymore, but for a long time, my percentage of subscribers actually followed, was a fixed percentage of my Twitter followers.

Ben: Paid subscribers were at a fixed percentage, like people who subscribe to the daily update?

Ben Thompson: Yeah, which meant I knew my limiting factor on subscribers was awareness of who I was. I had 500 Twitter followers when he posted that. Within 12 hours, I had 1500 Twitter followers. That sounds very small. I have 200,000-some followers now.

Ben: Tripling hour over hour is a great rate to compound that.

Ben Thompson: That's right. Also, there were a lot of people that were also bloggers, writers, or influential. There were two step changes in Stratechery's growth that was really the first one for sure.

The next day, I get reached out by the head of strategy at Microsoft, or a week later. He's like, hey, can we have a meeting on the call today? I thought I’m in trouble now.

David: He gets summoned into the principal's office.

Ben: At least it's not the head of PR. That would have been way worse.

Ben Thompson: He ended up being with him. He wanted to hire me. He's like, look, I'll bump you up to level 65. I want to go back to level one.

Ben: Is this Kurt DelBene? Who was the head of strategy at the time?

Ben Thompson: No, his name is Charlie Songhurst.

Ben: Oh, yeah.

Ben Thompson: I slipped about it. I knew he was probably leaving soon. He did end up leaving shortly after. He's like, no, go live in Taiwan. Just fly back once a month, it'll be fine. But fortunately, I turned him down. This is a circuitous way to say I did feel I needed to leave Microsoft. This thing was taking off, it wasn't sustainable.

I couldn't write about Microsoft. It was stuff that people at the highest levels cared about. It wasn't like writing about the finer details of VPNs or something along those lines. I'm looking for a job, and ended up on Automattic, and that's where I met Matt.

David: You went looking for a job in your heart of hearts. Were you hoping that you could someday not have a job?

Ben Thompson: Without question? No. Stratechery was my plan.

David: You just felt like you couldn't do it yet.

Ben Thompson: Yeah, I had a family. I had business school debt. I needed to have a job that paid the bills. I wanted to find a job that will let me continue to do this.

Automattic worked out. It actually worked out even better because I was hired as a growth engineer or whatever, which I didn't really know anything about, but then the team I was on pivoted shortly after I was there, to building a new back end of WordPress.

There was nothing for me to do. We didn't have a product out. But fortunately, there was a little bit of pushback internally, because I was becoming this very visible blogger. It's like, what the hell? This guy's working for us? I thought we were just to have, because back then Automattic was one of the few distributed companies. He could live where he wanted to.

As soon as I got the job, we moved back to Taiwan. You weren't supposed to have a second job for obvious reasons. I think Matt did run some interference for me, where he's like, no, don't worry, he's good.

One thing I did do for Automattic is I went through a lot of the company and what they were doing. I wrote this big strategy document about where they're at, what they should do. It had some impact, I think on where they end up going.

Ben: You guys should buy Tumblr.

Ben Thompson: It had been a very small company. Around that time, they decided to raise a lot of money and grow into being a much bigger one. I don't know how much impact I had. Matt says I had a big impact. He made me the big generous, I don't know, but I actually end up working mainly directly with Matt.

He mostly left me alone, and then he would have a question or whatever, and then I would think about it, write something up, and come back, well, nominally being the growth engineer for this team that did not have a product in the market. I owe Automattic a lot, but it was also very stressful.

I felt really guilty. I'm really devoting all my energy and time to Stratechery, and I'm getting paid by Automattic. That was internally very stressful to me. That wasn't the idea. It sounds cliche, but I was raised in a Midwest blue collar town. I'm getting paid far more than I've ever made. I didn't tell my wife, and I don't feel like I'm devoting all my time and energy to this company. That was very internally stressing.

I got this job to be a consultant for this company that wanted to expand in Asia Pacific. I'm like, well, I can do this consulting job, and then I can make Stratechery a paid thing. I couldn't do that while I was at Automattic. Again, you couldn't have a separate paid job while being there.

Ben: So you left Automattic to go do this potential consulting thing?

Ben Thompson: No. First, I left Automattic because I needed to build this subscription bit and this new website before I started this consulting job. I left Automattic, I'm working on building this. What happened was that the consulting job fell through. It just didn't materialize.

Ben: No way.

David: You burned the boats, and then there was no car.

Ben Thompson: I launched Stratechery. Again, the idea was you would log in, you get this much fuller experience. I launched it and there's something wrong with the security certificate. The first 24 hours, no one can make a purchase.

I'm up for 36 hours straight. I barely slept for the week before, I'm finalizing the site. I stupidly had reached out to Kara Swisher at Recode. She had a pre-scheduled post that's going to announce that it's going to be paid. I had this stupid artificial deadline that made zero difference other than stroking my ego. It was awful. It was a horrible experience.

The worst thing was the product sucked. It was super confusing. I didn't achieve my goal of having a good experience for non-paying customers that was ideally to lure them in. For paying customers, it didn't work well. It was very janky and it sucked. It was really, really bad.

Over the weekend, I'm just miserable. I know I screwed up, and I burned my bridges and all this thing. I realized that I messed up. The business models right the products wrong.

Over the weekend, I tore the whole thing out. I went back to the old website, and I told the people that subscribed, I'm like, look, I appreciate you subscribing, the format's all wrong, what I'm going to do is for your subscription, I'm just going to email you. I'll email you once a day with the extra stuff that I promised you. I felt completely and utterly asked backwards in the email. I thought it would all be on the website.

David: I've been thinking this whole time. I'm like, we have not talked about email once.

Ben Thompson: My mentality has always been, Stratechery is a website first and foremost, but it's like, look, I'll deliver you this extra stuff via email. It will also be on the website on the sidebar. It'll be archived there, but you're going to get an email.

It worked out in the long run. In the short run, though, I had a one day goal for new subscribers. I guess a two-day goal, because this site wasn't operable for the first day. I had a one day goal, a one week goal, a one month goal, and I failed to reach all of them. And failed pretty significantly, honestly, to reach all of them. I'm there, I've given up this six-figure job. I'm living in Taiwan, business school debt, and an idea that I thought could work but did not seem to be working very well.

It was very, very stressful. I stopped paying all my credit cards because, especially back then, Taiwan was very cash-centric, so I needed to preserve cash. I was not sleeping. I also watched a podcast at the time, which was Exponent with James Allworth. I'm writing, as I mentioned before, seven times a week plus doing a podcast. I'm doing all the editing for the podcast, all the production, and all this stuff. I thought I'm going to have to go teach English again, to pay the bills at the same time.

Then I think the first month, when I tore all that out, I screwed up the subscription, so I double charged a whole bunch of people to process all these refunds as well as customer support. It was pretty tough. I launched in April.

Ben: This is April 2014, 2015?

Ben Thompson: 2014. Next year, it will be 10 years of Stratechery, but 9 years of it being my job. Fast forward to the summer, we're back in the States. My wife and I had planned a longstanding trip. We're going to go to Paris and leave the kids with my parents.

David: You fast forward there a little bit. You must have had some thoughts in those intervening months where you're like, well, shoot, I was going to give up on all this, right?

Ben Thompson: Yeah, but there was certainly a pride factor. I couldn't bail on it. No one thought I would succeed. I had lots of people reach out and be like, hey, Ben, I love you, but subscriptions are not a thing on the Internet. It's not going to work, and a lot of people in tech, especially VCs.

Ben: Which is weird, because they always know exactly what's right.

Ben Thompson: No, they're very conventional wisdom-driven (I think) in general. I can still picture. I was sitting at the kitchen table at my parents house in Wisconsin. You looked at the numbers, and my main subscribers were more than April. June was more than May, and July was on pace to be more than June. We're still talking like a couple of hundred, not very many. I also had multiple levels. I had this $300 level, where I was supposed to chat with them, have subscriber calls, and all this stuff.

David: Everybody starts that way and then quickly gets rid of it.

Ben Thompson: I'm also trying to do sponsored posts. It's really just an overwhelming amount of stuff. I looked at those numbers, I'm like, I think it's going to work. I paid off all the credit cards that had been running up for the last few months. My wife's like, should we cancel the trip? Like, no, we're not canceling this trip.

She was very mad at me. She's like, you threw away that six figure job. I didn't want to tell her how poorly things were going.

David: You didn't give her access to the analytics?

Ben Thompson: No, of course not. No, we're not canceling our trip. Things are going great. We flew to Paris, the credit cards all back up again, of course. In Paris, I remember, I would wake up every morning at 4:00 AM, sit in the bathroom, and write a daily update. Then my wife would wake up, and we would go out for the day. That ended up being true. It just kept increasing.

I mentioned there were two big step changes, the Gruber being the first one. In November, I actually ended up reaching 1000. It was my one year goal. I hit my one year goal much earlier than I expected. In one year, $100 a year, $200,000 run rate.

Ben: The funny thing about exponential growth, you miss the early goals, but you nail the later ones.

Ben Thompson: I don't think exponential growth really applies to my business, but maybe more so at the beginning. There's more of an exponential curve. The problem with a word-of-mouth business and exponential growth is people run out of people to talk to. That's the limiting factor.

Ben: It's only the new subscribers that give you the exponential.

Ben Thompson: Right, there's a little bit of exponential with every new subscriber, because they will tell new people, but networks get exhausted. It's more than linear. But if you zoom out, it's really linear is the way this growth works.

What happened was in November, I put a little post out. First I simplified my model. I said no more of this $300 level, cheap level, one price and one product. That's all you're getting. Then number two, I'm like, I got a thousand subscribers, business model works, this is definitely going to be my job going forward. In the next 24 hours, I got 250 new subscribers, by far, the biggest step change in my subscriber growth.

David: Did not the VCs email you again and say, Ben, you're a genius, will you please come talk to our portfolio companies?

Ben Thompson: I was right about my metric of people visiting the homepage that hadn’t subscribed. What I was wrong about is that the vast majority of people thought I would fail and go out of business, they didn't want to lose their money. They didn't subscribe. But once it was clear I would be an ongoing entity, then like, oh, okay, I guess my money will be safe, so I will now subscribe. I was right about the market, I just didn't understand that psychological aspect.

One thing I think is great, sort of I went back to Substack and making it easy to pay, I think the real great thing for Substack and Substack writers today, it's not that it's easy to pay, but people aren't scared to give their money to some random writer on the Internet. They were previously, and now they're not. I think that's really great and something I'm very proud of.

Ben: Wait. What was it about yours, where they suddenly became not afraid?

Ben Thompson: Because I had 1000 subscribers, I was making $100,000 a year.

David: Was it they thought that before they knew that you were secure, that you might just stop writing and then they would have paid you, and then they would get nothing for it?

Ben Thompson: That's right. I think that was really the case. Since then, it never had a growth explosion like that since that 25% growth in one day, but it's been slow and steady since that point.

David: That accidental email hack, how do you think about it? You say you still think about Stratechery primarily as a website, but how do you think about email now? Obviously, it's a big part of what you do.

Ben Thompson: It is, but it's not. I think if you see the stuff that I've done. For example, now you can consume the daily update via a podcast or my articles via podcast, I think that's actually very much in line with my vision and view of Stratechery, which is, this is a publication that I write and I will make it as easy for you to consume in the way you want to consume as possible. Back in 2014, that meant sending emails.

Certainly, there's all the advantage of emails that everyone's talked about. It's a fee that everyone checks daily. You don't need permission to get in there. There's no algorithm. It's funny, because I think once Substack came along, it became overwhelming. People started setting up rules to send all their emails to a folder which they never check, so you're back and started the same problem, a self-imposed algorithm, which is where podcast is great.

It's the same idea. It's a feed that people check. It works through polling, but to people, it feels like push. That's certainly a great thing from an independent publisher perspective, and I think in line with my vision.

One of my criticisms of Substack was I think they were too email-centric to start. Again, I think the web experience is important. It's super important for growth because that's where people find out about stuff is often via social media and sharing links. Email is a tactic, it's not a strategy. At the end of the day, the strategy is about differentiation. It's about consistency.

I want it to be easy to use and fit in your life, and email was a way to do that. Again, backed into now podcast is a way to do that, you can get Stratechery articles via SMS, which gives you a link and you can read on the website. Obviously, I've always had RSS. I just want to make it as easy for you to access the content that you're paying for as possible, because that makes the whole thing go.

You mentioned churn. The beautiful thing about this model is, from a writer perspective, all I really need to worry about is keeping my subscribers happy. Should this be a free article? Should it be paid? Well, you know what? If it should have been free, but I made it paid, that's fine. My subscribers feel like they got a great article that they paid for, and they feel good about that. That recurring revenue is really, really powerful.

Also, that's my marketing channel. It's them telling other people about this is good and you should check it out. One thing we do with Passport is a big way stuff spreads is people forwarding emails.

Ben: And Passport is the technology infrastructure you've built to enable other people to build Stratechery-like experiences? If they're whitelisted by you, how's that work?

Ben Thompson: No, it's just my stuff for now. Obviously, we would love to make it broadly available. It's not all finished yet. There are customer support issues and things that would entail that, but it's something that I would like to do.

One of the things we did with that is I link to myself a lot, which people make fun of and deservedly so, because it's a running joke between me and my readers. But a way I think about Stratechery is that it's a live thing. It's an ongoing journal of my attempt to understand the world, to understand technology.

Sometimes I was right about something., and it's always fun to point back and say I was right. Sometimes I was wrong. It's like, why was I wrong? What mistakes did I make? Sometimes there's a trend and it's like, well, this happened back then, and this happened here.

Again, I think about it as being a live thing, so linking back to myself as a way to do that, it's also a great way to trigger that second article sensation, where you read an article, and then there's a link right there and you go read another article. That was also really good, and then there's XYZ.

One of the things that I wanted to do with Passport was, how can I really leverage email forwarding to accomplish this, especially when I'm linking to paid articles? One of the things we do there is, every link to myself in a Stratechery email is tokenized, and that token goes one link deep. Even if the email is forwarded to you, you can go read old stuff so you get that second article sensation.

Now, if you're in that second article, when you click another link, now you're getting a paywall, and then you're going to realize, oh, I have to pay to get this. There are all these little bits and pieces that the subscription all makes possible, which is really leaning into just serving your customers, trying to make it as good of an experience for them as it can be.

The other really important thing about subscriptions is there are always debates about, oh, people just write for clicks and blah-blah-blah. Then the publishers or the editors will come back and say, no, we don't even show our writers their click numbers. They don't know. All we want them to do is write content.

I think that's so foolish because everyone wants feedback. They want affirmation. They want to know, did I do a good job? If you don't even get access to your click numbers, where do you go? You go to Twitter. What are people saying about me?

Ben: You will find a way to figure out if you resonated or not.

Ben Thompson: And who's on Twitter, the biggest loudmouths. One of the things I word on Twitter about Twitter very early on was, I would be very engaged on Twitter, I'd be responding to people. It's only occurred to me. I'm responding to the same 10 people, 30 people, or whatever it is, right?

Ben: So true.

David: Yeah, you're engaging with 0.2% of your audience.

Ben Thompson: Right, that's a fixed number. Meanwhile, I have a feedback mechanism, which is my subscriber number which is going up, which means I know there's a huge number of people that like, appreciate, and are sharing, and it's all dark matter. I don't know who they are. I don't know where they are, but they like what I'm doing, and I need to anchor on that without worrying about what the loudmouths on Twitter are saying.

Subscriptions give this feedback mechanism. It's a feedback mechanism for people that will never email you, that will never contact you, but they will pull out their credit card and they'll give you money. I think that's so valuable and so positive from an incentive structure.

Now, there's a downside where subscriptions are niche. I do think you tend up. If they dislike you, they can stop paying. There is a worry and a challenge that you're not pandering to your audience or whatever it might be. I think I'm lucky because I was so early, because I was the only person in this space doing this stuff.

I got to a large-enough audience size where I could not care. If someone wants to cancel the subscription, I don't care. In fact, if someone comes back and if they are just over the top rude, disrespectful, or insinuating things about me, I will not just cancel their subscription, I will refund them their entire purchase and say, please just never come back.

Ben: Isn't that the nice thing about the approachable price point? Actually, your dollars are insignificant to me because my number of subscribers is so much larger. It's very different from if Apple decides to stop advertising on Twitter. It's like, oh, crap. Oh, I'm so sorry. I'm so sorry. Come back.

Ben Thompson: That's exactly right. Again, would I be able to do that when I had a very small number of subscribers? No. But it was easier back then. I started in 2013 and the entire opinion of the tech press and Wall Street is that Apple was doomed, because of course, what could happen with Windows and Mac, blah-blah-blah.

I had the lowest hanging fruit in the world to pick. It'd be like, no, I don't think Apple is doomed to be honest. That's why I wrote that [...] was wrong, because all the disruption, people were like, Apple's for sure screwed unless they go down market. I'm like, no, I don't think they need to go to market.

That was great because it's not because of writing anything that is controversial. I didn't even run into any issues where people would try to hold it over me. By the time I got into issues where that mattered, I was large enough that it didn't matter. I think I was definitely fortunate in that regard.

David: For our second sponsor of this episode and all of season 11—thank you guys for a great season—we have one of our very favorite longtime members of the Acquired family, pilot.com.

Pilot sets up and operates the entire financial stack for startups and growing companies. That means your finance, your accounting, your tax, even higher level CFO-like services, like investor reporting, all of which, as we've talked about all season, you would either be hiring a big four—not a big five—accounting firm to do for you, building out your own finance team, or doing it yourself as a founder, none of which are good decisions or good leverage on your time and resources as a startup.

Pilot is a much better decision. They take literally all the headache of finance and accounting off of your plate as a founder and a startup team. They provide you with their own team of experts, actual financial accounting experts, and technology to set up your financial infrastructure and run it right.

Ben: Now, we've talked about this a lot on this show, but it really is worth talking about this defining characteristic of Pilot. They integrate with the APIs of all the modern startup-grade platforms like Stripe, Brex, Gusto Shopify, Square, et cetera. But most importantly, the next five that come after that, they know how to make that work seamlessly with your company's books, so you can always use the best tools available to you and trust that your accounting bookkeeping provider will have the ability to keep up.

Stripe itself is an investor in the company alongside Sequoia, Index, and Bezos Expeditions. There are no other accounting firms in the world that can say that. If you are still using QuickBooks on your own as a founder, paying someone to integrate a bunch of stuff on your behalf, or paying an old school accounting firm, head on over to pilot.com/acquired and make your life easier.

Thanks to the pilot co-founders Waseem, Jessica, and Jeff, for providing this awesome 20% discount for the first six months of service if you go to pilot.com/acquired. Thanks, Pilot.

David: Thank you, Pilot.

Ben: Can you share what the shape of the curve looks like in terms of if you graph it on the X axis as time and on the Y axis as the number of subscribers from the start of Stratechery today? We talked about going up to 1000 and then adding 250, and that step change. Even if it's relatively linear, has it tapered off over time? Are you saturating the world of tech people who care about business strategy?

Ben Thompson: It's interesting, because there's been different periods where it actually I thought it was starting to taper and that actually accelerated. This is probably 2018–2019, around there. Over the last couple of years, it has tapered off. It's not quite what it was, which is fine.

David: In terms of the growth, it's tapered off.

Ben: I think it's subscription revenue. If it stays flat, you're in great shape.

Ben Thompson: Yeah. Then also, I raised prices a couple of years ago, which is the only time I've raised prices. I still mildly regret it. It's funny, because everyone's like, always, your price is too low, you should raise prices. That's definitely the absolute easiest way to increase revenue. I think the easiest thing for me to do would be to just keep doing what I'm doing and just raise the price $1 a year every year. For sure, my revenue increase would very much outweigh my churn.

Honestly, the biggest change that happened when I did raise prices was it didn't affect growth at all, except that I had a lot more people switch to annual subscriptions, because I like pre-announces like, hey, if you want to get a year at the old price, which is great, because I want people with annual subscriptions as we discussed at the beginning. I could do that.

I think on the Internet in general, the markets are much larger than people think. I thought it was much larger than all the folks that are critical of my model thought, and it's been larger than I thought all along. I thought it would take five years to build or to launch my business. It took a year.

I would rather explore the edges of that market, how big it is, as opposed to maximizing my revenue too soon. That's number one. Number two is, I do want to have an impact. I do want people to read.

By definition, the larger your subscriber base, the more your marginal customer is not aware of you, and is not immersed in this space. Their willingness to pay is going to be lower. When you start raising prices, you're gonna hit a wall very fast as far as subscriber growth, by definition. That’s number two.

The shift over the last couple years has been, well, is this it? I've reached my natural base or whatever it might be, which is, again, massively larger than I ever expected. I just wanted to pay the bills.

Ben: Yeah, like tens of thousands of people that pay you to read your work, and millions of people that I'm sure come to your website and read the free product. There is a real market for this.

Ben Thompson: I would definitely push back on the millions. I think it's interesting because I do think this is an area where I do feel I got there in time. I think the ability to spread on social media, on Twitter, has really diminished. Twitter famously, really started devaluing tweets with links a few years ago, which I think has made the product much worse. That's how we ended up with all these threads, because those spread more.

David: Oh, threads. Oh, my God.

Ben Thompson: Yeah, which all should be blog posts. I think that has hurt. The other thing that has hurt my growth, frankly, is releasing this stuff as a podcast. My subscribers love it. Half my subscribers now listen instead of read, which is amazing.

Ben: That's how I consume every single post.

Ben Thompson: Yeah, and then the other good thing is people would churn because emails would build up. They would look at their inbox, there'd be like 20 unread emails, and they're like, ah, why am I paying for this? Whereas an eight-minute podcast just feels I can knock this off real quick.

It's been very good for churn. But the problem is, people don't share podcasts. You listen to a podcast, you go to the next podcast, you do XYZ. Whereas if you're reading something, it's super easy to tweet it or to forward the email.

David: Click forward, yeah.

Ben Thompson: Yeah. I do think that might be the biggest issue on why my growth slowed down, to be honest, which is fine. It is what it is.

David: You're obviously leaning more into podcasts, right?

Ben Thompson: I did face a decision this year, which is, growth is somewhat leveled off. Do I raise prices and just be happy with the base that I have? I figured it'd be worth a shot to see if I can restart growth, in this case, by working to increase and broaden the value of a Stratechery subscription and not just my own content.

I watched the other end with Gruber. Obviously, he's not my podcast partner a couple years ago. That was like an add on, so you pay extra and you get Dithering. That was really when we made more money from our best subscribers. That's a way to raise prices on my best subscribers without explicitly raising prices.

David: Was launching Dithering a business decision or just, this is going to be a fun thing with a good friend, or both?

Ben Thompson: Both, and then also, I had this technology for paid podcast. That was a way to do it. We launched it. It's been successful. I think from day one, we had 10,000 subscribers, and then it leveled. It's like, where are we stuck? We didn't churn it all? How do you grow paid podcasts? We haven't done anything around free episodes in marketing. We will, but that was a de facto price raise of my best customers.

What I wanted to explore this space, it's like, well, is my market as big as it can be? Is there a way to go broader? I figured out the newsletter thing. I think subscriptions make tons of sense for podcasts. Because people get so attached to a podcast, they get so attached to a particular host, and it becomes such a part of their routine to a much greater extent than reading, which is more of an affirmative choice. You have to go read this where it's like, oh, this is my podcast player. I guess I'll listen to this next.

I think it's a great product for subscription, but it's totally unclear how you actually build a podcast, particularly a paid podcast. It's really hard to get people to start to listen to it.

In general, I think writers tend to succeed with podcasts because writing is a good marketing medium. Again, it spreads easily, you just pass a URL. People will become familiar and like, yeah, I'll try your podcast because I like you as a writer. But if you're just a pure podcast, how do you grow?

What I've decided to do is Dithering is no longer going to be an add-on. It's going to be a part of a Stratechery subscription. Now, again, your Stratechery subscription is worth more, because you have this extra piece. You got it for "free."

Ben: So you don't sell it separately at all?

Ben Thompson: It is available separately. Again, it's Colin with John and some of his subscribers maybe don't like me. If they want to go subscribe, they can, but it's no longer an add-on to Stratechery. If you are a Stratechery subscriber, you get Dithering. It's part of your subscription.

Watch the new podcast called Sharp Tech. Again, there are both free episodes and paid episodes. It's available to all Stratechery subscribers, so your subscription is worth more.

Ben: People are opting in. Just to make the point clear, because I've listened to every single episode of Dithering, including the back catalog before you launched, I started recently listening to Sharp Tech and of course, Sharp China, which you're about to talk about. It seems to me that Sharp Tech and Dithering is like, well, I get Ben, and I get Ben's thoughts, and I get a lot of the same thoughts. I basically am picking whether I like Andrew or John better, and I'm also picking the format and duration of the episode.

Ben Thompson: Yeah. Right now, the bundle is a joke, because it's mostly just me.

David: Different flavors of Ben.

Ben Thompson: I only have so many opinions. I have a lot of opinions, but I only have so many. It's not in its long-term place now for sure. It's very tricky because there is an extent to your point about if you release a bad episode of Acquired, you do worry about churn. Am I diluting what Stratechery is to someone? It's no longer just an email. Now, I'm reintroducing the possibility of people feeling overwhelmed with content. And then they also feel like, oh, Ben's repeating himself all the time.

I think there are a lot of underrated risks in doing what I'm doing. Number one, I think watching Sharp China was a good signal to my audience of what I do want to accomplish going forward. That's a collaboration with Bill Bishop who writes Sinocism, and it's the first Stratechery product that I'm not on. But I think it's an important topic understanding China. I think it's of a similar tone and quality level of what you should expect from Stratechery.

Do I expect all Stratechery subscribers to listen to it? No, of course not. Some people like me specifically, and I'm not on there, so they're not going to be interested. But I think for a lot of folks, it's like, well, I keep hearing lots of news from China, where do I go? I'm already a Stratechery subscriber. There's this other product here. And if they become a regular Sharp China listener, I've now decreased my churn that much more for that person.

I think, again, a big part of subscription is just churn management. It's like, I want to make sure this is a long-time subscriber, and you get that recurring revenue over time. As you might imagine, there are plans for other podcasts to be added in the long run, and we'll see what happens.

Growth has (I think) picked up over the last couple of months. Early indicators are that it's working, where I'm increasing the value and we'll make up for the costs. Would I make as much if I just raised the prices and didn't bring on the additional cost of paying for Andrew and other podcasters along those lines? Probably not. Again, the revenue maximizing thing for me would be to stay with Memberful and just write Stratechery.

Ben: And it's nice and simple.

Ben Thompson: Yeah, but (1) I've always been worried about getting stale. I know I have critics I hear about on Twitter who think I already am.

David: But they're 0.2% of your audience.

Ben Thompson: Who knows? They're very long on Twitter. (2) One of the things I'm so proud about what Stratechery is I'm most well-known for Stratechery, but I'm so proud of the business model, that it exists, and the fact that Substack is out there and there are hundreds or thousands or an army of people making their living doing this. I feel responsibility for that in a very positive way.

I really want to get this working for podcasts. I think there's a similar opportunity. Helping to help pioneer that is fun. Building software's fun, even though it costs me a lot of money as you might imagine. Producing new podcasts is fun. Figuring out this bundle thing is fun. How do you crosslink stuff?

If you listen to a Stratechery episode because we know who you are, because it's a unique feed to you, you can just add another podcast without having to sign in or do anything, like really smoothing out this experience of cross promotion. It's fun.

I think I'm fortunate enough that Stratechery has been successful enough that I can make choices that, at least in the short-term, are more optimal for figuring stuff out and having fun, even if it's not revenue-optimal.

Obviously, there's upside. Maybe it'll end up being a huge thing and I'll make much more money than I ever would have just doing Stratechery, but I do feel very fortunate that I can make that choice in the short- to medium-term.

Ben: Nice thing about having no outside shareholders. You're your own little Zuckerberg over there ruling by fiat on whatever sounds most fun to you.

David: You have no activist shareholders.

Ben Thompson: No, for sure. I actually thought about building a Substack. A few years before they launched, I actually had a team together and ended up falling apart. My biggest hesitation was always, I just wasn't sure if it would be venture scale. From my perspective, if you have the stamina and capability to produce regularly, subscriptions are an amazing ability to bootstrap.

Again, you're asking people to pay for the regular production of content. It's actually a very straightforward transaction and can be very sustainable. How many of those are venture scale businesses? I think, maybe not as many.

You're right, it comes with a bunch of compromises. It comes with a bunch of trade-offs. You have to optimize in certain ways. I think venture is a phenomenal thing. I think I'm not anti-venture at all, just anti-venture for me, personally. I don't think it would make much sense. I like the lifestyle. It's a lifestyle business for me.

David: You were talking to two venture capitalists who have a business, which is structured the same as yours. I love that we've had this part of the conversation, because I was really curious. Selfishly, for us, I'm curious about your thoughts on, there are corporations that have large numbers of people that make products that are scalable, and then at the opposite end of the spectrum, there's being talent.

You're a solo business, but your business is being talent in other people's productions. But the Internet has enabled this whole new class of stuff, like Stratechery, like Acquired, like Not Boring, like what have you. How big do you think this third class of whatever it is we are can be? Is that part of what this experiment is?

Ben Thompson: For sure. I'm not passionate about Meta's business prospect. I definitely have takes on it. I think that's the other company I've mostly been pretty right about over the years along with Microsoft or probably my two long standing best calls, but I'm not like waking up in the morning killing myself. If their stock goes up or down, I don't really care.

David: You're not going to go work at Meta?

Ben Thompson: I'm not going to work at Meta. I think that's pretty safe. If Meta wants to buy me for $100 million, I guess I'll earn out.

David: You'll rest invest.

Ben Thompson: Yeah, I will rest invest. Yes. Mark, if you're listening. What gets me super excited and I am really passionate about is this completely new arena of possibilities and I think new jobs that are made possible by the Internet.

Actually, one of the reasons I actually am (in general) favorable towards Meta is I think they're an essential component in the broader ecosystem of niche businesses, because if the entire world is your audience, how does the world find out about you?

I'm lucky because I produce content that people want to talk about. They share it for free on Twitter. If someone makes a really cool new piece of clothing or accessory, people aren't going to talk about that on Twitter. You need a way to advertise. I think that's what Facebook advertising has always been the best at and I think is really valuable.

I am (in general) a big defender of that, because it actually is in line with what I am personally very passionate about, which are the economic opportunities made possible by the Internet. What the Internet does in industry after industry, I think this applies to creative talent as much as anything else, is there's always a barbell effect. You're either very large or very small.

If you're very large, you get scale, you get aggregation effects, and then you can make massive investments or acquisitions. You can immediately feed that to hundreds of millions or billions of people and get a payoff. Or you take advantage of the Internet and open source software, whatever it might be, or different platforms, and your cost structures are basically zero, and you only need a thousand true fans. A thousand true fans was 100% true. That was my guiding vision and ended up being the case.

If you're stuck in the middle, which all the old publications were stuck in the middle, they weren't big enough to get aggregation effects. Their cost structures were way too large to handle a fractured audience. They were all in trouble and got a lot of traction about saying they were doomed and then they were doomed.

David: Like you were saying about, that's why they hate social media. But if you're on the low end of the barbell like us, you love social media.

Ben Thompson: No, that's right. It's an amazing asset. That’s number one, the Internet has its effects. Number two, the Internet has winner-take-all effects in specific markets. It's going to be hard for someone to be a generalist tech and media analyst and do what I do. It's possible. I think there are people that are very good just because I got there first. That doesn't mean there's only one analyst role available. There's a guy, Neil Seibert, I think.

David: It's like an equity research department in a bank.

Ben Thompson: Yeah, he works with Apple. He very much mimics his business after me. He was pretty early too, so he actually did a lot of stuff himself. He's done a really great job. He's been an independent Apple analyst for eight years or something like that, which is fine.

He writes for Apple every single day. Believe me, there are people that want to hear about Apple every single day. That's an example where it seems like we're doing the same thing, but we're in different markets.

This is what the Internet makes possible. The key to success on the Internet is you want to be the biggest fish in the pond, but the success metric is not competing with other fish, it's finding your own pond. The opportunity is broad, it's not deep. In each pod, there are probably going to be one or two fishes that survive, but there are an infinite number of potential ponds.

David: You can define your pond in very specific parameters.

Ben Thompson: I'm still surprised, there's not someone that writes for Amazon every day. It's a massive sprawling business, there are so many things to write about. I think it'd probably make sense to Google.

Casey Newton basically writes for social media every single day. It's been Christmas for him over there because of the Twitter stuff, but that's fine. I feel guilty writing about Twitter too often. It's very exhausting. I cover lots of other stuff. There are other things to talk about. I'm writing about it more than I want to. Yesterday, I really didn't want it on Twitter. Obviously, Twitter’s take on Apple is going to be everyone's been anticipating it.

Ben: It's the super bowl of Ben Thompson fans.

Ben Thompson: I have to write about it, right?

Ben: Right.

Ben Thompson: But Casey, the expectation is that he writes on social media. He's writing about Twitter every single day for like a month, and that's exactly what people want. I'm glad he exists from my perspective. Hey, if you want Twitter coverage every single day, go read Casey. That's a great thing from my perspective. I think that defines this market.

I'm really proud that this business model for newsletters exists. I think it should exist for podcasts. I think part of that is just figuring out the mechanics of it. How do you market? How do you grow stuff? I haven't done a good job marketing my paid podcasts, I would say, other than leveraging Stratechery, but that's something we want to work on.

Obviously, there should be some video stuff. There should be, what's the ratio of free stuff to clips, to snippets, things on those lines. We're actually experimenting that more with Sharp China and Sharp Tech, where even if you're on the free feed, you're getting more clips and snippets. Also, I think that the technological aspect is important.

It's funny. Even free podcasts, it's like, oh, we're going to have a guest on. Go listen to his podcast. Go to your podcast player, search for XYZ, and it's offloading this huge number of steps to the user hoping they follow through and do it. Whereas we've built something where, go to your show notes, click the link, boom, it's in your podcast player.

The sharing stuff is really tricky because people don't share podcasts naturally. I want to figure that stuff out. It's gratifying, again, not just because it's fun, new, and different than my day job. But also, that is my passion. My passion is the businesses, the Internet, not just destroying old business models, but making new ones possible. Not just the big guys, but for individuals as well. I'm very grateful and feel very fortunate that I get to do both.

Ben: I want to switch gears and ask you about Aggregation Theory. There's a multi-pronged question here. The business that you're running is far, far, far superior to, I think that I'm sure you've been asked a zillion times about, why don't you write a book? Do you make $150 a year per subscription or at least that's what I pay for the full bundle, I think.

Ben Thompson: No, you got a refund and a discount up to $120.

Ben: All right, then I pay $120 a year.

Ben Thompson: Yeah, Dithering is now wrapped into a Stratechery subscription, so yes. I should be clear, for anyone listening, you got a credit on your subscription. We do not issue refunds, but you did get a credit.

Ben: That is to say I have no idea what I'm paying. There’s some segment of your listeners that are so wildly price insensitive about what you do that it doesn't matter. It's probably hard to price discriminate on them.

Ben Thompson: Yeah. No one should look to me for pricing strategies because I know it's not optimal.

Ben: Anyway, my quick math was if you did $150 a year and I know it's $120, and you assume some five-year lifetime on customers, and you compare that to what you would make selling somebody a book once, which is $20 times 7% goes to the author, it's literally 500 times more revenue to you to do what you do versus writing a book.

On the other hand, there's something that you've become known for in Aggregation Theory and some other topics around the edges of it that deserve a canonical work. It's the modern Porter's Five Forces. It deserves a canonical notion rather than something that's been edited, revised, attached, and rethought through. Have you thought about what form canonical Ben Thompson topics would take?

Ben Thompson: Aggregation Theory is the obvious one. I think the time to have written that book would probably be 2017. I was writing about the ideas of Aggregation Theory from the very beginning. It's hard to imagine but back in 2013, again, back then, people thought Apple was doomed. People thought the Internet was inherently decentralizing.

David: It was not long after the Facebook IPO and there was a disaster.

Ben Thompson: Yeah, and Facebook was doomed, and then Microsoft is the other thing. I was able to come out of the gate with really four takes that provided tons of content. (1) Apple's not doomed. They're actually going to be doing very, very well. (2) The Internet is centralizing, it's not decentralizing. Everyone's understanding of the dynamics are completely wrong.

Again, today, everyone understands that, but it was, believe it or not, very controversial a decade ago. (3) This is what Microsoft should do. There actually is a clear path forward. They're not doomed to irrelevance. And then, (4) Facebook is way more dominant and valuable than anyone thinks. Again, like I said, I have lots of low-hanging fruit to pick.

David: You're being self deprecating here, obviously. But I think a big part of the reason, and this is behind Ben's question to you of it deserves canonical work, is the reason these are accepted truths and realities now is in large part due to your work.

Ben Thompson: It is a bit humbling to be a writer because I think people would understand all those things had I not written it. I think at best, they understand that maybe a few months or at best, a year or two before it becomes common knowledge. That's just the reality of the game.

The edge you can provide is usually measured in months, years, or a very low number of years. I do think Aggregation Theory should be a book. It was probably, again, more pertinent at the height of all these sorts of things. Maybe it's so pertinent now.

But (1) they're just a logistical issue. I write every day. To your point, I make way more money writing every day than I would writing a book. That's number one. (2) There's a fear factor, which is people think I'm very productive, but I, in reality, have daily deadlines that spur that productivity. The absence of those daily deadlines would terrify me in terms of a book.

(3) There's a second fear factor, which is that a book is frozen in time. If I would have written an Aggregation Theory book a couple of years ago, I probably would have centered it on Netflix. That ended up being wrong. It was wrong in another way that I wrote about, where content is super important. That's how you break away from aggregators, is by having high diversion content. I had the balance wrong between Netflix's aggregation effects versus the power of content, so I'm very fortunate to write that book.

Whereas now, I was still wrong, but I have the medium and ability to come back and say, well, I was wrong. This is where I was wrong. What does this mean for Discovery, Time, Warner? What does this mean for Disney? What does this mean for the other platforms? That is a fear factor.

(4) I think there is an aspect. Yeah, maybe it deserves a treatment, but Stratechery is very much of the Internet. I think the nature of the Internet is that it's transient, it's not permanent. Again, another thing people got wrong.

I think, actually, one of the biggest mistakes Twitter made—and it's understandable, no one could have seen it at the time—Twitter should have had disappearing tweets from day one. It should have always been a just in the moment social network. I think it'd be a much better product.

Honestly, I think they still do it now. People experience it and think of it as an in-the-moment product and then are stuck with this archive that induces fear, induces ruin, and reduces the facade of what it's like to be on Twitter. That's a big reason why Twitter is not what it used to be, because now people are scared.

David: To the Aggregation Theory point, I think I've heard you make this argument before. Articulating it the way you have over the years and revising it on Stratechery, it's actually a better product than if you were to have written a book five years ago.

Ben: I so disagree, David. It makes it really difficult to explain what it is to people. I'm like, okay, if I'm on the board of a company, and I'm trying to explain to them that they need to reframe their thinking and think about aggregation theory, if someone's like, what's that? I actually don't know what to send you. Read these things in this order to watch this guy contradict himself and say what he got wrong, and then take away what you think the modern interpretation is.

Ben Thompson: I think you're both right. There should be a set-in-stone treaties. Honestly, there's just a matter of priority. Again, it would be good to share, point to this thing, and go read this. To be clear, I'm in the middle of massive self-rationalization right now for explaining why this is the case, so take everything I'm saying with a grain of salt.

The other thing is I'm just having more fun and more interested in building software and figuring out podcasts. I would like to think, oh, a book is just really about my ego and putting it out there. I'm not that person. I just want to give back to the creative community. That's why I said I'm definitely in rationalization mode.

David: You're definitely rationalizing.

Ben Thompson: But no, I should write a book. I just haven't. I don't know if I ever will. I agree that I should have by now written a book, but alas.

David: One last quick question on Aggregation Theory. Obviously, you were building up towards it, even as you said at the time, I think. Was it one or two years you're doing Stratechery before you wrote the first post?

Ben Thompson: This is actually an example of the power of branding. I wrote articles that were basically aggregation theory well before I wrote Aggregation Theory, but giving it a term and coining it is what made it stick. Actually, some of those articles that I wrote before, there's one, I think it was called Economic Power in the Age of Abundance.

David: It doesn't have the same ring to it.

Ben Thompson: I think it's a better articulation of our Aggregation Theory in many respects. I wrote it in 2014, I think. (1) It does have a good ring to it. (2) Is one of my least read articles up to that date. No one got it or understood what I was talking about. And it's a weird thing as a writer.

There are things that I'm thinking about now or that I know I will write about, but it's not the right time. That's something you just learn over time, where you can be too early as a writer too. This goes back to like, I didn't know how to communicate.

I remember there's somebody at Microsoft, and we walked out, and my manager’s like, Ben, you're the only person in the room that actually understood the issue and what we should do. Absolutely everyone, no one understands what you're talking about, and people are annoyed at you. The problem is we want to get to H, but everyone in that room is on A. You cannot talk about H. You have to talk about B, and then C, and D.

Ben: Is this JR?

Ben Thompson: It is Jr, yes. It's funny, because that applies to writing online, too. (1) Sometimes I'm wrong, so it's good to wait or to be sure, but (2) there's an aspect where there's just the right time and place for things. There’s always stuff I'm thinking about.

One thing I've learned is it's definitely better to write about something, a current event, which is bad from a book perspective because I'll write an article that actually has some key insights, but it's talking about some event that happened in 2015, which no one remembers or cares about. But in the nature of my business, that is actually much better for helping people grok it, get it, spread it, share it, those sorts of things. There isn't a bit where the incentives of my business do work against timeless pieces in a certain respect.

David: Okay, when you hit publish, though, on Aggregation Theory, did you think it could be what it became?

Ben Thompson: I didn't know. I thought about the name. Obviously, I was inspired by Clay Christensen, Disruption Theory. That was one of the things. But I had written a number of articles going up to that were clearly building to that point. There's one about Airbnb, there's one about Netflix, there's one about just websites and publications.

Aggregation Theory was short and sweet because it was basically distilling what was in those previous articles into one thing. I felt very confident I had a thing. I wanted to have a definitive piece that was doing what it was and needed to have a name. That's what that was.

Ben: For our last sponsor of this episode, we are thanking our good friends at Tiny. Tiny, as you know, is the Berkshire Hathaway of the Internet and has built and acquired the world's premier collection of truly wonderful internet businesses.

David: By now, you all know their story. Andrew Wilkinson started the really premier design agency in the entire world, Metalab, from his home in Victoria, British Columbia. Beautiful Victoria, British Columbia. They built the UIs for Slack, Coinbase, Tinder, Headspace, Patreon, you name it, the best of the best.

And then he and his partners became completely obsessed, just like us, with Berkshire Hathaway and Warren and Charlie. They realized, wait a minute, there are a whole bunch of companies out there that are internet companies, who would be perfect Berkshire type companies, but Warren and Charlie aren't going to buy them because as we spent 10 hours talking about, they don't get the Internet, but Tiny can.

They went out and they bought companies like Dribbble, Pixel Union, Creative Market, 8020, Girlboss, AeroPress, among others. Businesses doing $5 million or more in recurring revenue with 30%-40% operating margins. But that otherwise were stranded assets in the technology industry because they couldn't raise venture capital. Or even worse, they did raise venture capital, and then it turned out that there weren't M&A buyers for them, and they couldn't get to a scale required for an IPO.

Ben: We're definitely in a situation now that the market has shifted, where 90% of businesses already shouldn't raise venture capital, but 90% of the businesses that raised venture capital probably shouldn't have, either. So what do you do from here?

Tiny has realized they can fix this situation for everybody. If you sell the company to them, the VCs can get their money back or whatever the appropriate amount of their money back is.

Founders can get to take control back and set up an incentive structure with Tiny that makes sense to keep growing the business, to keep pouring their energy into their life's work and still have enough control over it with the right capital structure that actually makes sense for the type of business that they're in.

They've done this with a bunch of businesses already this year, venture-backed companies doing over 5 million in revenue 30%–40% operating margins, or the potential for that to quickly become the case.

David: The most important thing is it removes the immense pressure on the business to get to an exit. An exit doesn't matter anymore. Tiny is happy to own these businesses in perpetuity.

Man, I can tell you in my previous life as a professional venture capitalist and board member of many VC-backed companies, there are a lot of companies in VC portfolios that fit this bill. It's just heart wrenching what to do with these companies, because they're making real products, they have customers, they have employees, but they're just not going to get to an outcome that makes sense for a venture capital firm. Having an off-ramp like this is a godsend.

Ben: If you're the founder of one of these businesses, if you're the VC board member of one of these businesses, don't let sunk cost fallacy get the better of everyone. Recognize what the business potential actually is now that you have seen it. If it could be a profitable going concern, shoot a note to hi@tiny.com. Tell them Ben and David sent you. Thanks so much to our friends at Tiny.

Ben: Ben, I have one more section that I want to do, which is you do all this analysis on companies. You have this very enviable position of getting to comment on and critique their strategies after they announce them or an event after they do them. I want to play a game where I give you a company.

I'm curious, either if you were the CEO or you were giving advice to the CEO, what would you do strategically? I think an interesting place to start as we talked about it a bunch on this episode is Meta. You are the new CEO of Meta. What do you do over the next five years?

Ben Thompson: I think Meta is actually doing a fair number of things that they should now. The Apple changes were very devastating. They're structurally devastating, so they deserved a significant haircut on their valuation because of that, But I also think they were moat enhancing in the long run, where I question whether any other company is ever going to build a top of the funnel advertising product that will be competitive with Meta, assuming they can keep their audience.

It appears that they've done a good job limiting the TikTok threat. TikTok's growth has flattened out over the last few years. I think they're actually in good shape. What I do worry about is this is a company that's always been growing.

It's really hard for those companies to shift to more of a scarcity mindset. They laid off 11,000 people, which only brings them back like 9 months. They probably needed a lot smaller, but it's also very disruptive to company culture and morale. Do they still have the people that they need to pull that off? Those are probably some of the bigger questions.

Obviously, any aggregator is dependent on having that audience, but I do think that the network effects of their products are still underrated. Everyone has in their head that they're shrinking. Actually, every product they have is still growing, which I think is under-appreciated.

(1) I think they're probably on the right track. (2) I would acquire Shopify, and I would have the FTC just throw it to court when they sue to stop it. I think they need to close the loop on ecommerce and advertising. Again, I think that'd probably be bad, generally, but I think it'd be very good for Meta, so I would do that.

As far as the metaverse stuff, I think it's a bad idea. It's very hard to talk about metaverse, because it's like, what are the prospects versus is it XYZ? I do think that it's not just a bad idea because it's taking so many resources and attention from Mark Zuckerberg. But also, I just don't think innovation is necessarily born of mass expenditures in large companies.

We skipped over a period of experimentation and ecosystem-building that in the long run, perhaps, would be consolidated into a couple of companies, but instead of just one monolith trying to brute force this bit. The reality is Facebook is a services company. It's a social network, and everything about their strategy works against that. To succeed, they not only need to sell headsets, they need to sell headsets at sufficient scale and into friend networks such that people can social network on the headsets.

Their place of winning is even further away than I think people think. I don't think strategically, it's the best thing for them to be doing. I've been pretty anti them from day one. They bought Oculus, I said it was bad. Again, it's very hard to distinguish between, well, what are the prospects of this versus zooming out? Or should they even be doing this? But I think the market is overly down in Meta, in part, because the branding was too successful.

This is still a powerhouse in social media and advertising. The amount of money they're spending on the metaverse is all things considered not that much. You'll have a $5 billion profit a quarter. Yeah, I would double down on what they are. I would consolidate Meta, acquire Shopify, and spend three years fighting out in court, because I think the payoff would be worth it.

Ben: All right. The second one, rather than going with another big American tech company, I want to go with one that's an Acquired fan favorite and one that's very close to home for you, TSMC. Any change to what TSMC is doing now if you became CEO tomorrow?

Ben Thompson: Not really. It's a very complicated situation, to say the least. For lots of reasons, I'm not just political, but technological. I think probably doing what they're doing, broadly it makes sense. Yeah, I don't know. I've ever heard a ton about them and where they are.

You could talk about maybe some of the pricing stuff. They were pretty slow to raise prices. Even in the face of shortages, they've been much more aggressive about that over the last little bit, which seems reasonable to me. It is opening the door for when and if a competitor comes along to undercut them in that regard. I think they're probably blessed by the weakness of their competition, but the long-term risk is obviously number one, just the geopolitical risk.

The reality is TSMC, a core to their model, essentially to the model of being so flexible and being so adaptive, of incorporating new equipment, of accommodating hundreds and hundreds or thousands of customers, is all their engineering is in one place. That place is Taiwan, and that has geopolitical risk. From TSMC's perspective, I think that's just a reality. You can't really hedge against that.

If anything, yes, they're building these fabs in the US (I think) largely for political reasons. Sure, do that if the Taiwanese government feels that's what needs to be done to keep the US on board and keep the US happy. Build a couple in Japan, because Japan is a future ally, but I think you do have to double down on Taiwan and roll the dice that nothing happens. I don't think it's a hedgeable risk, the China risk.

The other risk is that Moore's Laws are running out. UV has another 5–6 years, and then it's not super clear what's after that.

Ben: How can you get smaller than one, Ben? You just have one nanometer in this.

Ben Thompson: Yeah, there is visibility too under one.

Ben: Isn't it two molecules wide or two atoms?

Ben Thompson: It's very small. I'm not sure if it's quite that small, but it's ridiculously small. Obviously, I would imagine they're investing heavily. David doing this, like advanced packaging, like multiple chips on the chip approach. AMD is doing that. Intel is not doing that. Getting really good at that stuff is going to be super important.

Actually, one thing I do like about the Japan investment is their trailing edge. I think they're 28 nanometer fabs, which is really where China is making a lot of progress, because there's no real economic reason to build trailing edge fabs. The whole idea is you build it once and it's long since depreciated, and you're still making money selling cheap chips out of that fab. I don't know, maybe there's something in the trailing edge.

Ben: More things need chips, and they don't all need the leading edge.

Ben Thompson: That's right. The economics of it are very difficult. The reality is, that's why China is filling the gap, because that's all they can really make economically. You don't just jump to the leading edge. You have to build your way up.

China has a motivation and an economic rationale. A lot of the chips that they're manufacturing go right into products that are already made in China. They're filling in that gap. That's something that would be beneficial. But at the end of the day, TSMC is Taiwan. That's going to always be the biggest risk, and I'm not sure there's really much they can do about that.

Ben: Okay, last one, Amazon. David and I did seven hours of amazon.com and then a big AWS episode. At least my big takeaway was, it is day two, and day two is about becoming a profitable company, where the big sell story of tomorrow is realized today. You got to lean into that. That means lots of changes in how they organize, how they innovate, and what markets they choose to enter. I'm curious for your take on, is Amazon a day two company? And then the same question, if you were to become CEO, what would you do?

Ben Thompson: I think there's an analogy to real life. When you're young, you're like, I'm never going to become an old fogy, like those old people. Then you get old like me, and the people around you that are trying to still be young are just pathetic.

Actually, being old is great. My kids are fairly independent. They can take care of themselves. I can go hang out with friends. Obviously, I have more means than I did when I was younger. I'm a big advocate of just in general living in the present, embracing who you are, and where you are in your life stage.

I think that's good personally, and I think you're spot on. That's also true from a company perspective. You can't be a startup forever, and it's bad too. I wrote about from day two to one day or something about Amazon, when Bezos reasserted control a few years ago. He's like, no, we're here to do one day delivery. There's been too much time spent trying to squeeze our suppliers for profits and margins. And no, we need to get back to this.

In retrospect, that was the seed of Amazon's disastrous last few years, which was they dramatically over invested in their logistics network. Their cost structure got completely out of control. They over hired. It's probably a good example and maybe it was a precursor of what we saw with Jeff Bezos, personally, of losing track of where you are in life, what actually makes sense, and trying to be young forever. I agree with you broadly with that bit about Amazon.

David: Do you think that applies to AWS, too, or is that different?

Ben Thompson: Realistically, the challenge for AWS is: (1) What's going to happen with the real dry up in startup formation and easy money in that space, a lot of which went to Amazon? They're the default choice for startups. (2) Microsoft's bread and butter has been, look, you've been working on us for a long time. We're going to package it. Suddenly, you're not just paying for on-premise windows. It also includes Azure credits, and we're going to be able to attribute that to our numbers, and now you can move pieces over, and we'll help you do it, which I think is exactly what they should do. It's been a very smart strategy.

But I think that the issue in any market is it's like me. All the initial easy stuff is there are lots of low-hanging fruit, but then the largest part of the market is still the part of the market that's always been there and isn't necessarily fast moving. Microsoft has just really cleaned up in that market.

We're the known entity. We can help you move over. I think from Amazon, building up the support capabilities and rationalizing their offerings, it's weird because Amazon benefits, because they have so many features.

AWS is the Microsoft Word of cloud providers. They have an absolute absurd number of features, and the interface is pretty terrible. But every single customer is completely dependent on one of those features. And if that feature is not there, then they can't go away, and that actually ends up being their moat.

Ben: We were researching the episode. We were talking to longtime AWS veterans to understand the mental framework, to talk about them today. It became very clear that AWS doesn't deprecate features.

Amazon will kill stuff, kill the fire phone, kill local delivery for food. They'll kill all kinds of stuff. But in AWS land, if a customer depends on something, AWS’ long-term enterprise value is determined by customers believing that Amazon will continue to support them forever. They don't deprecate services, even when those services end up flipping upside down on the unit economics and they have to maintain a costly service that they never figured out how to optimize.

Ben Thompson: Right. Every time a customer does something custom for AWS, it's locked in. Everyone who fantasizes about this world, where every time it comes up, whether it be containers, or you have IBM talking about doing this when they acquired Red Hat, we're going to make it so you can be cloud-agnostic. Then it just turns out that, well, cloud-agnostic, but this one little piece would be better, because this is our service. You wake up and, of course, I want Passport to be cloud-agnostic. Well, Passport’s not moving off AWS. I can promise you that. Yeah, it's the Microsoft strategy.

Amazon has a lot of old Microsoft people in it. It's really interesting to consider the different cultures between Seattle and San Francisco. Seattle is just a platform town. Microsoft was the originator. Microsoft's always been the best platform administrator. All that backwards compatibility that you want to make fun of from a user perspective is essential to building this foundation that people trust and that locks them in. They're happy to be locked in because they don't want to go change it anyway.

Amazon does AWS. Obviously, Microsoft is doing that with Azure. The Silicon Valley companies are just very, very bad at that. No one trusts Google, right? No one trusts Facebook. Silicon Valley is much more consumer-focused. Even the SaaS companies. Those are consumerized enterprise technology.

The whole idea is, don't worry, you never need to pay for an upgrade. We're upgrading on the backend ourselves. But that means they will remove stuff, because it's one thing to remove an API that a piece of software depends on versus removing a feature that your customers are annoyed, but it's not actually breaking what they operate on.

It's just pretty interesting to see those differences, which I do think there's a geographic aspect to it. Geography is what saved Microsoft, because when Microsoft was in the dumps, if they were in Silicon Valley, all their best talent would have left them now to work for other companies. But all their best talent had kids, they had families. They didn't want to go work for Amazon—those people are maniacs—so they stayed at Microsoft.

They were miserable, and they bitched, and they wrote snarky blog posts about the company. But then when Nadella came in and refocused the company, they had this foundation of talent that the HPs of the world, the Yahoos of the world, had long since lost.

Ben: Well Ben, this has been awesome. Thank you for joining us and celebrating the almost 10-year anniversary of Stratechery with us. What is the easiest path for everyone who right now is listening to this in a variety of podcast players? You got Spotify, Overcast, and Apple Podcasts. What is the easiest way for them to opt into the Stratechery universe?

Ben Thompson: If you go to Stratechery, you can click any of the podcasts on the side, hit subscribe. It's funny how funnels work. Do you just go into Stratechery and read, follow, and I'll lure you in? You go direct, maybe I'll put a link in the show notes.

David: Yeah, use the show note link.

Ben Thompson: $12 a month, $120 a year. You not only get Stratechery, but you also get the update. You get Stratechery interviews. We didn't talk about interviews. That's actually been an interesting evolution of Stratechery.

Ben: Yeah, you're a primary source now. What's going on?

Ben Thompson: That was a challenge because I started out, I had no access. I didn't know anyone. In some respects, I missed those days. I still remember the first time I had a company very angry at me and called me in. It was Twitter, actually, because I had teased out their results.

Their direct response program was failing. This was years ago. They got super mad. In my next update, I'm like, this is possible. I kind of walked back a little bit. The next quarter came out and they're like, I don't need to write it down, but it was a big thing. They said, it's not working out.

I was totally right, and I was so mad that I walked back a little bit. But I'm glad it happened because when I started out, no one cared. No one paid any attention. Now, people cared and paid attention. I'm glad I was right on that one because it gave me courage going forward.

What is interesting about feedback from companies is everyone from COO down or VP down, they always push back. They're like, no, you got this wrong, you don't understand XYZ. I never get pushback from CEOs, even when I'm wrong. What I've come to realize is, CEOs are surrounded by people telling them what they want to hear. That's their incentive.

The reason why the VP is attacking me is because he's worried I'm going to make the VP look bad in front of the CEO. That's the concern. Whereas the CEO is like, they're so thirsty for any feedback that's outside of that rotten incentive structure that's just inherent in a corporation.

Sometimes they know they have more information than I do. They're aware that there are things that I don't know, but they're grateful to have a different point of view. Over time, I transfer from having no access to having total access. I can reach out to basically anyone.

Ben: Just for people who haven't, let's just go through the lineup. You've had this year Mark Zuckerberg, you've had Jensen from Nvidia. I'm trying to think of some of your early big ones. You have Rich Barton on from Zillow. I think he credited you with, you convince us to start buying houses. You convinced us in the open door article that—

Ben Thompson: I don't know if I should apologize to him or what. I was trying to figure out, what do I do with this access? I didn't want to become a reporter. I thought it was just important to me personally from my own pride that my takes are my takes. I'm not getting fed them from someone else.

What I ended up going with was interviews. Part of this was a product bit. Now you can listen to Stratechery via podcast. If I had an interview, there's a good reason to try the product out, to get it so there's a product angle. But also, my whole take is I'm not exclusive. I don't have exclusive information. What I'm selling is my personal analysis.

If I'm talking to a CEO, I don't want the sense to be Ben just parroting what the CEO says. If a CEO wants to talk to me, it has to be on the record, and the full transcript and the full interview is going to be available to my subscribers. I want my subscribers to have all the same information I do. When I write, it's me. It's coming out of my brain, it's unique to me. I think it's worked out pretty well. It's a change. Instead of me writing four days a week, I'm basically three days a week plus an interview. It's not just CEOs.

I think, actually, often the better interviews are with other analysts or people in different spaces. This also solved the how do I cover startups, because part of not being a reporter and being independent is that public companies have to disclose a lot of data. They have earnings calls, they have presentations, and things along those lines. With a startup, you don't have access to very much of that, and you don't know how much is blowing smoke, how much is not.

Now, I am interviewing founders, where I say upfront, look. This is completely subjective. I'm not going to verify what they say, I'm not going to XYZ. It's their chance to tell their story, what their business is going to be, XYZ. That's a way to cover that space, given the limitations in the way Stratechery operates. That's one of the products.

It's not a standalone thing, which I think is better. It's still part of the Stratechery. I thought it should be a standalone product, but I think there's an aspect of I don't want there to ever be any sense that that's a driver of my bottom line. I want to be able to say that I think the Metaverse is probably a bad idea. That's really tricky. The Mark Zuckerberg one, obviously, it's a huge get. I think that his interviews with me are I'm biased, but I think are light years better than he does anywhere else.

Ben: You and Eli had the best interviews with him of this whole last cycle.

Ben Thompson: Right, in part, because he thinks I'm fair, whereas he thinks a lot of other journalists aren't. What's the line between that and being you favor Facebook, because that's not the case at all. Number one, it doesn't drive subscriptions. I always make them free.

To be clear, no one's going to have to pay to get access to that, because you shouldn't subscribe to Stratechery because you want to read Mark Zuckerberg. That's not a reason. But then it was really annoying, because Facebook had that bad earnings call and their stock went down. I'm like, I'm going to need to write an article about why this reaction is unwarranted. They're actually fine. It's going to be three weeks after I just had Mark Zuckerberg on. It's going to be a relatively positive article, but that's where you build up your reputation over years. Sometimes, you can't always be depositing. Sometimes you do a withdrawal.

Me writing Meta Myths was a withdrawal on my reputation. Yes, it didn't look great that I just got an interview with Mark Zuckerberg and I wrote a positive article, a contrarian positive article about Meta three weeks later, but I hope I've built up enough credibility with my audience over the last nine years that they believe that I would have written that article with or without that interview.

Ben: You're also unabashed about your incentives. You're like, look, everyone. My incentives are to have as many people subscribed for as long as possible. My incentive is not, I think I'm going to be Mark Zuckerberg’s best friend, so I'm really hoping that he invites me on as PJ and we get to hang out.

Ben Thompson: It's tough because like I said, I'm super positive on Meta's advertising product because that's aligned with my passion. I do find the Zuckerberg one as the most challenging just because I generally have a contrary opinion about Meta overall, and it's generally positive, so I'm super wary about that.

I also feel like I get more interesting stuff out of him than most other interviewers, so I want to do that. Surely, it's a feather in my cap to interview him, but I definitely don't want that to ever be perceived as, a lot of interviews don't drive subscriptions.

I do it because, again, I want to push the tech product. A lot of people don't use my podcast product, and then it's a different kind of work. As you guys know, preparing for interviews is a lot of work. It's also different from writing an article.

David: Oh, for sure. We could not be writers.

Ben Thompson: Yeah, you can't stay the same forever. You can't be like the startup forever. I can't be the guy on the outside forever, which I was when I started with my chip on my shoulder. I'm just some dude in Taiwan giving his opinions about Apple. That worked for me, and I'm not that person anymore. It'd be dishonest to pretend that I am.

The reality is I probably have the best access of anyone in tech. I can literally contact basically anyone and get access to them. It's more honest to my product and what I do to wean into that (I think) than to pretend it's not the case.

Ben: All right, so listeners click the link in the show notes. Go experience the Stratechery cinematic universe, not just a guy in Taiwan giving his opinion on Apple.

Ben Thompson: More coming, hopefully.

David: Love it.

Ben: With that, thank you to Fundrise, Pilot, and Tiny. After you finish this episode, come hang out in the Slack with 13,000 other smart, kind, clever, curious members of the Acquired community, acquired.fm/slack.

Get some sweet Acquired merch. We now officially have live, the ACQT. We've got market size unconstrained with the original AWS logo.

David: Oh, we got to do a collab with Ben on Acquired Stratechery t-shirt for the merch store.

Ben: Oh, that's a good point. I have a Stratechery t-shirt. I almost wore it for recording this episode. I also have a framed aggregation theory. I didn't want a fanboy in front of Ben, but on my desk, I have framed an aggregation theory illustration. I don't know. Check out Ben's merch store too. We'll put a link to that in the show notes. The other great Acquired merch that dropped a couple of weeks ago is the Benchmark tee. The Benchmark style of course is there's always room at the top.

If you want to listen to the Acquired LP show and get more Acquired crammed in before the holiday season, we got some good stuff. Search Acquired LP show in the podcast player of your choice. With that, listeners, we hope you have a wonderful holiday season. I believe we still have one more episode coming after this.

David: Yeah, we've got something special coming. We got a little fun holiday Acquired present for everybody.

Ben: Yes. With that, listeners, we'll see you next time.

David: We'll see you next time.