17: Alex Danco - Innovation Begins with Gifts

[00:00] Welcome to Dialectic, episode 17 with Alex Dango. [00:05] Alex is a writer and product director at Shopify, who I've read for years, since he started writing his Snippets newsletter back in 2015 while working at Social Capital. [00:16] Few people have written with more generativity on topics like markets, venture capital, startups, how technology is changing culture, the implications of moving from a world of scarcity to a world of abundance, and more than Alex. [00:31] While he's been writing less lately since joining Shopify back in 2020, he recently published a number of excellent pieces while on paternity leave, which prompted this discussion. I aim to have a conversation with Alex that conveys all of the reasons I think he and his writing are so interesting, and so we cover both recent topics and ideas from the past. [01:01] broadly creative work and innovation and is the secret to solving many of capitalism's coordination problems. From there, it's a wild ride. And while it's the longest episode to date, it's jam-packed. I think you'll enjoy it end-to-end. As a reminder, if you've been enjoying Dialectic, please give it a rating on Spotify, Apple, or thumbs up on YouTube. Or even better, share it with a friend who you think will enjoy the conversations too. [01:26] It means a lot to me. Before we get into things, this episode is brought to you by Hampton.

[01:32] I think so much of company building is actually about energy. [01:35] As a leader and a founder, [01:37] You have to be that energy source for almost everyone in your company. [01:41] And so I think having people outside of your day-to-day context can be tremendously valuable in making sure that you yourself have the energy to keep going. [01:50] That's where Hampton comes in. It's a private membership for founders and entrepreneurs that pairs you with a subset of like-minded leaders who you'll meet with monthly to talk through all of the challenges of building a company. [02:03] In a sense, Hampton is a one-stop shop to create a personal board of advisors, a group that you can go to for hard problems, feedback on challenges, or simply perspective so that you have the energy to keep on going. [02:17] I've certainly benefited from this type of peer mentorship in my career. [02:21] And given how lonely being a founder can be, having a group of people that you trust that you can zoom out from the day to day with is such an incredible benefit. While the heart of the Hampton membership is your intimate eight person peer group, Hampton also has monthly and quarterly events, online speaker series, a digital community for asking the entire network of over a thousand founders questions and more. [02:46] Hampton isn't for everybody, but for founders who are on what can be both the thrill and joy of a lifetime in company building, but also an experience that can be quite lonely at times. [02:56] It's an amazing way to have a community who gets what you're going through. [03:01] If you've raised $3 million or have $3 million in revenue, or you've sold a company for $10 million, I'd strongly encourage you to check out Hampton. I've included a link in the description where you can learn more. And if you apply, make sure to tell them that I sent you.

[03:16] Thanks again to Hampton for supporting Dialectic. [03:19] Now, ladies and gentlemen, Alex Danko. [03:23] Thank you. [03:46] *music* [04:13] you [04:18] *music* [04:35] I think the tone is set. [04:37] Tone is set. Wow. I don't have music on this podcast either yet. For any listeners out there, that was Black Cow by Steely Dan, played somewhat sloppily on my newish Fender Roads, which I got last year from this poor guy on Facebook Marketplace who was getting married. Oh, no. The death of a dream. Yeah. And so I drove down to Hamilton, Ontario, which is not far from me, and came, and his soon-to-be wife welcomes me in. She was like, please buy it.

[05:07] And your wife was like, oh, no. We're kind of down here in a little bit of a lair. I think you have some space to... [05:15] to have some fun we're recording from my office we got all the books on one side we have multiple instruments and speakers on the other side but it's pretty dialed yeah i'm i'm happy you could be here thank you so much for coming out i'm so glad to be here my first time in toronto the danko experience all right let's get into it one of the things i try to do in these interviews and especially for someone who's written as much as you have it's it's a tall task i don't think i'm going to claim to have done it fully but part of the goal is to like what through lines can i [05:45] You've written about Silicon Valley. You've written about innovation, technology, markets, financial and production capital, and [05:51] organizations, the boundary of the firm. One of the more interesting pieces you wrote is about this sort of shift towards consuming functions versus consuming objects, scarcity and abundance, all these things. And [06:03] I was like, how do I make sense of all these? And you kind of did me a favor in that you wrote this piece a few weeks ago, or maybe a couple months ago now, that I think highlights what I see as the true theme in your writing, which is the real theme that came across to me is your writing about entrepreneurship and specifically how entrepreneurship deals with coordinating people. And you wrote this recent post titled Innovation Takes Magic, and that magic is gift culture. I'll read just a couple of quick excerpts. You say, I think the people who are going to be the big winners in this new age [06:33] instant prototyping are the people who are exceptional at gift culture. [06:37] Because they will understand the scarce resource of this new environment, which, guess what, was the same scarce resource before, too. The ability to coordinate people over time towards promising but unknowable goals. That's always been the hard part, and it feels magical when we solve it. And then one more line. You say the rules of gift culture compel us to accept the gift of possibility, reciprocate it, and pay it forward.

[07:07] entrepreneurship and innovation in Silicon Valley and broadly, [07:11] creativity and why is gift culture at the center of that? [07:15] Okay, this is a... [07:17] Great starter group of questions to work with. [07:20] So when you ask about coordinating people and this idea of we're going on a journey – [07:26] to an unknown destination... [07:29] We have a sense that the destination is worth it, and we know that we're setting our compass somewhere. [07:34] But... [07:35] We can't really know the obstacles along the way. We can't know how long it is until we will have to refuel. We can't know exactly... [07:42] how we'll have to change our tack going on the way. How do you get a group of people to all hold hands together and jump together, right? And say, I want to go on this journey with all of you. This is a coordination problem, right? And it's one of the great... [07:55] I think rate limiting steps on people accomplishing truly new things. And I don't think this is limited, strictly speaking, to entrepreneurship. I think you could describe the same set of – [08:06] people deciding to do something together and gift each other their commitment of people joining a band, right? Or people setting out to learn a new skill together or people becoming parents together or any of the great – [08:20] journeys that we go on in life. [08:22] You framed this in terms of [08:24] a coordination challenge. And I'll tell you that the original... [08:28] The original person that I heard talk about this coordination challenge was actually Bill Janeway. [08:35] I don't know if you're familiar with any of Bill's writing. You came up a little bit in your writing, but... Bill is a real OG in the venture world, and he's a unique individual because he's both...

[08:46] an economics professor, right? He is a real academic economist who understands at a very grand level how you rigorously think through value creation, you know, at an intellectual level that is genuinely beyond the scope of most Twitter discourse. But he also was a practicing venture capitalist, right? He actually walked the walk. He was at Warburg Pincus for a long time. This was in an earlier era of VC, right? [09:12] Right. When term sheets were very different. And at series A, you sold two different firms, 20 percent each, and you kicked out the founder. And like this was. [09:21] This is just the way it was back then. Yeah, they would literally, you would have your VCs hire a CEO for you. Exactly. [09:28] One of the interesting... [09:30] hallmarks of that era was that [09:34] A lot of the progress, like a lot of the genuinely forward progress that you would have to make as a company was by doing deals. Right. [09:41] There were not all of these incredibly stable surfaces and platforms that we enjoy today [09:47] from which you can just go build and go get growth, right? You are ultimately dependent on... [09:53] business development at a much earlier and more critical stage, right? The path towards – it was much more milestone-driven development. [10:04] You could say, right, because you would have to do you would have to do major deals, right, either. [10:08] in terms of like, [10:10] First of all, you would have to go get vendors for things like your compute. You would have to buy computers. You'd have to buy a database from Oracle. But you would also have to do distribution deals with people who could bring your product to market. Nothing was permissionless. Nothing was permissionless. That's a fantastic way to put it. Nothing was permissionless whatsoever. And as a result...

[10:27] You know, you would say that like every opportunity was much closer to being, quote, priced in than it ought to be. But nonetheless – [10:36] There was technological innovation, right? There was progress, right? And the reason why there was progress was because people – [10:43] and they're forward-thinking venture capitalists, [10:46] could imagine a possibility space in which there was room to move. [10:51] between a current investable opportunity [10:54] and some future ability to, if not necessarily... [10:59] reach your goal, at the very least reach a refueling station, right? And the ability, but the problem is you don't know where the refueling station is, right? You can't really know enough about where it is. But this is, and this is the essence of the coordination problem, right? You can't actually, you have to come up with a way of saying, look, [11:18] we're going to, to some degree... [11:21] Trust in – [11:22] The sequencing of events that we have going of saying, I'm going to raise money now in exchange for us all agreeing that there probably will be an opportunity to refill next step and so on and so forth. And what happened was over time, this. [11:36] organically arranged into this series of shelling points that people would call Series A, Series B, Series C. Right, right. Which now is actually very established almost as a ladder. Well, now it's so established, right, that it's like it – [11:48] frankly, doesn't really matter that much because what matters now is just growth. Growth is just this continuous thing, right? It's a kind of a weird thing that we do financing in discrete tranches, although there are reasons for this. But ultimately, the reason why these tranches had to exist and these milestones had to exist is to create the opportunity for people to coordinate transactions.

[12:08] around these fairly... [12:10] There's contrived but important events for people getting together and saying now is the time for us to take stock. They sort of bounded ambiguity too, right? Yeah. There is a – [12:20] post I wrote quite some time ago called VCs Should Play Bridge that I think explains this is my best attempt at explaining this, which is. [12:29] I don't know. Have you ever played Bridge? No. Do you know the game at all? I know that my grandpa used to play it, but I don't know it well. [12:34] Bridge is a phenomenal game because... [12:37] It is like poker in the sense that it's like poker is applied – [12:41] you know, like probability and risk taking. Right. Bridge is applied deal making. Hmm. Right. So in bridge, you are playing with a partner and you are playing against another team of partners. And what happens in the game is you deal out the cards and then... [12:56] You and your partner have to have to without talking, right? You can only communicate through your bids. You and your partner have to establish what is the most ambitious way we could play this hand in terms of declaring what Trump is, declaring how many tricks we think we can take and then executing on it. You have to figure out what is the possibility space here and how ambitious can we be? Are you are you purely collaborating or are you collaborating and competing? [13:20] You and your partner are purely cooperative. You win and lose as one team. You are one team and the other team is one team. And what you have to figure out is you have to say, okay – [13:28] So [13:29] How are we going to find out what the window of opportunity is here? Only through bids, right? Only through these conventions, right? And your opponents are trying to – they're the opposite. They're trying to come up with their own possibility space and or derail yours. And –

[13:41] What's so powerful about Bridge is that it transdued this muscle of saying, okay, I'm [13:47] We know that we, like... [13:49] There are going to be some conventions around what this kind of bid means where we're going to understand each other as this being a signal for saying, OK, I believe we can play, let's say, like three spades or three no trump or these are bridge terms if you know them. If any of your listeners, if you've ever played Euchre before, Euchre is a simplified game of bridge. And just to confirm, you have incomplete information. You don't know what cards your teammate has. No, that's right. You have totally incomplete information. You only know what you have. But the whole goal is coordination. [14:19] you have and you know what other people are bidding right right that's the information that you have right right um [14:25] Eventually, what happens is once one team wins the hand, what then happens is one of the two players will actually lay all their cards face down on the table, thereby creating another round of information asymmetry, which is you have one person will actually play both hands for both people. [14:41] So they have the advantage of one person has control over both hands, whereas the other team will have a different kind of advantage, which is they can see. [14:49] Net new cards. Cool. So it's a game of fascinating asymmetry. Anyway, I'm bringing this up because ultimately – I'm just trying to get this back to your original question around coordination, which is – [15:00] What does it mean when a VC says, "Okay, [15:05] In order for us to get to make any kind of progress in funding this company, we have to agree on a valuation. [15:10] It's like, without agreeing on a value, let's put safe notes to the side for a second. It's like, we have to agree on evaluation. How are we going to do this?

[15:16] It's okay. [15:17] What does it mean to value a startup? Well, so here's where it's like, you know, one of the greatest tricks that VCs ever pulled was calling it value and not price. Right. It's. [15:29] It's not like there is any reading of this thing, this startup that we are contemplating where it's worth – [15:36] $40 million. [15:37] of, you know, discounted future cash flows or something like that. Purely imaginary. It's worth some function of probably zero, but maybe a billion. Right. And it's how do you assess this? How do you possibly assess this? And [15:50] And moreover, how do we assess this in the way where different groups of people that are somewhat cooperative but also possibly competitive, i.e. different firms, the entrepreneur versus the VC, how is it that you can agree with this? [16:02] on what we mean by any of these. So the genius shortcut that we came up with was just saying, okay, valuation is actually not going to be valuation at all. It's just going to be code for a discount on a future round. [16:13] We say, okay, we're going to assign a value of $40 million to this company because that is a fair discount on something that we agree will be worth $80 million next time. [16:22] Right. And 80 million, meaning a fair discount on something worth 300 next time. [16:27] And that forward motion is a critical kind of assumption that's built into all of this. Oh, yes. So, again, you're either growing or you're dead as a startup. There's no such thing as the exit right to a business that you all you you can't suddenly step off the escalator. [16:43] It's like, no, if you step off the escalator, you fall down.

[16:46] There's gravity. There's gravity. Oh, no, exactly. Totally. But the concept of forward motion is very, very important as an overall coordinating function for saying, listen – [16:57] You and I are going to get together and shake hands and do a deal as a discount to a future round. That's a discount on a future round to a future discount. That's something we can model. [17:05] And overall, this ability to coordinate – and the reason why this is a hard coordination tax, the last piece of the puzzle is – [17:14] If we're going to shake hands and go fund this company, knowing full well that this funding does not get the company to positive cash flow, [17:21] How do I know the money will be there? How do you know that I'm not going to be offered money? [17:26] worse terms next time because the market has changed or something. This is interestingly enough, it's a concept that is fairly like foreign to VCs in a literal sense, but it's something called duration risk, which is familiar to any treasury or bond market investors, which is, hey, like – [17:41] If I buy this treasury or if I buy this fixed income instrument, there is some amount of risk that when I roll it over and like to the next time that like the terms will be worse. How do I have confidence that I will be able to get the terms that I need next time? Again, like in a world of – [18:00] no Silicon Valley ecosystem, that risk is immense, right? It's like, you can't, [18:04] count on this very well, but the fact that we have so much structure and so much precedent, and particularly the fact that VC is a repeat game, [18:14] Right. Of people who have relationships with each other that co-invest with each other all the time. There is a sense of I can count on you to be there next time if such and such conditions are met.

[18:24] Beyond just an arbitrary set of actual rules. It's sort of a goodwill in the air. It's not just goodwill in the air, although that's a part of it, right? But it is a sense of like, look... [18:35] we all benefit from the system having integrity. Right. Right. If the integrity of the system falls apart, [18:41] This is the VC's version of institutions matter. Right? It's like you miss it when you're gone even though you think that you are smart and clever. Yes. Right? It's like you are not so smart without – [18:52] this coordinating effort that makes everything go. And so this is one of the amazing things [18:59] And I should mention, by the way, that this system – [19:02] of repeat game occasional shelling points of coming together to refuel [19:08] has worked so well [19:10] that what actually happened over time is – [19:13] the advantage started to shift more and more and more. [19:16] towards founders, right, starting to have leverage over VCs because founders could say, well, I have the growth rate. The growth rate is actually the only thing that matters here. If you have growth rate, everything else will work out. [19:28] Exactly. Like I have it's like founders started to own the escalator. Yes. And could see the escalator. Yeah. They could start to dictate terms. They could start you saw the beginning of founder friendly investing. And suddenly the founders can't just kick out the VCs can't just kick out the founder anymore. And more importantly, right with this, I think a lot of the time founder friendly investing got lumped into. [19:51] the same category that was paying high valuations. Sure. Right. Which is like, Hey, Oh, founder friendly just means we only take 10% of this round. Founders keep a lot of the, you know, of the equity. Oh, giving them lots of,

[20:02] runway and room for many, many future financings or whatever it may be. [20:07] It's a bunch of concepts rolled into one, but it is a cohesive theme, right? Which is like, hey... [20:12] the more ability you can give founders to drive the bus, [20:16] First of all, the more – like you get all kinds of good things happening inside companies when founders are in charge, right? And I'm obviously not the first or only person to say this. But I think smart VCs – actually, it wasn't VCs that figured this out. The real person who figured this out and actually sort of set the tone for how the rest couple of decades is going to go is Paul Graham, who understood through YC and through his writings that – [20:40] founders actually control the growth rate and the growth rate is actually the [20:44] I don't want to call it the scarce resource because scarce resource is a little bit too pigeonholing, but whoever has the growth rate has the legitimacy. [20:51] in this town, right? And if you have the legitimacy, you can dictate the terms, right? So ultimately... [20:56] This whole this thing you talked about of being like a coordination effort. [21:01] to get these multi-stage funding events to take place worked so well that it actually faded into the background. Right. And now what we just talk about is like, what are your default? What's your growth rate? Like, how quickly are you growing? And how, where does that take you in terms of like, what kind of valuations will you command? Just became the only set of questions that mattered. Sure. Right. Along those things. So a lot of the old arts and arts. [21:23] I think he's going to... [21:24] Were there to have been a profound contraction in the VC market, many people have predicted over and over and over again. It's like if there were a true VC bear market, I'm sure you would have needed some of the old partners to come back out and explain how everything worked again because the new generation of partners had never really had to deal with something like this. But once again – But the escalator never broke. It literally never broke because technology keeps yielding more and more and more bounty for us to work with.

[21:50] Right? Or, you know... [21:52] So we all continue to believe. And that belief has never failed us so far. So you just painted a picture of something like – [21:57] definitely involves goodwill and involves like some level of faith, but like is a pretty clear view of like a structural positive some environment. How does this like, [22:07] Almost like this myth at the bottom of it that it's GIF-oriented. How does that actually shape all of this? Okay, so... [22:16] There are two ideas in there, and they're related. I think the first idea that you talked about is – [22:22] These notions of myth... [22:24] And the concept of the founders as kings and VCs as priests is a very important kind of structural asymmetry that has always been the case. Founders and VCs both have power, but they have very different kinds of power. The founders have power because it is bestowed on them by the priesthood. [22:43] And the power that the priests have over the king is that ultimately they are actually the source of the legitimacy of the throne, not the founder themselves. Totally. Even if that's not super obvious to the onlooker. [22:53] Correct. Right. And [22:56] I find it to be very funny that you had this whole memetic cycle of everybody in Silicon Valley wanting to read Girard and just thinking that Girard was about mimesis, which is how you got to this whole, I too am contrarian. [23:08] story arc. But Rene, the most interesting Rene Girard is not about the, is, is not this story. It's this whole idea about taboos, right? And this notion of like, [23:18] How do you know who is in charge? It's like, well, the way that you know who is in charge is you look at who is uniquely allowed to break taboos and you look at where that power is granted from.

[23:30] And it being granted by, of course, the VCs and the investors. And again, it's like... [23:35] One of the greatest taboos in tech is this idea of like, do founders have to tell the whole truth all of the time? A truly dark question to think about for a little while because, you know. [23:47] You have to be able to simultaneously reconcile two opposing things, which is one, [23:53] No, founders can't lie. Like, if founders lie, this whole system of trust... [23:58] Really falls apart very quickly. Right. But on the other hand, if founders can only tell the literal truth. Yeah, it might be a better way of putting it. OK, so you can you can really start to split hairs here around what is OK or not. You can't be Trevor Milton and do the video of the road test of the truck being rolled downhill. Right. Right. You can't you can't do that. [24:19] But on the other hand, it's like if founders can only tell 100% of the literal truth all the time, it's like – [24:26] Well, that's pretty hard also, right, to find those windows of opportunity where there is – [24:30] possibility space, right? But you have to will a lot of it into existence and you have to will a lot, you know, the classic story, and I know it is hotly disputed whether this is true or not, is the story of Bill Gates and Paul Allen going and getting those early deals from Microsoft, where they basically said, oh yeah, we have this software, right? And then they wrote it on the plane, right? Yeah, yeah, yeah. You know, these stories have become the truth. Many such cases. Like, these stories are actually the stuff of real founding myth, right? In current Silicon Valley.

[25:00] - In some sense, like the lifeblood of what it actually is to make a new thing. - Yeah. - You almost need that, like, if the market were perfectly efficient, [25:09] and perfectly rational and economically savvy at all times, you would never have the room to make something new. It's not just how you make a new thing. It's also how you learn to make a new thing. Ah, interesting. So I have three kids now, and so I've gotten the great privilege of watching them learn things. And it's like, I promise you, you learn things by faking it until you make it. Right? You are... [25:28] attempting to do something by mostly, you know, faking and cheating your way through it. And then eventually you find yourself doing it correctly. Right. It's like, this is true in all kinds of walks of life. Right. That's just building things. It's true for creating art. It's true for learning a new language. It's true for learning how to express yourself and find your style. Especially if that learning is something, is anything other than rote copying. Right. Yeah. If you're trying to do anything slightly creative or new, the learning process has to have some like room for... [25:57] exploration, failure, etc. Exactly. And so I think it is very important and non-accidental that there is all of this founding myth in the early years [26:08] technology world of computers and early internet of people doing these fake it till you make it [26:15] types of activities. And again, I'm going to say myth because it truly does not matter whether these things factually happened or not. What matters is that this myth is in canon. Yes. Right. And so what this does is this creates this. [26:27] understanding, right, of founders where – [26:30] The VC and the founder are going to have a very, very important kind of relationship and a very important kind of trust built between them where the VC is saying like –

[26:38] founder, [26:39] you are never allowed to do the wrong kind of lying to me. [26:43] Ever. Right. If you do the wrong kind of lying to me is so over. Yeah. Right. On the other hand, you are now blessed with the legitimacy of this firm to go create possibility space. Hire people, give away more of your equity. Yeah. [27:13] to new hires saying, [27:15] We're going to have this many sales in 18 months, and I'm going to give you this much money when we do it. You can't do that. That breaks for all kinds of reasons. You can say here's the option plan. [27:24] Right. [27:25] Our VCs have blessed the option pool, right? Here's how it's going to grow. Here's the dream. And moreover, VCs do another very important thing, which is they have the – [27:34] mechanical competence to know how an option pool is constructed correctly. [27:40] from having done it many times. And what this does is it means that [27:44] Good employees joining a startup early on do not have to read all the fine print of whether their options are actually built correctly. They can just look at the cap table and see that a reputable VC is in the cap table and trust that. It is incredible. [27:59] Furthering in some sense, like it's adding sort of some kind of structure to the myth to make it more. Well, as you add more structure, the myth becomes real. Yeah. Right. Magic occurs right in the form of the realization of the dream.

[28:13] In real things. And this is the kind of. [28:16] institutional state capacity, right, of the innovation economy that has come into being over 40, 50, 60 years. Right. Where, again, you could take some of the best investors in the world. [28:29] out of this ecosystem. And I don't think they would be able to get very much done. And that's not a slight to them. It's a compliment to just how essential this system has become. Yes. Because of, to maybe use language that you used to refer to this sort of gift giving, is like, it's like a magical solvent that allows things to happen in this part of the world that like couldn't, allows a certain type of coordination to happen that would be really, really hard, if not impossible to pull off elsewhere. Okay. So you're bringing us into gifts territory and I want to get to gifts in a second, but [28:59] Rather than thinking of it as a solvent, I think the better... [29:04] The analogy from the physical sciences is as an enzyme, right? Oh, yeah, yeah, yeah. In biological reactions. Right. So in life sciences, what you have, you have this classic problem all the time, which is here are a bunch of chemical precursors. There is the potential for them to form a reaction into some much more valuable output. Right, right, right. But this does not happen organically, right? The randomness in the system is too high. The odds of them bumping into each other in the right way is too low. It just ain't going to happen. [29:34] Most of the world with regards to anything, right? It's like the base state of the world is just like empty entropy. Yes. Slow heat death. Yes. Right. Or maybe rote copying efficiency, but not creativity, not innovation. Right. It's, you know, these, these, these new things with.

[29:50] The ability for new forms to come into being is something that does not happen normally. But, you know, in the life sciences, there's this familiar concept called an enzyme, which is a particular protein or set of proteins that are shaped just the right way. They evolved in just a particularly interesting path so as to catalyze. [30:09] right to accelerate and lower the amount of energy that is required. [30:13] for a bunch of inputs to turn into an output that's more valuable. And once that enzyme, and if that enzyme is doing really, really valuable work, and again, you know, part of the miracle of life is that these enzymes have the ability to be selected for and passed down generations. And, you know, it is not very hard to imagine the analogy of this in all in the innovation economy, right? And how venture works and how startup works. We have all kind of like, I'll give you a graded example of, [30:39] An enzyme is the safe note, right? The safe note is a kind of enzyme insofar as it takes a bunch of inputs, which is people and money and very early companies, and it creates an output, which is the money is in the startup's bank account, and we all agree on a certain way of pricing it in the future on a future round. [30:58] A certain kind of very well vetted and very well understood terms that everybody accepts and no one needs to lawyer over so we can get on with our day and not spend an overwhelming amount of energy activation costs on each side hiring lawyers to negotiate. On trying to coordinate. To try to coordinate. Exactly. Exactly. So the fact that we no longer have to do this, right, is just – and again – [31:20] To bring this back to this system by – like what you were talking about around kings and priests and legitimacy of this is –

[31:27] If you take a lawyer from outside of tech, [31:30] And you ask them to review a safe deal. What do you think they're going to say? They're going to say something like, are you out of your mind? You can't just take all of this at face value. All of this is just completely hand waved away. Yes. And the result is that it will destroy your deal and you will not move forward. This feels like you're getting a big idea. [31:49] So, yeah. So anyway, but the reason why the lawyer who is in tech can know it and trust it and have confidence in the process is because of the legitimacy of the history of, again, the priests, the VCs, who have created the legitimacy superstructure, almost like the – and then you have – [32:09] enough founders. [32:11] have succeeded by this right enough kings have triumphed we can believe in it that we can believe in it right there is reason to believe that this works because it has it does work [32:18] You know, what do you mean it's impossible? How can it be impossible if it happens? Right? Yeah. So... [32:24] But I know you're itching to talk about gifts, and gifts are an even larger and I think even more profound expression of this. So we can get into that. Yeah, I mean maybe the place to start would be like – [32:36] I still think you could take everything you just went through. [32:39] and draw like a fairly sort of like positive sum, rational actor, I don't know, some version of the prisoner's dilemma that allows for this type of coordination to happen in a structured game or repeated iteration game, maybe not on like bridge. Whereas... [32:53] When I hear gift, it implies like a level of...

[32:57] suspended selfishness or a level of just true earnestness that [33:03] isn't so obvious there. So I'd love for you to try to connect the dots or how do you see the gift idea kind of underpinning all the other stuff you just went through? [33:12] Okay, so... [33:15] I don't know if you ever spend any time thinking about the fox and hedgehog dichotomy of like – the fox knows many things. Hedgehog spiky. The hedgehog knows one big thing. [33:25] I think I'm probably on the Fox end of the spectrum in the sense that I think about lots of ideas. But like if I were to pick one idea that I have, it's probably the idea that gifts – [33:35] are the dark matter of why everything in the world works. [33:38] Thank you. [33:39] And specifically gift exchange. [33:42] as being a critically important substructure that allows every other kind of human organization to actually function in the real world. [33:51] People like to talk about markets are a very important way of organizing things, and you talk about other ways in which the world spontaneously self-organizes. I think gift culture is the most underappreciated and, frankly, the most critically dark matter of them all. So let's spend some time talking about gift culture. Yeah. [34:08] So, [34:10] Anybody – [34:12] Certainly I think. Anybody I've ever seen who is successful in the world. [34:17] at [34:19] getting what they want out of life, [34:21] making forward progress in things. [34:24] has a common attribute, which is that they're often very generous. And they're generous in a particular way, which is that –

[34:34] You can see them using their generosity, not selfishly, not cynically, [34:40] but in a genuinely constructive way to create things out of nothing. Abundance, to use a word that is loaded. And not just create things. I don't want to use the word things because that is very unsatisfying. To create... [34:53] structures of ordered people out of nothing. Right. It's like, [34:59] Gifts are doing a kind of work that is creating... [35:03] an arrangement of people and understanding that was not there before. Right. And this is a kind of work. [35:09] Right. It's like, let's let's spend a minute and talk about like work. [35:12] You know, so – [35:14] In the world of [35:16] business broadly and in the world of markets. Um, [35:21] We're very fluent and familiar with talking about the ability to do economic work as being described as very Newtonian classical mechanics, sort of like here is the price curve, right? You have supply and demand and – Everyone's a selfish actor. Everyone's a selfish actor. Everyone is predictable. Everybody is rational. It's like you can just – there's plenty of work. By the way, markets can be pretty damn elegant when it comes to harnessing that energy. Oh, yeah. This is not a slight against markets. Markets are an amazing and wonderful thing. [35:48] But, [35:49] Markets are amazing at describing sort of classically Newtonian sorts of work. [35:53] So, [35:54] There is another kind of work. [35:56] that I think gifts are more suited to, which is what you would call thermodynamic work. This is like the idea of the enzyme that we touched on earlier, which is not the work of –

[36:06] moving this mass from here to there. It's the work of creating something. [36:11] It's the work of X becoming Y, right? It's the work of turning liquid water into gas, right? It's the work of turning these precursor materials into this value. Like transformation. It's the work of becoming. This is where it's like you can kind of intuit that gifts do a really important work for. [36:31] on the thresholds of becoming. Right. And if you think about we have a we have a book in front of us called The Rites of Passage by Arnold von Gennep, all about sort of [36:41] The gifts that are exchanged... [36:44] in moments where people become something or when a relationship becomes coming, becomes something. This is, I think, one of the is something that is so important and ingrained in our lives that we almost forget that it is even happening. Right. This idea that you would. [36:58] close a business deal over a dinner it's just so almost the norm it's like it's so natural that you would forget to think of it as a c as a coordinated exchange of gifts right of breaking bread in order to make something actually become real right right which is this new business relationship and it's like yes you're papering it and you're signing it and you're doing everything but the actual like work involved in solving the coordination challenge of can i trust you are we [37:28] Yeah. [37:28] Boy, do gift exchange really lubricate those sorts of interactions. So much. And we've gotten so normalized in some of them that we don't even think of them as being generous. Right. Perhaps is what is the blind spot. We're not fully seeing the water on it to an earlier point. And so there's no question in my mind that.

[37:47] Gift exchanges and gift cultures are basically – [37:52] the evolved tacit understanding of, [37:55] of how do you cross thresholds successfully? - Ah. - And so let's think of it, like, again, if you think about any moment in our lives where people exchange gifts, what are those moments? It's birthdays, it's weddings, it's anniversaries, it's commemorations of people starting a new job, it's retirements, right? It's crossing of thresholds, right? And what everybody, bar mitzvahs, everybody kind of understanding that-- - Even housewarming. - Even housewarming. Housewarming is a fantastic example. [38:21] Right. It's like you were crossing a threshold into living in this new place. We are going to come witness this and bear witness in the form of gifts for you to make this real. And so, by the way, so in case any listeners have detected this. [38:36] When I talk about gift culture is this idea of [38:39] We are going to like we are going to make something real by giving this for you in front of this. There's a reason why a lot of that language sounds very familiar to anybody who's ever attended church. [38:51] Because this is really – we're talking very foundational – [38:55] Christianity here in terms of the ordered structure of everything as being like, we are breaking this bread for you in this place so that X might proceed into Y is so unbelievably, you know, sort of Christ coded. [39:15] I enjoy sort of deliberately going a little bit heavy on these, one, because I am Christian. I go to church every week with my kids, and this is a big part of our life, but also because you don't have to be Christian in order to appreciate the incredible ordered structure that this has put into the world that has advanced our ability to coordinate around mutually beneficial outcomes. There are plenty and plenty of people out there in the world who it's like –

[39:38] You don't have to believe – you don't have to have any particular kind of faith in order to understand that you benefit from the precedent of gift-giving cultures going into a certain kind of pattern. Generosity is like a bridge in a lot of ways. It's not just a bridge. It's the bridge, right? It's the way that you transcend – [39:56] a base case [39:58] That isn't working. Yes. Yes. Right. The base case does not work. Right. Normally we talk about coordination problems. We're sort of acting on this view that sort of like otherwise you can't trust someone. Right. Well, remember the base case is we're all cold and dark. Right. How do you escape cold and dark? [40:11] Well, we need to be able to pass a threshold beyond cold and dark, right? And part of the way that we – again, like – [40:17] You can reduce all of this down to just the ultimate cheat code in life is to just be really generous with everybody. Right? Because – [40:25] Generosity accomplishes a couple of things. One is that gift giving is an unbelievably effective way to [40:34] to communicate information. [40:36] So gift exchange is actually a really, really high bandwidth channel for establishing two-way information transfer between people in a way that commerce is not, by the way. Like, yeah, so one of the great things about commerce is that commerce is a great facilitator of information across people, across cultures, across whatever. And while this is true, gift exchange is that but just on steroids, right, a whole order of magnitude more. Yeah. [41:03] The reason why this is is because – [41:06] If I'm sort of a faceless Amazon-style vendor or whatever, and you are a faceless purchaser, and you buy an item from me and I ship it to you, but we never meet, we never shake hands, never anything like that.

[41:18] The meaning of the object that you got from me is whatever you ascribe to it. [41:22] On the other hand, if I give you a gift, the meaning of the object to you is what I ascribe to it. Wow. That information has just been transferred from me. And you don't need my permission. [41:32] in a sense. You do a little bit, right? Well, you need my buy in. But it's not when you think about like a commercial transaction, both sides have to sort of [41:41] come up to a level to agree with a gift. [41:45] You wrote about this a little bit. There's sort of an implicit sense of all you have to do is receive to agree. Yes. OK, so yes. So now we're on the same page here. It's like. [41:54] The fact that gift culture comes with a set of obligations, again, a lot of people kind of jumped to they've read The Gift by Lewis Hyde or then these other books, which is like, oh, gift culture works because you have to reciprocate. You don't always have to reciprocate in kind. Right. There are plays like, yes, there are some very rigid expressions of gift cultures where if I give you a gift, you are compelled to give me an exactly equivalent gift. Yeah, it's like almost bartering. Yeah, I'm not talking about these very little interpretations. People actually get this wrong about Burning Man. Yes. It's like Burning Man is not a bartering culture. [42:24] - That's exactly right. [42:26] The rule of gift culture is not that you have to give me a gift back exactly. It's that you have to be... [42:32] grateful for the gift. And you have to accept it. You have to accept it. You have to be grateful. And the idea is that presumably you will pass this gift forward either back to me or to someone else. But way softer, karmic. Yeah, exactly. Abundance mindset. It's more powerful the softer it is. Right, right, right, right. So

[42:49] Remember what I said about when this gift is transferred, information is exchanged. And this is how information grows. [42:56] Right. You talk about it's like how does ordered structure create and multiply in the world? It's like, well, the wonderful thing about information is that, like, there's no copying cost of information, but there is a reception cost to information. [43:07] This is really important. It costs nothing for me to say information, five, six, seven, eight, nine, ten, ten. It costs nothing to shout. [43:14] It does cost to listen. Gift culture is how you lower the cost of listening. And that's why information is actually received. That's a powerful idea. And so this is where, again, there is a very, very direct link between gift cultures as a way to propagate information and information theory by Claude Shannon, which one of the many ways you can summarize this unbelievably powerful idea is information isn't what you say. Information is what they hear. Yes. [43:44] Yeah. [43:57] we can fast forward all the way back to startups today and the ability to create value, right. In groups of people that are trying to create an unknown, uncertain future. And so like, [44:10] one of the very basic rules of startups and or tech companies or any kind of value creation at all is that like, [44:17] You want very few structured rituals or meetings in your day, but there's one that you absolutely have to do, which is demo day.

[44:23] Demo day is very, very important to do. And in fact, if I think if you look at [44:28] Any company and dial in on any team, the number one predictive factor for whether that team is good or not is do they do Demo Day? The reason why Demo Day is so important – You're just talking about internal Demo Day at Shopify, not like Y Combinator. I'm not even talking about Y Combinator. That's actually an even more evolved function of this. I just mean inside a team in a company – [44:47] Does the team getting together in the course of its normal work of building products do demos for each other? And the reason why demos are so important is because... [44:57] The rules of demo day is that everybody shows up and then you give the gift of demos to each other. Why is this important? It's like, well... [45:06] Demo day is actually where you figure out what it is you're building. What's the difference between, in this context, what's the difference between a gift and performance? [45:15] A gift of performance. Because I would read, and maybe I'm thinking 2xCombinator, but I would read demos to be as much performance as they are a gift. [45:26] I think that Demo Day, like the YC Demo Day, is actually not a Demo Day in this sense. I think it's named Demo Day on purpose. But I think that is the performance. So Demo Day YC is a show. You're selling. It's a show, which is different from the Demo Day that I'm talking about, which is a gift exchange. [45:45] So can you explain what makes that – even let's say it's Shopify. Like, hey, I worked on this project I'm really proud of. I want to show all my coworkers why we should use my design. Like that – maybe that's cynical. So in practice, I think real demo days don't really look like that. It's like – it's any number of the following things. But it's like here's this problem I'm stuck on. I'm going to show you why I'm stuck. Or here's this fun thing that I was surprised by. I didn't know I was surprised by. It's like show and tell almost. It's show and tell, right.

[46:15] Show and tell, it's I gift you something interesting and you give me something interesting. But most importantly, right, is to get to the heart of why Demo Day works. [46:23] Demo Day is a moment when people listen. [46:26] Because you're offering things as gifts as opposed to as gifts. [46:30] project management. You're opening up that information transfer kind of magic thing that you talked about. Exactly. It's like, [46:36] Project management meetings is like a bunch – that's a bunch of people talking and nobody listening. Yes. [46:43] Demo Day is a bunch of people listening, and that's the difference. That's why it's like this doesn't mean I'm not advocating for like zero planning, but it's like your ratio of planning to demo days should be like one to ten or something and not ten to one. There's something in here that I really like, which is a previous guest, Stefan Ongo, who runs Obsidian. He has this idea of like creating the experience where people feel like they are in good hands in the omakase sense. I like that. [47:13] add in the way you're talking about the demo day too, which is, it's one thing to talk about like, oh, here's the project brief or whatever. It's another to say, hey, I built a prototype. Let me walk you through it. The show is how energy has a little bit of that in good hands energy. Yes, and okay, so this is really important because [47:29] this idea of [47:30] I'm going to take the care... [47:33] of showing you why the back of the cabinet is beautiful. Yes. Right. Like matters just, you know, you get all crafters know that like well-made things have the parts inside that you don't see being made well. And the reason why they're made well is because you want to show other crafters how much care you put into it. And that is reason enough. Yeah. And so you, you've had this,

[47:53] Recurring conversation on a couple of your previous episodes about gifts versus slop. Not gifts versus slop. Excuse me. It's slop versus care and slop. [48:02] My version of this is that the opposite of Slav is gifts. [48:05] Right. Instead of using calling it care, I call it gifts. [48:08] And I'll tell you why I think this, which is that like – [48:12] The point of a slop... [48:14] is [48:15] Slop is what you get when no one's listening. It almost doesn't have a point. It doesn't have a point because slop is talking. Slop is when nothing is actually received. The goal is not the reception. The goal is the production. [48:27] Slop is peak production. Right. Right. Right. When something is [48:32] Or maybe it's being produced for commercial reasons. Sure. But it's like, it's just production. Make, make, make, make the output. Marvel number 37. Yeah, exactly. Yeah. [48:40] And [48:41] Whereas gifts, it's like the reason why it's like I think that care and craft are all very nice descriptors of what the opposite of slot looks like as a characteristic. But I think the actual – [48:52] antithetical to slob is gifts because the definition of a gift is something that is received. [48:58] Right. How much does the in the specificity in mind of the audience matter? So, for example, one of my favorite ideas that I thought of reading about your gift stuff. Yeah. This is classic thing in make something wonderful book from Steve Jobs. He's obsessed with this idea that he's building on the shoulders of giants and he wants to make something wonderful and put it back into the human experience. Granted. [49:21] Maybe his audience is literally humanity, but it's this very open-ended, whereas there's another view that says, like, the first – when you first ever texted me that idea that gifts are the opposite of slop, I almost thought of, like, a letter in the sense that it has an incredibly specific audience. A letter is not slop. A letter is not slop.

[49:36] Right. Right. But you're, I guess maybe I'm, you don't need to necessarily specify. A gift can be as broad or as narrow. Oh, sure. As long as it is received. Oh, sure. [49:46] An artist making art can give it to the world. Yes. It doesn't have to be for us. I don't have to make this art for you. I can make it for people in general. But what if people don't receive? I mean, there has been art that hasn't really been received initially. Yeah. [49:58] Yeah, I mean – Although usually we come around – it sort of must be received at some point. It must be terminally received. Well, okay, so you can get into some really interesting, like, the reaction is the content type of online meta theory, right? Well, this Rick Rubin would be – Is 4chan art? Yeah, yeah, yeah. It was given to be heard, right? It's not slop. Right, right. There are all kinds of uncomfy directions. When you're supposed to make art for yourself. Right. [50:28] Oh, wait. Okay. Hold on. Are you supposed to make art for yourself? This is a great question. You're supposed to make art that you want to make. [50:37] but it should be. But I don't know if you're making it for yourself. I think you're making it for others, but, [50:43] But you're making what you think is good. At your bar of quality. Right. I think that's right. I think that's the right distinction. Yeah. [50:49] There's something that Toby at Shopify has said that just resonated a thousand percent with me. It just hit me like a ton of bricks. He says... [50:58] When I was building Shopify, I made this online store that was for me. It was what I wanted. It was everything that I thought was great. And then I showed it around. I showed it to people, and they all said the same thing. They said, Toby, this looks great, but this will never work in the real world.

[51:12] Right. Like this will never work for real customers. This will never work for real businesses. This will never work for blah, blah, blah. Enterprises like he's heard it all. He's like, you know what? [51:21] I don't really care about this real world place. [51:23] I'm going to make what I'm going to make on my island what I want. And you're all welcome to my island. But you have to come to my island because it's what I want to get. Yeah. And it's like – [51:33] Trust me, come be in my hands and you're going to like it. Right, but I'm going to make what I think is right. Right. And so you know – [51:43] I actually think we should spend a second teasing this out because it's like on the one hand, you are absolutely correct that you are making – [51:49] from me like this gift is from me it's not from what mckinsey says a good gift good gift looks like it's from what i think is a good gift looks like [51:58] But it's also for you, right? It's, you know, this is my gift given for you so that you might receive it. Yeah, it's simultaneously personal and for someone else. Yes. Which is, again, I think... [52:11] When something is for someone else, it is personal, right? I don't think these things are in opposition at all, right? It's like there is a vector to it. [52:19] That is the stuff of life. Right. Maybe when I said personal, I more meant authentic, perhaps. But it's coming out from versus... [52:29] To go back to the earlier point about demo days, performance is not always really a personal or authentic thing. [52:35] And I think gifts seem to me, at least when I think of great gifts, it's always this, to go back to again, this bridge, it's like, I want to meet you.

[52:45] where you are on some mobile and show you, I see you, but also like give you the type of gift that I would give you. Right. Like it is. So it's, it's kind of like in a way it's sort of the opposite of this trend of self care. Oh, interesting. This, you know, this, this idea of like, [53:02] oh, you need some you time. You need some time for you or whatever. When it's like... [53:07] Listen, I get that there are a lot of people who... [53:10] are living very busy lives in service for others and could use a break. But it's like – [53:14] In general, the way to have a fulfilling life is to live it in service of others. Yes. Right. It's not to live it, you know, in self-care. Yes. Right. That's that's like self-care is a real sort of hedonistic treadmill that you get on. [53:26] where ultimately I think self-care is a kind of slop, right, in a way. Like, it doesn't feel like it at the time. It feels like it. It's like, oh, I'm going to – [53:34] I'm going to go on this run right now for me, right? And just do what I want to do, or I'm going to go take a day off for me or whatever. It's like, I'm not saying don't do those things. It's great to be able to recharge and it's great to be able to have days for yourself. But ultimately the way that you drive meaning out of life is to be living it with a vector of direction. [53:49] in service of others. Yes. Right. I think the, [53:52] Way that you would just describe that in non-esoteric jargony sense is just like be generous all the time. Why do you think... [53:59] You wrote about this in the gift essay about sort of like comparing it to the lemon market problem where like the car salesman is incentivized to kind of give you the crummy car. And in Silicon Valley, sort of pulling this magic trick that allows us everybody to suspend selfishness or disbelief or any of these things. Why do you think...

[54:18] outside of it maybe just being necessary for creative innovation, why do you think certain industries, perhaps Silicon Valley, perhaps other creative fields, [54:27] have internalized this phenomenon, in part, or maybe especially so because they don't even – they're not even fully aware of it. Okay. This is a great question. I don't think people in Silicon Valley would necessarily identify as being that generous. Right. Okay. So – [54:41] First of all, let's go over, for the benefit of any listeners who might not know, the market for lemons problem. The market for lemons problem is Akerloff, I think, who was the author of the paper. It presents the following problem, which is like, how do markets work under conditions where there is information asymmetry between the buyer and the seller? [54:58] And the classic example of this is a used car lot. In a used car marketplace, the buyer and the seller are coming together to do a transaction where I buy your car. But you know a lot more about the condition of the car than me. [55:10] Right. You know whether the car is good or if the car is a lemon, if it's bad. And I don't know this. Right. Or I don't know it very well. And so what happens is. And it's not really a repeat iteration game. It's not. Exactly. It's not a repeat game. What this means is that. [55:25] I have a lot of uncertainty as to whether this car is actually worth this sticker price or whether it's bad or not. Right. And you're sort of incentivized to screw me. I well, I'm incentivized. You the seller is incentivized to screw the buyer. Yeah. And what this means is that over time. So the phrase is the bad drives out the good. Right. Over time, bad quality goods will drive out good quality goods because buyers will only be able to pay a price assuming that it's bad.

[55:55] We'll go elsewhere. It's like a tragedy of the commons. Yes, it is a kind of tragedy of the commons. That's exactly right. Now let's go to a world of innovation where it's like we're trying to try and build brand new things. [56:07] out of technology, out of new pieces. And as you know, it's like when you're building new things, they don't work all the time. [56:14] A lot of times the demo doesn't work. A lot of times the demo is crap. So [56:19] Imagine if you were in a market scenario. [56:22] If you're trying to go and find customers, if you're trying to go and find people to use and pay for your product, it's like – or even just listen to you, right? It's like spend the cost of their time for listening to you. It's like – [56:36] How do you navigate this in a world where the quality of the demos is widely varying like a used car would because people are taking creative risks? Right. Well, you're also trying to play a repeat iteration game. You're trying to play a repeat iteration game. And you're also it's like you're trying to take creative risks such that the odds of the demo or of the gift or the whatever being a lemon is actually quite high. [56:58] Right. Because that's what it means to make art and take creative risk. Yeah. Like, why doesn't the bad drive out the good? The reason why the bad doesn't drive out the good is because when it's presented as a gift, [57:07] Right. The meaning is intact, even if the demo doesn't work. Right. It's like the gift is a gift regardless. Yeah. If you give somebody a painting you made, even if it sucks. [57:20] I mean, I may have a better example when a child does that. Right. Yeah. That is a better example. Yes. Everyone is going to receive that. And it is about the spirit and the energy and the approach and the intent. Yes. Not even necessarily. Yes. What is received is the meaning of the gift.

[57:36] Right. And again, it's like [57:38] The it's like the meaning of a gift is the gratitude that it creates. Right. But Silicon Valley and other artistic fields are still highly commercial. [57:45] Yes. Which is the paradox here. Okay. Okay. So this is good. So there's... [57:49] Anybody who is interested in gift culture probably knows there is this book called The Gift by Lewis Hyde. [57:55] The current edition of The Gift, which has become an airport bookshelf staple, is The Gift, How the Creative Spirit Transforms the World, which is an unfortunately very watered-down title. This is the frustration of every author who has their titles written by other people. But you have both versions for us. But I have – the first edition of the book is called The Gift, Imagination and the Erotic Life of Property. Wow. Which is a way better title. Wow. [58:25] It is rightfully considered one of the great works on this. But there's one aspect of this book that drives me nuts because it's just not accurate, which is there is a primary contention of this book, which is that gifts and markets don't mix. One person's gift can't be another person's capital. I can't give you a gift, and then that gift is your capital that you use economically or whatever. That poisons the well of gift culture. [58:55] It's totally separated. Otherwise, it is no longer gift culture. [59:00] And I think I'm sorry, but anybody who has ever been in a music scene, an art like the startup scene, any of these things knows that this is not true. There is an absolutely an intermingling between the economies of the gifts and the real economy of exchanged money in actually advanced high forming gift culture. Right. And my favorite example of this is how music scenes work.

[59:25] Right. It's like, [59:26] Any music scene, right, it's like you have this thing that has to come together, which is in any scene you have – [59:32] A number of different bands and people in the different bands who are putting on shows on some sort of regular cadence and fans who are going to the shows and venues and bookers who are charging various ticket prices. And from the outside world, you would be very tempted to look at this. [59:51] and say, [59:52] This is a market economy we have here, right? You have a market of buyers and sellers of people who are playing shows for profit and people who go because they want to spend a certain amount of money to go to the show. To get entertainment utility. To get entertainment, right? There's a value that they place on entertainment and they go pay money for the bands they like and not for the bands they don't like. And this is a perfectly functioning market system. It's like, okay, anybody who has actually lived in any of these scenes is like – [1:00:18] It's not that there's no market system here, but this is way more interesting than that. The actual economy – It's almost like the commercial part is the baseline. It's sort of the very, very bottom that makes it possible, but everything on top of it is – But it's – moreover – [1:00:31] Half of the tickets are going to be guest lists. Half of those guest lists are going to be comp through drink tickets. Half of those drink tickets are going to be a gift from a sponsor who is sponsoring the alcohol in exchange for you playing at this festival. It's like, no, no, no, no. The actual exchange of value here is way more mysterious than straightforward economic… [1:00:51] transactions. And by the way, there's plenty of commercial stuff wrapped up inside of that. Yeah. But it's indirect and it's avert. Yeah. But this notion of.

[1:00:57] I'm going to like me and my crew are going to come to your show as a gift to you because I know that you have these other people coming and you want the room to be full. So in exchange, I expect you to give me a bunch of drink tickets. And instead, I'm going to give those drinks to a bunch of people who are new to your show so that they will be excited and they will buy your merch, which is money that you will use to pay for gas. Right. So this is why it's like I love this initial title called like imagination and the erotic life of property, which is. [1:01:23] All of those exchanges there of [1:01:25] Guest list to drink tickets to drinks to merch are all – it's like it is an erotic life of exchange of possibility. [1:01:35] of meaning that is being traded, of participation, that is so much more significant and has so much more information being transferred than if this was a purely commercial transaction. Again, if you go back to like, [1:01:49] In a commercial transaction, the meaning of the purchase is what I ascribe to it. But in a gift, the meaning of the gift is what you ascribe to it. Yep. Right. This is this is what the point of scenes are. Right. Scenes are very, very high information information. [1:02:01] Bandwidth. [1:02:02] exchange mechanisms. Right. Which might be the best way of describing to tie it back. [1:02:06] what Silicon Valley has found a way to sort of almost like productize at tremendous scale and tremendous effectiveness. Like deeply embedded in the fundamental culture of the place. I hate the word productize, but absolutely. Like what you're describing is exactly it, right? It's like Silicon Valley is just a very, very high functioning music scene. [1:02:24] Right. And the byproduct, by the way, happens to be wildly profitable. One last thing on gifts before we talk about a few other things. You've written extensively about bubbles and how bubbles is sort of this like important fabric that creates innovation as well. And there's a lot of different textures to this. One of them is that it creates this sort of environment where there's lack of differentiation. There's a rush to differentiation.

[1:02:54] are graded on results as opposed to potential. Obviously, everything we were talking about at the very beginning. Can you talk about how... [1:03:00] This sort of like gift texture leads to what you've in the past called like the controlled bubble state of Silicon Valley. I'm glad you got to this. This is great. [1:03:12] All right, so... [1:03:13] Many people have observed and better articulated than me, read Boom by Bern Hobart, read Build Chainway, all kinds of people, have written about how bubbles do incredibly important work in financing brand new stuff. Carlotta Perez. Right. This is this whole idea of infrastructure is built during bubbles, which you've seen. Technological revolutions in – [1:03:35] Something capital? Financial capital. Financial capital. Yeah, all very important canon – [1:03:40] stuff. The overall, the message here, part of the message about why bubbles are important is if you go back to this coordination challenge we had earlier, which is, [1:03:49] Me and you are going to get together to do a deal. We're going to put in $10 million now, even though it is not going to get us anywhere close to free cash flow. [1:03:55] How do we know that the next financing tranche will be there? What gives us the confidence that we will be able to raise it 50 later? I don't know. Do you know? Do I know? Do you know? You just have to kind of trust that it's there. In a bubble, nobody worries about that. [1:04:08] Right. In a bubble, this is solved by virtue of the fact that the price is going up. And I'm glad to give you capital. You're glad to give me equity. Let's just. Yeah, let's let's go, go, go. Right. It's like the price of everything is going up. So you have to do the deal now. [1:04:20] This is why bubbles kind of solve that problem for you. So this is one mechanism by which bubbles and number go up

[1:04:28] um solve or at least obfuscate or mask a lot of the problems that are coordinating around these uncertain projects maybe they also spark generosity okay so this is this is my second point which is like there is also a really just literal thing that happens during bubbles which is everybody's feeling rich and so everybody's feeling really generous like don't discount that it's really important that in bubbles when everybody's bags are up [1:04:53] Everybody takes people out to dinner more and more things happen. Everybody buys NFTs. Everybody buys NFTs. Everybody does. Oh, exactly. It's like. [1:05:01] All kinds of interesting stuff happens just because people have money to burn and they want to burn it on looking and feeling good and giving other people credit and giving other people attempts and paying various kinds of things forward. This is the challenge. This is what Silicon Valley has benefited from where other quote unquote creative fields like – [1:05:20] more traditionally entertainment has not had the benefit of this sort of surplus that drives generosity. [1:05:25] At least in recent years, I would argue. Let's think about that because if you look at Hollywood and if you look at music and Hollywood, there have been other periods of booms and busts and great surplus. Look at the 90s in the music industry. More like Silicon Valley now. [1:05:41] Versus now, I think there's much more scarcity. [1:05:45] especially in Hollywood. And it's like everyone's kind of acting selfishly. There's way less generosity probably as a result because you don't have this controlled bubble. You don't have this controlled state of additional surplus. Yeah. Well, you know, there's a great question that you can ask to get to the heart of any person's mindset or any scene's mindset, which is what do people buy when they have money to burn? There is one particular mood that says, well, what you buy when you have money to burn is you buy gold, right? You buy jewelry, you buy gold, you buy that sort

[1:06:15] safest possible way of buying both durable and also highly liquid and exchangeable forms of status. There's another type of mindset that says what you buy when you have money to burn is champagne. [1:06:27] Right. You buy things that are celebratory, that take you across thresholds. Champagne is the champagne is the ultimate sort of threshold crossing. It really is. It really is. Right. And at this point, it's more of a gift than an actual drink. Yes. I think LVMH is selling non-alcoholic champagne. Right. Of course, as they should. Right. So. [1:06:48] It's like in bubble environments when there is all of this exuberance and there is all of this – [1:06:55] of goodwill on people who are basically like, well, I got in early and my bags are up, so I'm going to pay some of this forward in the form of – [1:07:03] picking up the tab or whatever. Right. It's like, [1:07:06] Yeah, maybe patronage itself is sort of a version of this. The Medicis. Okay, so you're opening the door into this other fantastic topic, which is – [1:07:17] Under what situations is patronage good? [1:07:21] This is a big topic I've been thinking about for a long time. We can go there if you want. Yeah, let's do it for a few minutes. Okay, so... [1:07:29] First of all, what do I mean by patronage? So I think people – when they hear patronage, people jump to the Medici's and the Fugars and the – people of means funding the great artists of the world. But there is a – [1:07:43] That's like a tiny sliver of patronage. There's this other much more everyday form of patronage, which is –

[1:07:50] sort of synonymous with what you would call historically machine politics which is like [1:07:56] There are people with power. [1:07:58] What that power allows them to do is decide who gets what job. [1:08:02] Right. Their power gives them discretion over how the employment is going to be distributed. And then the people who then get those jobs and might assign sub jobs under that. [1:08:10] have complete and total loyalty to the person. This is like Robert Moses. [1:08:14] Robert Moses is a great example. It's like it's every local city government. Right. It's the way that things just used to be. And so so you get a couple of things out of this. Right. One is you have this supremely. [1:08:28] non-merit-based [1:08:30] unjust way of forming and maintaining a workforce that is only based on favor trading or whatever. On the other hand, you get an incredibly loyal and aligned workforce that is like, the boss wants this, we're going to do it because we owe the boss, right? You have all of these systems of like... [1:08:51] And tremendous people feeling like a family and feeling that they were like, we're going to figure out what the goal is and we're going to do it. And I bring this up because there is this fantastic podcast that very few people know about that I want to recommend. It's produced by this local Boston area radio station. [1:09:09] And they've done two seasons so far where they've looked at like various interesting aspects of like Massachusetts history and sort of like how governments work and how things have come to be. The first season was on the big dig and on like why is infrastructure hard these days? And the first season was OK. But the second season was on the Massachusetts state lottery.

[1:09:29] And it's about the system by which Massachusetts created the most profitable and most successful lottery system in the United States. And it all came through this – [1:09:39] patronage system explicitly run by the state treasurer in Massachusetts for many years, this guy named Bob Crane. And [1:09:46] The real kind of story behind this season was actually the story of the Massachusetts Patriots. [1:09:51] state like patronage system where I was like, which persisted for a long time was very, um, [1:09:57] related to a lot of kind of like the Catholic ethos of the Northeast. And it produced – [1:10:03] this [1:10:05] Very interesting kind of state capacity, right, in the capacity where, like, all of the jobs work this way. And so, therefore, a lot of interesting things did actually get done very well. And now, of course, it's like this system is all gone now, right? It's like it's all gone now. You could never go back even if you wanted to for all kinds of reasons, and you wouldn't want to go back for all these reasons. But it's like people are nostalgic. [1:10:26] For this time when it was like – when the government said they were going to do something, they did it, and it was on time and on budget. How? How did this happen? Massive alignment due to patrons. Massive alignment. Again, it's like – and again – [1:10:37] If you look at systems, if you look at what are the actually kind of like productive institutions in the world that can get things done on time and on budget and really well, a lot of it looks like businesses. [1:10:46] Right. Like private businesses that are founder led. [1:10:49] where everybody knows who's in charge and everybody knows why they're there and who got them there and this and that. It's like it is not exactly the same as a patronage system, but it is kind of similar, right? If you look at a lot of like anything that this styles itself as founder-led is like not so far from this concept.

[1:11:03] And so you can ask like, [1:11:05] To what degree should we be nostalgic for this and or trying to recreate it in the forms of other institutions? And part of the advantage of companies and private businesses is that you have more leeway to do things that are explicitly like this. [1:11:17] where it's like, you know whose guy you are, you know why you're here. And if they say do something, you do it. You don't do like a [1:11:24] Risk benefits analysis of weighing all of the different stakeholder scenarios. It's like, no, bosses do it. I'm going to just do it. Right. It's like, you know, there's some advantages to being in a system where you can just do things like that. That is an incredible transition to the next thing I wanted to talk about, which is we talked obviously a lot about coordination in the last – [1:11:46] section about gifts, [1:11:49] if gift framing is almost about this like ecosystem level coordination, at least in the Silicon Valley context, [1:11:55] I'd be curious to talk about [1:11:57] the ways that trust and accountability and agency manifest in companies and in markets. [1:12:04] you have this great series from 2018 where you talk about scarcity and abundance and sort of what happens as you move from a world of scarcity to a world of abundance. One of the big ideas there that maybe if it wasn't perfectly on point to me really rhymed with where we are now, which is this world where you're moving from consuming objects or assets to consuming functions. Maybe that's, [1:12:22] a slightly, if you wanted to revise it, you'd maybe say we're consuming what are about to be agents. Yeah. Agents are functions. Right. Right. So I think a lot of ways you were you were pointing at something that was pretty spot on. You wrote about this super recently in the sort of shift in software from code is capital to code is labor. Again, another precursor to

[1:12:43] where we're going with agents. Companies are really good at solving for this idea of the O-ring problem. Essentially, the [1:12:51] The most critical, the O-ring named after the spaceship, like the most mission critical thing that can't go wrong. Companies in many ways are built around that idea. They're built around having accountability to make sure you don't fail in the mission critical failure process. [1:13:03] way. You've also written about this classic, iconic Venkatesh Rao series called The Gervais Principle, which is really also about [1:13:15] companies and how they function with these kind of multi-tiered, for people who haven't read it, the sort of very simple idea is that in The Office, created by Ricky Gervais, he outlays these three modes of [1:13:26] companies, sociopaths at the top, clueless in the middle, and losers or economic losers at the bottom. And the most interesting version of that being the clueless, Michael Scott and Dwight Nandy. Put another way, the company man, the guy who just does whatever the company needs. And so [1:13:41] I know this is a little bit long-witted, but in a world where, at least that we're moving towards, where – [1:13:47] Intelligence is free. Software is abundant. [1:13:50] Hey, guys. [1:13:51] If they're not agents already, they're interoperating with anything via MCPs. We have trustless payments. There's a lot of things that don't require the level of coordination that used to be required in the economy. [1:14:03] Are we going to live in a world where you just have lots of individual actors and entrepreneurs and you don't need... [1:14:10] large organizations and they're just coordinated by markets? Are you going to have a looser boundary of the firm? Like where, I guess the root of the question is where does organizational hierarchy and accountability actually still matter?

[1:14:25] Let me see if I can untangle these different threads. There's totally a coherence to all these. Let me just see if I can answer this well. I'll take it kind of in reverse order. So the essay that you are referencing here is the one that I still get the most email about, which is the Michael Scott. [1:14:44] Yes. Yeah, that was your riff on Drew Van Katesh. My riff on Van Katesh's piece was the... [1:14:50] This idea that it's like, [1:14:52] As you rise the ladder of the socioeconomic upper middle class of sort of like educated professionals, the more you become Michael Scott, which produced a lot of that was a the reaction is the content piece. That was that was a hot piece. Yeah, we get some more of that later. But I got basic. I got no like actual hate mail for that one. But a lot of people being like, oh, God damn it. [1:15:22] Thank you. [1:15:23] And that they were sort of chasing arbitrary detachment from reality rather than real money or power. While I did say that, I also said something else, though, which is like it's important to remember what the office, at least the American office, which is the superior office, actually was about, which is. [1:15:41] The Office is presented as a show where there is this inept boss, Michael Scott, and then there is this funny, cool protagonist, Jim. And then when you watch the show, you realize that the opposite of that is true. [1:15:55] That Michael is actually incredibly good at his job. He is a kind boss. He makes the office work. He actually is a good manager, right, even though he's funny and he's a cartoon. He's a jester, right? He's a comic character, but he's actually a very good boss and a good manager, whereas Jim is actually like the villain, right? Jim is an asshole. Bank Attach would say he's like right on – he's teetering on becoming the sociopath. He's fully a sociopath by the end of the show, right? It's like Jim is actually the villain of the show, right? Like he's mean. He's capricious.

[1:16:25] He breaks up a marriage. He's mean to pay. He's horrible in all kinds of ways. He's mean to Dwight. Anyway, the point of that being is that like – [1:16:33] Michael Scott is not... [1:16:36] in some profound ways, an unflattering character. Michael is actually really important. Michael is actually load-bearing for the show, and the Michael Scotts of the world are load-bearing for our way of life. [1:16:44] Right? This is, like... [1:16:47] Yes, it's presented in a very... [1:16:50] cartoon buffoonery sort of way. Well, everyone's laughing at, sometimes with, but a lot of the times at Michael. Of course they are, but it's like, you know, that's kind of the tragedy of life is that often the people who are laughed at the most are actually the people who are doing a lot of the unsung work. This is dangerally close to product managers being like, nobody appreciates me. [1:17:16] But... [1:17:17] Anyway, so... [1:17:19] Let me – here's a way of explaining why the Michael Scots of the world are not going to go away even when there's lots of AI. Right. [1:17:27] There's a fantastic, fantastic essay on the internet. And it's, I think it's the piece that I have sent to the most people. [1:17:35] in my professional life. It's called How Complex Systems Fail. [1:17:39] by this guy Richard Cook. He is... [1:17:42] An anesthesiologist, actually, but like it doesn't matter. Right. It's like what he's writing about is. [1:17:49] When you have complex systems that contain within them the possibility of catastrophic failure. This is sort of the O-ring. This is O-ring. So it's like in the O-ring, it's like the space shuttle blows up. In the case of anesthesia, it's like the patient unexpectedly dies. In the case of the power grid, it's like Spain and Portugal go dark for 10 hours. Yes. Right. It's like one guy's random maintenance problem he forgot about. Well, it wouldn't be one guy's problem. It would be like a series of things. Right, right, right, right.

[1:18:19] It's like breaking the coordination problem in some sense. Yeah, it's like in all of these systems, it's like they constantly contain within them the possibility of catastrophic failure. [1:18:29] And yet catastrophic failure does not happen most of the time, right? It doesn't happen because people construct – [1:18:35] an array of defenses in these systems that are always operating in [1:18:41] very broken and degraded modes, right, in real life, right? This is a really important thing about the sort of real life operating is that, like, [1:18:51] In the actual real world, the people that run systems of various kinds are always operating Band-Aid duct tape hacks on top of temporary solves that became solidified into the permanent solve or whatever. It's like no system is ever running as it was actually. And we from the outside looking in call them inelegant or whatever. Sure, you call them broken. You call them whatever. [1:19:21] And this is why, like, a lot of the most – like, arguably one of the most mission-critical systems in the world, which is the B-52 bomber that flies – nukes all over everybody's heads are, like, 70-year-old airplanes that we keep rebuilding and rebuilding and rebuilding and rebuilding because we know every single failure mode in those things. Right? It's like the planes are rolled on purpose. Yes. That's a feature. Yeah, yeah, yeah, yeah. But – so anyway, going back to this, it's like – [1:19:46] All of these systems constantly run in sort of broken failure mode all the time, right? That's just the default state of affairs.

[1:19:52] What happens is that over time, right, there is – [1:19:55] pressure from a variety of directions to fix all the broken windows and fix all the problems, right? Because the... [1:20:02] old solution is expensive or it looks bad or for whatever reason, there's pressure to modernize. [1:20:07] What happens then is that [1:20:09] The introduction of getting rid of all of the existing latent forms of failure sometimes introduces new paths, [1:20:16] to unexpected... [1:20:18] catastrophe, right? So for example, this is again, not, I don't wish to take this in any kind of political direction, but it's like, there's a lot of interesting accusation about the Spain and Portugal power outage a little while ago. That's like, hey, the fact that the grid is like 60% solar panels made it impossible to restart, right? Because they had no dispatchable power, right? They had no gas plants that they can fire up and prime the system. It's like, it's a solar panel. It just kind of sits there and makes power. And so therefore they couldn't jack up the system [1:20:48] Introduction of all this change creates new possibilities for catastrophe. [1:20:52] that [1:20:53] for O-ring explosion or whatever that doesn't exist before. And again, it's like the only way that you can, [1:20:59] move forward while continuing to not fall over and blow up all the time is by like people continuously creating safety right it's people who continuously do the work of making this broken system work anyway right by actually making the decisions at the sharp edge of the decisions right like people continuously making gambles right

[1:21:23] that are mostly successful, but occasionally not successful, right? The paper is like... [1:21:27] The fact that all practitioner actions are gambles is obvious after a failure, but not obvious when the system is working correctly. Oh, interesting. Right? No, they're always gambles. All the time, just mostly they pay off. [1:21:38] Right. You were expected to maintain production. Oh, yeah. Yeah. Like that's a kind of gamble, too. It's just not as appreciated anyway. And the fact that all of this continues to work is because the Michael Scott's of the world are making it work. [1:21:49] Right. The people who understand this latent combination of people and training and ritual and precedent. [1:21:57] that sort of forces systems to continuously create safety. [1:22:00] Now, why am I talking about safety when your prompt was not actually like about safety at all? [1:22:04] Well, bringing up safety, because it's like, ultimately, I think, like, what is the purpose of companies? It's like, well, the purpose of companies... [1:22:11] is to do work that is really hard for markets to solve. [1:22:15] This is why you need big companies full of trust and accountability and accountability inside. It's like companies have selected over years and years and years for solving O-ring type problems. You have a quote there. You say literally that's just what firms are. That's just what firms are. That is what firms have been genetically and Darwinianly selected for over years and years and years. [1:22:45] I don't know if it makes them less good at innovation. I think what it makes them less good at is the sort of ruthless cost-cutting that markets are good at. They're not going to be the cheapest way to do something. Or the most efficient straight shot. The cheapest way to have clean bathrooms is always going to be to outsource to a janitorial service. Does that mean you have a workforce of people who feel real loyalty to the company because they've worked there for 30 years and are going to notice when there's some paint seeping? Amazing movie about a bathroom cleaner, though, if you haven't seen it.

[1:23:15] Cool. Recommend. Loyal bathroom cleaner. Right. Okay. So what companies are is organizations that have been selected to solve for O-ring problems. Yeah. Right. Where it's like what companies are is they are safety creating cultures. Right. [1:23:29] Right. Because safety is ultimately required to continuously deliver something of high value. Yes. Right. If there's no safety, it probably is not going to be durably high value over time. Right. Now. [1:23:40] Why – so backing into the origin of the question, which is like – [1:23:45] To what degree are agents going to take over – [1:23:48] work. Or at the very, I'm not, the AI piece is part of it. I'm also just presenting a world where like, it seems broadly that we're moving towards a world where you're going to have many more people who are self-employed, many more people who are individual, highly agentic actors in the market, relying on increasingly the combination of crypto and MCPs and agents and AI to basically trustlessly, the opposite of the firm, trustlessly act in the ecosystem. And so part of what I'm [1:24:16] Maybe you gave a partially good answer here, which is that at the very least when it comes to mission critical maintenance, it's really important. But what are the other ways you think about [1:24:25] the way that the boundary of the firm might evolve and where it's really, where, where companies are actually going to be more effective than individual commercial actors. Yeah. Okay. So I think you described it really well. I don't actually have a ton to add there, but it's like, [1:24:40] What's definitely happening is that [1:24:42] individuals are now equipped to do all kinds of stuff at a, you know, seven out of 10 quality level. Right. Right. Like this is, this, I think everybody sees, um,

[1:24:51] What kind of work are they going to be able to do? [1:24:53] Well, like they'll be able to do lots of pointy forms of businesses that derive their value from being able to participate in marketplaces of various kinds, right, where ideally they are a market of one. [1:25:04] Right. It's like you don't want to be competing in a market of whatever. It's like it's hard work being undifferentiated. [1:25:10] One thing that has happened since I wrote that piece – [1:25:13] and now, is that O3 came out. And O3 was kind of the model where I was like, ah, humans had a good run. [1:25:22] My friend Nabil, former podcast guest, he calls it, it's like Einstein is your butler. Yeah, like... [1:25:28] I don't know. So I don't think any of how I phrased it would really change though in so far as like maybe the firm just requires fewer people who are good at using O3. But ultimately it's like… [1:25:40] I will still stick with exactly what I said, which is fundamentally the purpose of a company is to solve O-ring problems, and that requires people and judgment. And people with accountability. You made this earlier point, I think when you were talking to Paki about that scarcity and abundance point, that it maybe originated as almost this accountability to agency spectrum. Yeah. And it sort of feels like maybe that's capturing some of this, which is that in an increasingly high amount of the world and markets, agency is maximally rewarded. [1:26:10] particularly around downside mitigation, probably also lots of other parts about company work, where actually you don't want that much agency. You don't want like self-directed people. You want people who are going to like be accountable to making sure that they do what needs to happen to...

[1:26:24] Okay, so one is like I would actually say that markets are a form of accountability, right? Because markets produce, you know, the kind of very stereotypical skin in the game. Skin in the game, by the way, one of those possibly misunderstood concepts. [1:26:36] Right. Like a lot of people think that skin in the game means you own equity in the upside or whatever. It's like that's not what it means. Skin in the game means if you do a bad job, you are filtered out of this and replaced by someone else. Right. It's like skin in the game. Real accountability. Skin in the game isn't about incentives. Skin in the game is a filter. I suppose what I mean is that market, it's a different kind of accountability, which is to say. [1:26:59] Markets will hold... [1:27:01] bad actors accountable, but they won't keep systems from breaking. Right. Okay. So here's where I will totally dial in on what you just said, which is like, [1:27:10] I think if you were to describe the prototypical low agency, sorry, low accountability environment, [1:27:17] It would paradoxically be a place full of people who feel themselves to be very high agency. Right. And the sort of made up example I will use here is kind of your stereotypical parks and rec style city government. Everybody who is there and I'm not talking about sort of the rank and file like staff here. I'm talking about the middle managers, the professionals, the people who have titles like head of blank and director of blank. [1:27:41] These are all people who genuinely believe that they and their peers are all there for merit-based reasons. [1:27:49] They have a source of legitimacy that is I earned my way here and therefore I have agency to go pursue what I think is what I want to do. Right. And the result is –

[1:27:59] The emergent behavior of a group of people like this is low accountability. [1:28:03] Why do you think that in that context? Are there commercial environments that are like that? Sure, and take any big company. Imagine your stereotypical big corporate environment. [1:28:13] full of people... [1:28:14] that all have... [1:28:16] on paper, a lot of decision-making power. And then in practice, what you get is stalemate all the time. Right. Because nobody can make everybody happy. Right. Right. And you end up with all of these sort of deadlock conditions that, [1:28:30] Where the pace of actual progress just slows down and slows down and slows down and slows down and scope creeps up. They're not accountable to real outcomes. Yes, exactly. It's like too much agency in a system results in overall the accountability of a result being delivered going to zero. Got it. Right. Got it. And this is why. And again, so if you go back to this patronage thing. [1:28:51] we were talking about earlier, it's like [1:28:53] You know how there is this thing we ask all the time, which is like... [1:28:58] Why do big projects cost so much money? Right. Why is this like this? The New York City subway was dug for one dollar a mile. Why does it cost a billion dollars now? Whatever exaggerated numbers. But, you know, it's like I don't even know if it is. Why is it that these big efforts that we try to do collectively suddenly cost like money? [1:29:17] quadruple what they used to right why is this technology should be getting better right all like these the input costs haven't gone up like the cost of steel or concrete hasn't meaningfully appreciated that much like why is the overall cost of the project like forex and so when you look into this at any degree of looking under the hood you're like oh the cost of the actual subway stations is like a little increased but the cost of

[1:29:42] consulting and planning and contingency and this and that this budget is massive and yet nobody can really seem to figure out how to get rid of any of it right you can't just be like spend less on alignment people are like oh so we're gonna be unaligned right so it leads you to this question which is like [1:29:58] Well, we used to be able to do this when we had these very aligned sort of like machine politics style system. And the answer, I think the way to think about it is like a positive side effect of those old systems was that you got accountability and alignment for free. [1:30:10] And now you have to pay market rate for accountability and alignment in the form of hiring project management and consultancy firms. And they will get you alignment and accountability together. [1:30:21] but at a very expensive price. Or you need to have dictatorial control, which like government. Yeah. Robert Moses. Or you need. Ironically, startups. [1:30:30] have that in a way that is like opt-in. Yeah, yeah, yeah. Which is the core innovation. Yes. Oh, so, well, I don't know if it's an innovation. Or not an innovation, but... I wouldn't call it an innovation insofar as before we had the term startup, we just had like family businesses, right? Like family businesses. Yeah, Shopify the family business. I think that would probably resonate to a lot of people there, honestly. I'll show you a fun book I just grabbed from my bookshelf. This is a book written by my grandfather, Leon. No way! He has a whole series of this, but his... [1:30:59] His profession. Beyond survival, Leon Danko. [1:31:03] So his profession was – his calling really was sort of working with – [1:31:08] family business owners who had built their businesses. These are the first generation business owners who are trying to figure out

[1:31:14] succession planning, among other things. Right? It was like, how do you actually deal with this knowing that the hard part is dealing with all the different personalities involved? How do you keep this kid happy versus this thing happy versus whatever? Yeah, Leon Danko, check him out. The writing goes in the family. And getting back to this, it's like, [1:31:35] All kinds of really interesting and non-obvious things that you get for free in terms of that sort of accountability to deliver what the boss said or whatever. It's like it's really expensive when you have to recreate that and pay a consultancy firm for alignment on something. [1:31:54] A few more questions to zoom back out. Broadly, in a lot of ways, we're moving from scarcity to abundance. You have this frame where we're moving from sort of these classical, horizontal, or vertical-shaped companies to... [1:32:06] Effectively, there's like omnidirectional, universal operating system like behemoths. This is like Amazon and Meta and Microsoft and NVIDIA. And then these super pointy... [1:32:18] incredibly asset light. Maybe this is the classic sort of Twitter idea of the one person [1:32:24] really valuable company. A couple of excerpts, you say, in the long run, there will be two ways to be profitable in low friction environments, be utility and earn profits through massive scale across the entire stack, or be so differentiated, lightweight and zero stack that you can be unit economic positive and immediately compound your way to success before the deluge of competition, that is. Incremental effort is best spent either on pure differentiation or on pure utility. You have this other analogy that I thought was useful. If that didn't totally click for listeners,

[1:32:54] rainforest and there's the huge canopy trees and then there's the small plants that live on the forest floor. [1:33:01] It's very hard to be in the middle. The Rainforest analogy for what it's worth is Ben Thompson's. Okay. Or possibly James Allworth's, his old partner from the old podcast. A few questions on this note that I think are maybe generalizable for a lot of people. First is, are we headed to this end point where it's just like – [1:33:17] Single actor businesses who are really good at capturing attention, who just like monetize the infra intelligence speed utility. Amazing Martian is like, is attention and brand really the one of the things you have at the end of that quote I mentioned is like before the deluge of competition, that is like, what is the way to be differentiated as a pointy business outside of distribution? Yeah. [1:33:41] Let's think about this. Okay, so... [1:33:44] First of all, for what it's worth, I think to the degree to which the pointy and utility businesses has had any sort of predicted value is that I think it fairly well – [1:33:53] anticipated [1:33:54] you're either building a base model or a vibe or a vibe coding. Yeah. And by the way, I think it's worth acknowledging for people listening. Like this is, [1:34:02] I don't think it's quite the way I was framing Pointy, but like Cursor and all these VS Code things are kind of that. Granted, they're much more capitalized, but it's these companies that are benefiting from the amazing tidal wave of all the base models. For what it's worth, I think that my expectation is to something closer to the terminal state of things is that the Cursors are going to get bought by whoever. Right. It was just bought Windsor. And I think they tried to buy Cursor for a lot. Yeah. Yeah, sure. I feel like the natural home for those kinds of things is sort of like –

[1:34:32] cursor more valuable obviously today anthropics more valuable but in the terminal state i'm i'm not sure that's a great question goes back to the distribution question yeah another thing with this by the way would you would be like shopify like in many ways the shopify merchant is a perfect example of the pointy business yes in some sense you're capitalizing on all and now it's stuff like shopify soon it might be like mass scale 3d printing or other manufacturing like there's the abundant shift is going to allow small single actors to do a lot of things well you know i would [1:35:02] this massive platform with an API that you made products out of. It was called China. [1:35:07] R.A.P. Sorry, you brought up Buffett. Okay. So, no, well, I mean, Shopify is a great example insofar as that, like, as Shopify has matured as a company, we have had to become an actual platform. Right. Right. Which is hard work. To linger on that for two seconds, what does being an actual platform mean? [1:35:21] The way that I would describe being an actual platform, like a computing platform, an internet platform is – so, okay, Marc Andreessen had a classic essay a long, long, long time ago is when he was making Ning of like three types of internet platforms. [1:35:35] It was type one, type two, type three. A type one platform is like what you would call a headless something. It's just like... [1:35:41] Here's a server that has a well-structured database and that you can query it through an API and then however you want to... [1:35:48] deal with the results, you can do it. So the answer to this would be like Flickr. [1:35:52] Right. It's like Flickr is a photo sharing platform. Right. You can kind of say, but it's like it does actually very little. It like holds it hosts your photos. Right. You can fetch the photos. Right. It has good performance. That's it. A type two platform. Right. Is something that is much more involved. Right. This is where.

[1:36:07] you would call it's a place where people go. And then third-party developers can make things that render there through plugins. [1:36:15] So this is maybe what you classically think of as a platform. Well, it's one of the things you could classically call a platform. This is like – [1:36:23] Like a way that like, you know, you had like the Facebook platform and you would have Farmville on it or things like that or many, many things that many kinds of e-commerce platforms historically worked like this where. [1:36:34] What I mean by plug-in is that third-party app developers would be given some – [1:36:39] Hooks and handles by which their little application could render something. [1:36:44] And then the business logic of their app would live on their own app server. [1:36:48] So it's like, I'm the app developer, I have my app that is hosted by you, but ultimately, the business logic and what works is on my server. [1:36:57] This distinction is very important. Got it. A true platform. [1:37:01] is where I write my code and it executes on your server. Lambda. It's AWS, right? It's Google Cloud. It's Microsoft. It's Ethereum is actually an interesting version of this. It's like, no, you are actually both the host and the execution environment. And this is the Shopify shift you were describing. Yeah, yeah, yeah. Going from two to three. Yes. So Shopify recently did this shift from two to three, right? [1:37:24] Getting to witness this has been an incredible pleasure, right? [1:37:31] to see this in action because it's very hard to do. That's what I mean by... Is there any path... I know this is another but it actually ties to something I wanted to ask about. Is there a path...

[1:37:40] For startups to really become platforms anymore? I mean, I mean, Shof, I did. I guess part of what I mean is like in a world where, I mean, if it's AI related, the GPU cost alone, like it does seem that there are fewer and fewer real clear shots of maybe open AI. But again, you know, it's actually I think the best answer I can give you for a startup like entity that did this recently would be like base. Yeah. [1:38:07] Solana, Solana, Solana, there you go. These are examples of this, right? It's like... [1:38:11] you are creating both an app store and execution environment place where people can build stuff with, [1:38:20] somewhere on the spectrum of permissionless. Yep. Right. But also Solana had to inherently kind of go after a category that was less... [1:38:27] Less in demand or less sexy? Well, more or less depending on your – okay. So, okay, there is actually a really interesting lesson there, which is that if you actually want an open window to go make these really valuable types of things, it's really helpful if you're building – it's really helpful if the product is kind of embarrassing. [1:38:46] Right. And I mean this with great love, right? [1:39:01] as a way to build these frankly astounding new platform capabilities. Right. Right. It's like if this were taken completely seriously by everybody, this opportunity would not exist.

[1:39:11] Just to tie it back so we finish the thought, moats for pointy businesses. You have notably written that the central focus of a business or the goal of a business is to – [1:39:22] Capture value on the back of scarcity. Occupy scarcity somewhat. Yeah, I mean, look, Leap. [1:39:27] You know what I was thinking? I was thinking the other day. It's like, [1:39:30] What are some things that... [1:39:32] What are some uncopyable things? [1:39:35] If you gave Sam Altman infinite time and infinite GPUs and infinite money, [1:39:40] And he already has infinite agency. He's Sam Altman. [1:39:42] Could he copy it? [1:39:45] And it's like starting to think of some examples of this. I was like the band Phish. [1:39:50] You could never copy fish. [1:39:54] Thank you. [1:39:55] Some people might be able to. John Mayer and some talented musicians might be able to. Sam Mahoney, not even John Mayer. Not even John Mayer and Pino Palladino and whoever his crew are. [1:40:06] I'm just imagining Sam Altman. Oh, gosh. I think you can copy The Grateful Dead, but you can't copy Fish. Oh, why? Because Grateful Dead. I've been to a lot of Dead shows, never been to a Fish show. Because ultimately, the Dead wrote pop songs that you jammed on, whereas Fish writes incredibly elaborate compositions whose meaning is only executable by them. [1:40:30] there aren't fish cover bands got it there are a lot of dead cover bands there are no fish cover bands got it right it just doesn't work um like so but like that would be an example of like [1:40:39] Does fish have a moat? [1:40:41] Well, I think you're pointing, by the way, at a template for... So fair. I even, like, not to make it out of me, I thought about this podcast, like...

[1:40:48] There are very few things I'm going to be able to reliably do better than 04. We're probably already there at the earlier point with 03, and to the extent I'm going to be able to do an interview that's interesting, it's definitely not going to be having... [1:41:00] done better research than a computer or like these and so i i think the fish thing is [1:41:06] There's probably something in that. Well, so, yeah, maybe this is, like... [1:41:10] What are all the things that they do that is, you know, uncopyable? It's like, well, fundamentally, it's like, [1:41:17] You have this fan base that loves you and travels all over to see you. And this fan base is really... [1:41:22] diverse. [1:41:23] It's not one type of person. [1:41:25] It's grudgy hippies and it's investment bankers. You have a fan base that is diverse. The exact opposite of that is the lesson of Silicon Valley Bank. [1:41:38] If you're a bank, it's really bad if all of your customers are in one group chat. [1:41:42] You want to avoid that kind of scenario. Mark and Dreesing can text them all. Yeah, you want to... So you can't, you know, like... [1:41:52] It would sort of withstand the sway of all of your customers suddenly succumbing to the same kind of decision to move to a different thing. [1:42:00] But second, I think more importantly, it's like, [1:42:03] They have all these people who love them, right? And what they love is not a recording or like a captured thing. [1:42:09] right? It's, [1:42:11] an experience that happens live. I don't know. I'm riffing at this point. This is not something I remember before. No, I think you're... By the way, I think that's what the most...

[1:42:18] unique art all has that characteristic. Right. It's like, you know, if you think about somebody who is like, [1:42:26] Their public differentiation is that they have a newsletter and that newsletter or a podcast and it has listenership and they keep coming back for new episodes. Right. It's like, you know, why do people come back and listen to your episodes? It's like I love listening to your episodes for. [1:42:38] reasons that are not entirely dissimilar as to why somebody likes band, right? Or why somebody has brand affinity to something is because yeah, it's, [1:42:45] It's – [1:42:46] It's over a threshold of caring, right, that is really cool, right, and there's a – [1:42:51] is a [1:42:52] I am not yet. I am not at the point yet where I have gone out and sought out other people to listen to your show. And we don't have like tailgate parties when you launch an episode. Hey, the acquired guys do. That's a great point. Right. The acquired guy. That's a fascinating point. Yes. They threw an invented chase at us. You know what? Let's talk about acquired for a second. This is a great this is actually better. This is a better example than fish. [1:43:13] Acquired doesn't do anything like net new, right? They don't do a little bit of original research. But mostly it's like they're reading books that are already published. They're... [1:43:23] Like, why is it that O3 can't do acquired? Could O3 or O4 do acquired? Certainly on the substance, yes. On the substance, yes. But there's a certain kind of gift that Ben and David give us with every episode, right? Yes. It's like, there's a joy to it, and there's a... [1:43:41] community of people that like to talk about it. I don't know. I feel like there's a lot more durability in what a choir does than in, you know, a fair number of other things. Yeah. Right? It's hard to articulate why. Yeah. Another example of this would be David Sender and Founders Podcast. There's a definition somebody gave me recently of the best teacher is someone you want to learn with. Yeah. That's how I feel like

[1:44:00] I could go read his books, but I like learning... [1:44:03] about these biographies with David. My last question on this topic that's related might be the same answer might not be an answer but [1:44:10] broadly how you think an individual should think about building leverage or uniqueness today. [1:44:17] Boy. I don't know. There's a 21-year-old. You're 21. You're thinking about... [1:44:20] It's sort of a cliche question, but... [1:44:23] I'm curious if anything comes to mind. Okay, so, I mean, I'll tell you what I was doing. You built a lot of unique leverage. Maybe it's a better way. I'll tell you what I was doing when I was 21, trying to go build unique leverage in the world, which is that I was playing in a band, right? I was... [1:44:36] We were – this is a band called The Fundamentals. You can listen to us on Spotify and I'll make a quarter of a cent or something. You didn't tell me this beforehand. Yeah, well, maybe I'll put on some music and play out. [1:44:46] And what you do in a band, right, is, again, bands are all about trying to get leverage, right? It's like you wouldn't really describe it that way. You would describe it as we're making art and we're cultivating fans and we're developing a sound and we're – it's like all we're developing a sound. All of these are forms of leverage, right, because there are things that are yours, and once you have them established, you can get a lot of output from a little bit of input, right? Like just thinking about like developing a sound. What is your sound, right? What is your style? That's leverage, right? [1:45:16] you know your aesthetic. [1:45:18] And you can really use it. [1:45:20] That's, I guess, my answer that I'm going to go with, which is like if you actually can describe your aesthetic and if you can communicate it really well to people, then you'll be able to get things done, right? Because you'll be able to actually understand why people are coming to you and you'll be able to get more people to come to you. That's awesome. So like again, as a 21-year-old, what we were doing all day was like developing our sound.

[1:45:41] Right. And the way that you do that is not just deciding what your sound is. Right. It's by playing and playing and playing and playing and playing. Often trying to sound like someone else. The classic music story you hear. Oh, you're trying to sound like so and so. And we ended up sounding like ourselves. Yeah. [1:45:54] And again, a lot of the really great record producers, I'm thinking of that famous memo by Steve Albini, [1:46:01] I don't know. [1:46:12] Basically saying, hey, I would love to produce your next record. Here's how I would do it. [1:46:17] Here are some nuts and bolts mechanics of how I would do it. Here are my do's and don'ts about where I do versus don't want to help you influence your sound. Here are some absolute, [1:46:26] Like lines by which if you agree we don't cross them, then we're friends. And if not, we can't work together. It's a really good – it belongs in Sererum's classic memos. Wow. But it's in the music business. Cool. You'd love it. I'll send it to you. Yeah. And it's like, yeah, that's the kind of work that is developing leverage, right? Like the way that you develop leverage is not to sit around all day thinking, how do I get leverage, right? It's like thinking about startup ideas, right? You don't sit around all day trying to think of startup ideas. It's like solve a problem you have. Similarly, it's like the way that you get leverage is by – [1:46:56] cultivating the craft of like down to some real mechanical nuts and bolts, right? It's like, when you think about developing a sound, [1:47:03] Right. [1:47:05] So much goes into, like, guitar tone. Yes. Right? So much goes... And again...

[1:47:12] When you talk about leverage, there's a great quote by – [1:47:16] Who is it? I'm blanking on his name, but he's a famous mastering engineer. [1:47:21] The quote is, it's not about how loud you get it. It's about how you get it loud. [1:47:27] And literally what this means is that when you produce a record, what actually happens is – [1:47:35] You record all of your tracks, you know, maybe together, maybe separately, however you do it. And then they all go into, you know, the mixing board. And then a sound engineer will go make the mix. So they'll figure out all of the different levels of all the different tracks and what's here and what's there. Then you take the whole mix, which is... [1:47:54] a level that is very quiet, actually. Like if you listen to a – [1:47:58] a final mix like just on headphones like in like if you were to get it in spotify or something your initial reaction would be like why is this so goddamn quiet right like it's way way way down [1:48:08] Then what happens is the mastering engineer will then take it and then they will raise the overall volume in a particular way so as to anticipate – [1:48:18] the different kinds of speakers and environments that you will hear it. So the overall effect is for it to become loud. It's the last stage is the loudening of it. [1:48:27] And so it gives it that particular kind of texture and that's it. And so the interplay between these two things, it's almost like there's a micro and there's a macro aspect to developing your texture. Yeah, yeah, yeah, yeah. Where the micro is like you spend all of this time developing your guitar tone and you can isolate your guitar tone, right? You can work on it and only it for days and days and days and days and days.

[1:48:47] And then there's this macro aspect of it, which is like, you can only master an album when the album's done. [1:48:51] You can't think about it ahead of time. You have to have... [1:48:55] the product ready. And then you go do, you know, you go do some, uh, uh, some moment of Zen, you would do some Rick Rubin, right. And then, and then you, and then you bring it up, right. You bring it loud. Yeah. [1:49:07] But that requires such an intimacy with the inputs and the detail. Yes. Oh, yeah. You can't just think about this for a couple days and just be like, all right, I've decided I have this sound. It's like, no, it takes a lifetime to figure it out. But then once you have it and you have a really unique style, like let's take a great example, which is Rage Against the Machine. [1:49:30] No one sounds like Rage Against the Legion, right? Absolutely no one. And a lot of that is... [1:49:36] Tom Morello, right? It's like, it's like the tone of that guitar, right? [1:49:40] And the singer's voice. [1:49:42] are so unique. [1:49:43] Right. And it's like before you even get to the content of the songs and the artistry and like the, you know, the whole the whole package of what the band is, it's like just those two things. It's like that's the basis of a band. Right. It's like, yeah, you have a unique, you have unique ingredients and a unique dish, which is. Yeah. Which is cool. So, yeah. So that's my answer. Right. It's good. Go figure out what your sound is. Work on it. Can I actually add one more thing? Yes. [1:50:08] This is what gives me so much good vibes about AI, by the way. Right? It's like there are so many people who are on the pessimist train of like, oh my god, this is like destroying creativity or this is whatever. It's like –

[1:50:21] If you talk to people who, especially in the early couple of years of all of this, it's like – [1:50:26] I've never seen so many people put in so much energy into a kind of tinkering that is the exact same as people playing with their guitar amps. [1:50:33] people who are tweaking is like how do i play with this how do i try my people figuring out how to prompt people figuring out the different personalities of what they want these things to do it's like this is just people and guitar amps right this is the same and like that's great right whenever people are doing that behavior good things result you went right where i was going uh you specifically in that piece which i think it's called there's why there's no goth downtowns i'm mixing up two pieces have you ever seen the goth downtown yeah yeah there's the chris fleming [1:51:03] creating the crunch. Yes. [1:51:05] The guitar crunch and what that might look like in a – [1:51:09] um a generative ai texture part of the backdrop for that and obviously i think people are probably attuned to this is that so much of what these systems currently produce is wildly predictable like they're so good at giving us the sort of median thing which ties back to the the piece on the goddamn town which is essentially this idea that like chris fleming makes this joke that about st vincent which is just amazing she's talking about all the freaks in new york city that get

[1:51:39] Slightly vetted idiosyncrasies go to Albany. Go to Albany. If you want to see a freak, go to Albany. Yeah. And obviously, I think you say you can tell when something was written with heavy GPT assistance because there's nothing surprising in what it says by definition. Nabil and I talk about this, like the idea that sort of non-slop has a sense of strangeness sometimes. Yeah. [1:51:59] To your point, I think it's exciting and optimistic to imagine the ways that people are tinkering. And as much as these things can one shot, to your point, [1:52:07] There's probably more people tinkering with technology tools than we've seen in a really long time. Mm-hmm. [1:52:13] Are there any, either personally or that you've seen, any specific... [1:52:17] instances of the crunch or the fuzz or like what it might look like to actually get spiky with ai you even have an image in there um and i've seen a few people make this point that like prior versions of [1:52:30] Dali and Chachupeteen may have been less sloppy than the current ones. Yeah. Because they were slightly weird. They're weird. Yeah, exactly. They were full of problems and they were endearing. [1:52:39] Well, somebody at that point was like, we're going to have... [1:52:43] old AI slot core nostalgia in 18 months. And then that's exactly what happened, where it's like people really hark back to the [1:52:51] old Dolly and Mid Journey prompting style or the image style that was so distinct. Yeah. And now it's like it's gotten better. I don't know. Maybe we just go through this. It's gotten more immediate. Yeah, yeah. Maybe on the other side it's just perfect, right? We just go across the uncanny valley, no problem. But even then, if it's exactly predictable –

[1:53:09] I don't know that... This is the point that I thought was something interesting you made about goth. Right. Yes. You don't really see goth people in New York. You see them in suburbs. Yeah. And, like, malls. Which is, like, it's almost a... [1:53:22] Part of what I was reading there was like this element of like, [1:53:25] Obviously, goth people are presumably self-conscious on some level, but they're like less seen. [1:53:31] They're less constantly seen, so they have less of like an evolutionary fitness function around it. And as a result, they're actually sort of more... [1:53:38] purely authentic or at least purely expressive. Yeah, environments that produce Goths are not the same as environments that produce sort of city people and the particular homogeneity that is, you know, the people version of airspace. I think it's worth being even more precise, which is part of what you were saying in the piece in the St. Vincent joke was like, it's not even like normies in New York. It's the cool people in New York. Yes. But the cool people who are like perfectly attuned to. [1:54:08] go with [1:54:08] AI. It's not like the quality is going to be low. This stuff is going to be amazing. Okay. Yes. I would totally agree with this, especially with this discourse that was going on a couple days ago around... [1:54:18] hey, do you like this personality? Thumbs up. And everybody was like, oh my god, no, don't do this. Yeah, it's like, you create a particularly sort of high school feedback loop when you give the AI feedback over like [1:54:31] Yeah, I like this style or not. Yeah. Right, because this is how you sort of get lunchroom table behavior. Yeah, I'm not like most girls. We're all wearing the same shoes. Yeah, exactly. And sort of –

[1:54:43] This is a somewhat separate point than the fact that the AIs are now all saying, it's like, tell me something about me that I don't know. You're maybe the smartest person I've ever met. [1:54:56] The fact that you wouldn't even be able to ask that question just shows me how brilliant you are. [1:55:01] The quote that's getting quote-tweeted by everybody is Mikhail, who's our CTO now, who is the guy at Microsoft that made Sydney and sort of was like, yeah, he's our CTO now. So he knows. [1:55:13] has been in it. Anyway. There's one other thread here that I thought was really interesting, which is, I've talked about with others, including Eugene Way, actually, which is like, how do you get [1:55:22] subcultures when there's no friction. Right. Part of that is in the goth idea of like inherently the suburbs are farther away. There's less connectivity. There's less density there. You have this one line that I think maybe points at it, which is you say this is in the Chris Fleming thing. I can't shake the phrase attractive people with heavily vetted idiosyncrasies. That is a description for what AI is a medium wants to produce. And conversely, the punchline you want to see a freak go to pumped up fun. Yeah. How and where do we create [1:55:52] Okay. So if there's no friction, great question. Um, [1:55:56] There's a question that I really like to use in like – [1:55:59] interviews scenarios or anything like that which is like what was the first place you posted you [1:56:05] Huh. And some people will just immediately tell you the answer and other people are like, what do you mean? You mean like Instagram? And it's like, okay. I think mine is Brawl Central, which was a Super Smash Brothers forum. Yeah. So it's almost those forums, right? So my answer would be Wizards of the Coast who make Magic the Gathering had these forums, right, that attracted all these people and it posted there a lot. But yeah, the answer is always something like that. Right. Like there's...

[1:56:31] One of my favorite places to occasionally visit is there's this forum called Urban Toronto, which is basically it's like it's a classic forum. Right. Of people talking. And a lot of it is complaining about sort of like micro autistic detail about all of these different buildings and civic projects being built and how they're going on and people documenting everything with like really richly with photos and things like that. And it's just this fascinating group of people that know so much about a single thing. [1:57:00] And this is alive and well today, right, in 2025, right? These places are still there. It's just... [1:57:06] I think the mark of any good forum is that it's a little bit hostile to new users. And probably a little bit unpopular. Or maybe not unpopular. It has to be unpopular. It's definitely unpopular. Which is why we maybe don't see this quite as much in music, for example. Which is like, where's the... One of the other points you make in that piece is how, like... [1:57:22] The bands that sounded the most unique were the ones that came from the suburbs. They weren't from downtown Toronto. I think, I don't know, I've debated music managers and stuff about this. Like, if anyone created actually interesting music on the internet today, [1:57:35] They're like... [1:57:37] aggregators would find it so quick. [1:57:39] You don't have – Maybe. You don't think so. Maybe. Well, I don't know. Like the fact that we're not finding them is not evidence that they're not there. Right. [1:57:48] Chuck Klossman has written about this a little bit. Yeah, yeah. Yeah. [1:57:53] So, okay – [1:57:54] Nadia, Delian's wife, has this – has an amazing book called Working in Public.

[1:58:03] And it's a book about how, this is a nice callback to earlier in the episode, it's a book about talking about how working on open source projects changed before and after GitHub. [1:58:12] and essentially it's like [1:58:15] Before GitHub in the old days, it's like... [1:58:18] Every project would use their own, like, version of Git or their own, like, version control software or something. [1:58:27] As a result, it's like all these different open source projects. In order to contribute to it, there was like a lot of work you had to do. [1:58:33] to just onboard yourself onto the project. Right. It was like, you had to really do some proof of work, [1:58:38] in order to start trying to contribute to a project. Right. But once you did, [1:58:44] You stuck around a lot of time, right? So it's like you had there's real friction for people getting on board and trying to help out with some sort of open source project. But once you did, it was like these small type groups of communities. One of the points that her book makes is that the advent of GitHub was like this wildly successful and way better than all the other ways to do version control. It's like, OK, everybody's going to use this and it's going to be really, really easy to find new projects and start contributing to them. [1:59:06] What happens? [1:59:07] He's like, well – [1:59:09] All of these poor open source project maintainers suddenly sort of became deluged [1:59:15] with people who just following instructions or like, hey, can I contribute? Like, hey, can I just make a little PR? Can I try to contribute to this? Because again, people who are like in the journey of learning to code or anybody is like the advice that you get is like, oh, go find a cool project and just go like try to make a PR and go try to do something. So these poor maintainers of these projects.

[1:59:34] suddenly faced with no friction anymore for people trying to participate. And it's like, you don't want a million people doing random suggestions to your project, right? It's like, this is like not what you want. So what she's talking about is this interesting change in what it means to be a maintainer [1:59:47] towards something that looks like being a Twitch streamer. Where it's like the good maintainers, the good project leaders now are increasingly aware that it's like they're doing a show. Yeah. [1:59:57] They have fans. Such a great point. The fans want to interact with you. You need to let some of them interact with you. [2:00:04] But not everyone, right? You want it to feel like a community. Yeah, yeah, yeah. The fans need to be handled. You need to have meet and greets. You let some of them come on stage with you every once in a while, but not by default, right? It's like the book is fantastic. Yeah, it's on my list. Working in public. Maybe, I don't know if I should say this, but I think a future guest of the show. So working on it. Fabulous. It'll be fun. Strong recommend. [2:00:25] One of the first I ever I ever heard you talk about credit to David Perel, I think was an interview in 2020. You talked about the medium is the message and McLuhan and this idea of hot and cool media. [2:00:35] Maybe a teaser here. You might have to defend or roast my decision to not do video for this podcast. No, I applaud it. But you you mentioned this line earlier. Information isn't what we're told. It's what we understand. And obviously that's rooted in Cloud Shannon. [2:00:51] as well as McLuhan. Before we get into some of the weeds, and we don't need to spend that much time on it, but can you just very briefly do your best to try to actually explain what [2:01:02] People have heard this term a lot. The medium is the message. McLuhan is brilliant, but not necessarily the most accessible. I think at the very root, you have this specific example you gave both in the interview and your writing of the Nixon-Kennedy debates, and you say the content doesn't matter, and that's what people miss.

[2:01:18] Can you explain another anecdotal example of this would be like Trump on the radio versus Trump on Twitter. People are obsessed with the content and they don't think about the mediums. Can you explain what the mediums message actually means? Sure. Sure. [2:01:30] To do this, let me explain, I think, a more approachable version of it, which is explaining hot and cool media because it tells you the same thing, but I find it a little bit easier to intuit it. [2:01:45] Let's walk through this. [2:01:46] Here's your brain. [2:01:47] Okay, here are your eyes, right, and your ears, and sort of your sensory organs that are constantly taking in information about the world, okay? [2:01:55] In between your eye and your brain, there are – [2:02:00] Three or four neurons making relays before you get into the heart of the interesting stuff. And then to do any kind of computation whatsoever. [2:02:08] to actually make decisions about like, what do I think I'm doing here now? [2:02:11] you are going to deal with... [2:02:13] at a minimum three or four other synaptic integrations. So even in a very simple circuit inside your brain, you're dealing with, call it five to 10 relay signals for even very basic things, okay? [2:02:28] Now, each relay... [2:02:30] takes... [2:02:31] Call it between 10 and 15 milliseconds. [2:02:35] All right. [2:02:37] Why don't we experience the world in lag? [2:02:41] I think I know the answer, but – Why not? [2:02:45] Our brains are helping us out. That's right. So the reason why you don't experience the world in lag, despite this very obvious kind of

[2:02:55] This is the brain's version of speed of light is just like it literally takes time for a brain to relay information from one neuron and information in the binary sense, like on or off. Literally what happens is like between one nerve. So inside a nerve, information travels via an electric propagation, right? It's literally a voltage potential that spreads along the nerve very fast. [2:03:16] This is milliseconds, right? How, how, maybe it doesn't matter, but how long, like, would you recognize 50 milliseconds if you're watching audio video lag? 50 seconds? 50 milliseconds, yeah. Ah, that's right around where our perception is. But you'd recognize 100, right? You'd recognize 150, like, for sure. So inside a nerve, it's very fast, but from one nerve to another, literally what happens is that, like, these little kind of, like, floating balls full of chemicals are released [2:03:46] nerve across a very small barrier right it's small but still it's actually an incredibly slow process like it's like releasing carrier pigeons right from one to the other so why am i saying this so it's like [2:03:57] you are inevitably dealing with a slow sensory processing process. [2:04:02] equipment in order to experience things in the outside world that are actually happening very fast. For example, if I toss a ball to you, [2:04:10] and your arm reaches out and catching it, how on earth can you catch the ball? If I'm on lag. If you're lagging. How? [2:04:17] Like it's actually kind of melts your brain a little bit when you think about it. The reason why you can catch the ball and the reason why you don't experience the world and lag at all is because the way that you're not actually perceiving the world most of the time. You are perceiving a model of the world that you have bit, that you've built and are constantly error checking against.

[2:04:39] Right. To make sure that that model of the world is accurate. Right. This is just it really is kind of a profound idea. We actually are kind of like LLMs. We are. This is where LLMs come from. It's like it's like. [2:04:51] When you look around a room and we see a table, guitar, keyboard, painting, books, whatever, it's like what we're actually seeing is... [2:05:00] is sort of like [2:05:01] conceptual representations of what all of those things are. And then very, very, very low bandwidth shortcuts of like green blob, blue blob, red blob. And then if you focus on it, your brain then selects all of its attention on that thing. [2:05:15] So it's like you have a very limited – It fills in all the resolutions. It fills in all the resolutions. We have actually very low bandwidth for what makes it through. And your brain is constantly having to make allocation decisions about what makes it through versus what am I going to just populate with my model that was already there. Okay? This is very important. What am I going to hallucinate in a set? What am I going to hallucinate versus what am I actually going to go get primary source material? Okay? [2:05:39] Here's why this matters. [2:05:41] So – [2:05:43] different sensory modalities [2:05:45] take up different amounts of bandwidth. [2:05:48] So, [2:05:49] A bandwidth that is one channel, so audio only, one. [2:05:54] written text only... [2:05:56] even visual only, right? Photograph. A photograph. Will take up less bandwidth. [2:06:02] than something that is [2:06:03] multimodal like audio and video right or for example like if you ever if you've ever watched like old-fashioned tv um

[2:06:11] or something, it's like very fuzzy and you're having to do a lot of work to kind of integrate what's going on. [2:06:16] Or to give you another example of like this, if you're on Twitter, right, or in a group chat, [2:06:21] And there's a lot of context that accompany all the words and all of the jokes and all of the memes and whatever. [2:06:29] These different formats... [2:06:31] require different levels of bandwidth. [2:06:35] in order for you to actually accept the primary source information. [2:06:39] Another way you frame this is like, [2:06:41] the level of engagement, the level of participation. Yes. Okay. So here's what this [2:06:45] So what this means is that [2:06:47] When you are listening to an audio-only track – [2:06:51] Imagine you are in the dark wearing headphones, only listening to this podcast, [2:06:58] This is a fairly low bandwidth channel, so a lot of the information actually makes it to you, right? The real information makes it to you. [2:07:06] This is called hot media. [2:07:08] It's like a wiretap. It's called high in engagement, low in participation. You're high in engagement because you are actually engaging with the real signal. It is low in participation because you have to do relatively little work to fill in all the gaps, right, with what you thought was coming. You're mainlining this conversation to your brain. You are still actually filling in a lot of the gaps, right? [2:07:30] It's like if Jackson were to start singing some song lyrics to a well-known song, you would naturally fill in what the song is unless he were to then drop in some unexpected word and you have to go back and error correct. But still, low in participation because you are doing relatively little hallucination. You are doing a lot of actual accepting of the thing. In contrast, video is a cooler medium than audio is.

[2:07:56] Because it is – you have multiple channels to integrate into what's going on, right? So hearing, vision – [2:08:03] Just hearing a vision, right? That's two instead of one, right? So your brain has to do a lot more work to integrate those things. So as a result, less actual source material makes it into you. So there's actually more total information coming at me, but I'm processing less of it. The same amount of information that... [2:08:17] strictly speaking, makes it to you either way. But what information you are selecting for is going to be different because you're still making sure that you're- Like a more crowded highway. The more crowded highway. Exactly. The capacity stays the same, but you have to kind of pick and choose as to what's actually going to make it in so that what you receive information-wise is what you perceive to be accurate. Right. Okay. Now, so this is called- And then to take it to the other end of the spectrum, Twitter or text messages- [2:08:40] even cooler than television. [2:08:42] Yeah, so like a real example. So I'll give you another differentiation between hot and cool, which is. [2:08:48] Mono is hot and stereo is cool. So – [2:08:53] One person speaking like a speech person, [2:08:57] is going to be hotter... [2:08:59] than a dialogue between two people, which is a little cooler, right? When there's two people talking, like we're talking right now, [2:09:06] It's not just our words that you have to parse. It's also our ums and ahs and our backs and forths and the fact that context is passed between the two of us. And you having to keep track of both of those things in a dialogue is... [2:09:18] is actually cooler than if just one person were talking at you. [2:09:21] It also just less intellectual. It feels more like you're listening in on the conversation versus you're getting lectured at it. You're feeling like you're part of the conversation because you literally are doing most of the work of filling in the conversation. So it feels very participatory. I'll give you an example here, which is –

[2:09:38] Imagine you were in a – so ultimately the choice of the medium used – [2:09:44] will matter a great deal for how much the listener to the conversation will be [2:09:50] actually hearing it coming at them. [2:09:53] or if their experience is largely them creating a pastiche of what has happened. This is the premise of The Medium is the Best. This is the premise of The Medium is the Best. I'll give you a real example. Imagine you are in a confrontation with your landlord. [2:10:04] And you have to basically send a message to, [2:10:07] to figure something out. [2:10:09] You have four ways of doing it. [2:10:12] you can... [2:10:13] Talk to them on the phone. [2:10:16] You can write an email. [2:10:18] You can text them or you can leave a voice message. [2:10:22] I want you to try to arrange those four ways of doing it based on what will escalate the situation versus what will de-escalate the situation. Hmm. [2:10:31] Well, it probably depends on how important it is for me to convey... [2:10:37] How much I want them to gap fill or not. So if I if I want to convey the exact level of fidelity I want, I would do a phone call, which is I can control my tone. I control the content of what I say. I can control. There's even better than a phone call. [2:10:49] You can leave a voicemail. Oh, interesting. Voicemail. If you're in a phone call, you're going to just chat it back and forth. It's a one directional voice. One directional voicemail. Right. Hi, landlord. Fuck you. Listen to me. You need to fix my sink. Thank you. And then gradient. Sorry for swearing on the pod. No, you're good.

[2:11:08] So it would be voice, phone, email, text. [2:11:11] That is how I would arrange it. I think you could debate as to whether phone and email could be swapped. [2:11:16] Uh... Um... [2:11:18] I see. I see what you're saying. Because email has one directional going to it, whereas phone has audio going to it, but they're clearly in the middle. You could nitpick, but the point of these is that... [2:11:27] Same content in theory, but totally different thing is received. Exactly. Very clearly, if you leave a voicemail for anything, [2:11:35] it's escalation. Right. If you text, that's deescalating. Right. Right. And then you made this point with David, like the thing about most of Twitter and certainly text messages is that like you say about Twitter, like it's all punchline. Right. Like there's no setup for the joke. You have to show up to the if you look at my group text with my best friends from college, you would have all of this missing context that would it would probably make it hard to parse what you were actually reading. OK, so here's the Nixon Kennedy debate story, because this is a very famous example of how this is taught. [2:12:03] The Nixon-Kennedy TV debates were done at a time where – [2:12:08] About half of American households would have watched this on TV and about half would have listened on the radio. And that split did not really correspond to political affiliation. [2:12:17] So it's important to get that out of the way. What happened in the debates was – [2:12:21] They do the debate. [2:12:23] Find it. [2:12:24] Afterwards, people are polled as to who they thought won the debate. [2:12:27] And so the fascinating result here is that people who watched on TV thought that Kennedy won the debate and the people who listened on the radio thought that Nixon won the debate. And so this is broadly misinterpreted and oversimplified as like, oh, Kennedy had no substance and is better looking. And so that's what the TV is or whatever versus it always kind of devolves to physical appearance, which is funny. And like, that's not what this is about. It's like, no.

[2:12:51] Here's why. [2:12:53] Nixon's entire personality and style and approach was terrible. [2:12:59] I know a lot of facts and I am in control of the situation and I'm going to tell you. I'm going to blast you with that. I'm going to blast you with the facts. Right. Bam. Right. They're going to go right at you and you are going to be really clear about what I'm saying because this, this, this. [2:13:11] Right. [2:13:12] Kennedy, on the other hand, was very like... [2:13:15] It's much closer to like an Obama campaign or it's like, hey, like – [2:13:18] We're all going to be inspired by what we want America to be. You're seeing what you want to see in what he's saying. [2:13:25] Yes. Yes. So that's exactly right. It's like Kennedy was a master at evoking people's best aspirations for what the country should be. Right. Right. It was very it's like Kennedy was all about evoking this particular kind of hopefulness and like all of this sort of youthful energy. And so exactly what Kennedy was really good at evoking was like you feeling inspired about where you thought the country was going. Right. So as a result, let's think about this in terms of the different mediums. Right. [2:13:53] On the radio. [2:13:54] Right. [2:13:55] All of Kennedy's or all of Nixon's bam, bam, bam, bam, bam came through crystal clear. It's the only thing to focus. It's the only thing to focus on. And what you're left is this guy is a communicator. Whereas on the radio with Kennedy, you're like, this guy's not saying a goddamn thing. Right. When are you when are you going to get to the information? Because you're not filling things in. Right. You're waiting to receive and nothing ever comes. Right. Whereas on TV. Right. [2:14:21] Kennedy, it's like you participate fully in the experience. You're like, yes, I'm filling in what this guy is saying, and I like it because it's my message and I want to hear it, whereas Nixon just came across as –

[2:14:31] Tinny and wooden because his message wouldn't actually reach you. [2:14:36] Right. Because it's too high bandwidth of modal. Right. So it's like he was just like talk, talk, talk, talk, talk. And it's like the grownups in Peanuts. Right. That's what Nixon would sound like on TV. Right. And so this is the reason why the medium is the message. Right. Like the medium on the radio is we're evaluating this on substance. And the medium on TV is we're evaluating this on how you feel about it. On the vibe. Your participation is vibes based. Yeah, whatever. OK, cool. And it's not just vibes based. Like this is this is I think it's important to make this. [2:15:06] qualification that it's like [2:15:08] It's not strictly speaking. It's like they both have vibe aspects to it. Like, for example, Trump is a very vibes based and a very hot media president. Right. He is both of those things. [2:15:18] How does that work? [2:15:19] So – [2:15:20] The thing about Trump, first of all, is – [2:15:23] People talk about Trump as being the Twitter president, but it's like, [2:15:26] His communications through Twitter is actually – [2:15:30] Interesting because it's a garish spectacle, right? It's like it's not actually the medium in which he sounds good. And he doesn't treat like anyone else either. No. It's like it's interesting getting attention. He's literally blasting you. He's all caps. He's all caps blasting you, and it's like it's very unsuited for the medium. It's not super good. Whereas – [2:15:48] Trump on the radio sounds fantastic, right? He's really, really good. Like, again, imagine if you're watching a Trump rally and you close your eyes, right? [2:15:56] It's like he sounds like a very, very good stand-up comedian, right? He's got his patter down. He has his jokes. They land. Again, if you take it and you put it into a context – into a cool media out-of-context scenario, it looks really stupid and garish. How does he do that high information density and vibes at the same time? I'll tell you exactly how. It's because –

[2:16:17] Trump is incredibly good at communicating people [2:16:21] you know exactly what I mean when I'm going to say this. [2:16:24] It's like – so when Trump says make America great again, this would have been more of a first campaign kind of thing. It's like – [2:16:33] you would be tempted to think that like all of Trump's campaigning, make America great again. We're going to, we're going to, we're going to bring back the, the, the, um, the showers that actually have water in them folks. Um, it's like, [2:16:44] You would be tempted to think that this is cool media because this is you filling in what you want. But it's not. It's actually the opposite. This is like... [2:16:52] But speech and how you phrase things and what you are suggesting by those things, it's like, no, no, no, this is not you feeling it. This is him insinuating what great again actually means. Yeah, exactly. It's like. [2:17:05] Again, it's like all of the rhetoric around... [2:17:09] how you are crafting this idea of like, first of all, crafting a rhetoric of otherness and crafting a like America is going to come back, we're going to do this and all that. [2:17:17] It's delivered unbelievably well through things like tone of voice and through anything that sort of ends with. And you all know what I mean by that, folks, don't we? That's actually hot media. It's not cool. Got it. Got it. Cool media is when you are actually filling in different jokes. Cool media is like if Trump were to do that on Twitter. [2:17:34] And it wouldn't work, right? It wouldn't really work the same way that it would work at a rally. You know what? When it works, it's when you're reading it in his – you're hearing his voice in your head when you read it. Exactly. And again, I think an even better example than Trump, and this is what I was writing about in that essay of The Audio Revolution, is that like –

[2:17:50] it is now really obvious that like, [2:17:53] this past election was the podcasting evolution, right? Podcasting emerging as the dominant form of media, right? [2:18:01] for actually really kind of important and influential people [2:18:05] comps right for various important people is really interesting because it's the resurgence of this very very hot format [2:18:11] Again, if you look at podcasts, this is where I'm super interested. You were saying about Gabby's difference with millennials or pre-millennials, right, of like I have to see the video feed or not – [2:18:21] My contention is that the dominant hot media company in the world is YouTube. [2:18:26] Right. Because the important track of YouTube is the audio. Right. YouTube is the radio. [2:18:31] Right. That is what YouTube's heritage is from. It's like YouTube fundamentally is a radio station that just happens to have video. [2:18:37] And also everything. But clearly, I was thinking about this rereading that I think you could at the very least make the case that both TikTok and YouTube and Instagram Reels like the dominant content form on those platforms is a person looking at the camera talking to you. Yes, exactly. So even you're seeing the video, it's like not that important. You're sort of discounting it. [2:19:07] Thank you. [2:19:08] You want it to be a talking head, and actually, this wouldn't have been Russia. This would have been – [2:19:13] Thank you. [2:19:14] This would have been a little bit later, but it was like there was a period of time where CNN and MSNBC and like these other networks started making their presentations more elaborate and more featured and more fancy. And Fox did the opposite, right? They made their screens simpler and had little going on in the background, just talking head. And that corresponds exactly to what – Focus on the voice. It corresponds exactly to when Fox started outperforming, like massively. So they knew, right? They absolutely knew what worked.

[2:19:44] that piece that [2:19:46] made me think of Neil Postman. You say, if you remember one thing in this essay, remember this, hot sensory processing and cool sensory processing are like muscles. The more you use them, the stronger they get, and the stronger they get, the more we use them. We used to think that our neural circuits were relatively fixed by adulthood, but now we know they're highly adaptive, strengthened, and synchronized with the repeated use. I recently, I read Musing Ourselves to Death, and Neil's lamenting this shift in the way that specifically not only is the content changing, but we are [2:20:16] You just got it out a little bit. Podcast election. I think that piece was really prescient. How do you think... [2:20:21] society is changing as we become more attuned to hot media. [2:20:26] There's obviously the political implications and the types of candidates, but do you think it's actually changing people or changing us culturally? I'd say the most obvious – [2:20:36] way in which this is manifesting is in the decline of traditional TV. [2:20:40] as mattering. TV doesn't matter anymore. [2:20:45] Like it just doesn't right in the way that it did five, 10 years ago. [2:20:50] People talk about White Lotus on the coast, but like it's not Game of Thrones. [2:20:56] So not TV shows, right? That's different. I don't mean TV shows. Oh, I see what you mean. I mean like cable news, right, and things like that as the form of discourse, right, by which news would be broken. Yeah, partially it's a generational thing, but I think it's related to your point. News doesn't break on TV anymore, right? TV is not TV –

[2:21:14] There are occasional exceptions. Like, it's not like it's literally dead, but it's like, for the most part, it's like... [2:21:21] there is a better... [2:21:23] Twitter is both a better format for both cool media – Twitter and Instagram and all these things are a better format for the cool media job of high participation, low engagement – [2:21:35] Brain candy. [2:21:37] that there was infinite demand for that used to be fulfilled by TV. But it's also better for Blast. [2:21:41] And it's also better for blast. Right. It's all exactly. It's like you can also just like state the information and put it right there. Right. Twitter is a bit of a chameleon because you're getting both at once. And that's part of the dissonance to it. [2:21:52] But again, it's like – [2:21:54] For long-form stuff, when people are like, hey, I want to go and do a long-form interview where I talk about my company or I talk about my platform or I talk about my whatever, it's like – [2:22:05] They go on a podcast now. Right. Or weirdly, they will write a blog post. [2:22:11] Right. It's like there was an interesting wave of when, like, you remember when the trend was, like, um... [2:22:16] people would write medium posts or whatever. I think that was kind of the beginning of it, but then podcasting turned out to just be like better at that thing. Yeah, yeah, yeah. Because there's a parallel thing people talk about, which is not the same as this, but it's related, which is sort of like oral versus written culture. [2:22:31] And sort of like the journey back to oral culture and all of that, Walter Ong and everything. I think it's super late. Yeah. One other piece of this, you say... [2:22:41] or I guess broadly if information is uncertainty resolution, which is one of the, I think, the Claude Shannon definition. Yep, it's the definition.

[2:22:52] Do we have like certainty overload? [2:22:54] Do we need less certainty? [2:22:56] Do we have certainty overload? Can you phrase the question again? Yeah. So like, [2:23:00] Information is uncertainty resolution. We have crazy information. We have so much information. Information is fundamentally abundant. [2:23:08] I wouldn't call it information, right? I would call it... [2:23:12] Incoming, you know, incoming information. Incoming information. Incoming, yeah. One of the, [2:23:17] This is tied to the last question, which is sort of like, it seems to me that things are heating up. Maybe you don't totally agree with that. [2:23:24] And as a result, all of the information coming in is sort of like accepted as it is and like taken as certainty versus taken as like inputs to reading Postman. He's talking about how people would sit and watch a seven hour podcast. [2:23:37] Abraham Lincoln versus so-and-so debate. They're going through rhetoric and they're deciding for themselves. And it feels like... [2:23:42] We're all just like collecting stuff. [2:23:43] data points from people blasting at us? Yeah. Okay. So, [2:23:48] I mean, our attention spans and our capacity to make sense of things being nonwithstanding – [2:23:54] I don't think we are necessarily in a world that is heating up in terms of content because the dominant platform now for everything, TikTok, right, is a very cool media. You think it is? Oh, yeah. Interesting. TikTok is mixed media, right? It's like there's all kinds of shit going on on TikTok, right? It's very – you have like – you have the video. You have the audio. You have the chat. You have the – The sound. The sounds. Yeah, I guess I'm just thinking the classic like person in the car blasting at you. But to your point, even then, it's sort of like the Twitter thing. We have to figure out what they're referencing. Yeah.

[2:24:24] 95% of you filling in what the thing is. I see. So it's like I think probably on balance it's like the total amount of demand for hot and cool probably stays the same. It's just they move around what is fulfilling the things as different formats become more apex predators for taking over various jobs. Right. And you can put reels in the same category I think. [2:24:45] But again, interesting little natural experiment, which is not comparing reels and TikTok, but it's comparing both of them with YouTube Shorts. Because YouTube Shorts is in the middle of this medium that is otherwise fairly hot content. [2:25:00] And like it's different content, right? Yeah. TikTok and Reels are interchangeable as far as I can tell. I don't use either of them, but as far as I can tell, they're the same. [2:25:07] YouTube Shorts is different. Like, just the content is different. The people are different. The style is different. Instagram Reels is just TikTok content from last week, whereas YouTube, to your point, is a total... Huh. Yeah. Even though the format is literally the same, right? It's like, you know... Right. The last note on this that I hinted at briefly at the beginning, and maybe we talked about... I think you referenced earlier in the conversation, is when you wrote this piece, you referenced quitting podcasts for a while. And your observation when you quit was that [2:25:34] Your brain was quieter. Your thinking was clearer. [2:25:37] And your writing was better. You said you have gone back. Am I being dragged here? Hey, I'm doing this. This is an own goal. I'm doing this on a podcast. Two people listening to a podcast. You said, there was one part you said, I miss them, but I don't think I'm going to go back. Only after taking them off do you realize that headphones aren't all that good for you. There's a lot of discussion about screen time and how scrolling feeds and glowing screens are having bad effects on us, but a lot less discussion about the constant audio simulation.

[2:26:07] Yeah, I mean, okay. [2:26:10] I still, I'm off the wagon, I guess. So I'm definitely back listening to podcasts, and there's probably a very practical reason for that. By the way, I should acknowledge that a huge orientation of the piece wasn't just audio and podcasts, but it was headphones specifically, which I think is telling because headphones are this highly, I've talked about this with friends, you walk around New York City and you can like, [2:26:29] if you have AirPods in, you can just like opt out of the world. Yeah. It's this very single player. Like, I don't want to have to ever deal with another. [2:26:37] You referenced another piece. [2:26:39] maybe in that piece about like everything getting louder. There's a notion of that inside of this too. Like headphones drown out the world. Right. [2:26:47] Okay, so I'll tell you what. You know what I still try my very hardest not to do is not wear headphones when I'm walking. [2:26:54] So, [2:26:55] There is a, so I'll, I'll tell you why I have, I'm back with the vengeance back in the podcasts. Um, [2:27:00] And it's that – so – [2:27:02] So I have three kids. They're five, three, and new. And the five- and three-year-olds, over the past sort of year and a half or so, the way that our bedtime routine has worked is that, like, we get all ready to bed and we read stories, and then I will lie with both of them while they fall asleep, right? Because that's how they get to sleep. And this often takes a very long time. You've got the all-in podcast in nature. Well, I'm not a regular all-in listener, although occasionally I do the, ah, shit, here we go again thing. [2:27:32] to a podcast while like my kids are falling asleep and it's a really nice sort of like 45 minutes where it's just like lying there with my kids and it's like yeah i'll go listen to some macro shows or whatever and that so so because of that i'm now listening to you know podcasts again and sometimes sometimes i'll listen to music but like a lot of the time it's like no i'm gonna i'm gonna use the time to read other stuff why listen to podcasts versus reading generally you read a ton too oh because i can't read in the dark

[2:27:55] No, that's the literal – I would read them too, but it's like I'm literally sitting in the dark with headphones on. Do you think on the perfect text to speech where you quit podcasts and just do that? [2:28:05] Like, you know, I don't know, like Morgan Freeman, just read you your articles. [2:28:12] AI Morgan Freeman or real Morgan Freeman? [2:28:15] You know, I wouldn't say no to that. It's an appealing possibility. Okay. Yeah, I'm not... [2:28:21] I don't do audiobooks for some reason. Okay. I've always had – well, it's because I really enjoy reading books and marking them up with, like, a pen. Audiobooks are a much hotter medium. Yeah. Then reading text? Yes. Text is also pretty hot. [2:28:34] I find audio to be much harder. It can be. Yeah. I think you're, I think you're, you're probably right. Right. [2:28:38] Part of it's because of pace. It's like audiobooks are a treadmill. [2:28:42] That's true. It's not like reading a book is cool media, though. Like, written text from one source where you just read page after page is pretty hot also. Right. Right. [2:28:52] We don't have to spend a ton of time on it, but I have a few questions about the U.S. and Canada. Sure. [2:28:57] You recently wrote about America under Trump and a return to something like Manifest Destiny. [2:29:03] There's an idea that I've always been fond of. I think it comes from Richard Rorty, which is that the myths a country believes about itself shape it pretty profoundly. And there can be lots of different myths. Yep. [2:29:13] It gives a little bit to some of the conversation we were having about myths earlier. [2:29:17] This is from you. The best chapters in Kissinger's diplomacy are the ones where Kissinger talks about Nixon and Reagan contrasting their styles and the different ways in which they effectively led America to think of itself in new ways. I think you have that book in your hands now. And then you say, if Canada wants to avoid tariffs, it should simply become the 51st state.

[2:29:38] quote, that's, I think, a Trump quote. It's not my quote. It should be very clear. Trump says, you're quoting Trump, if Canada wants to avoid tariffs, it should simply become the 51st state. It's interpreted as more like the incantation of a magician than as a serious diplomacy. But it invokes something important, an earlier, more confident version of America that wasn't afraid of its own shadow and that justified its international actions as domestic expressions of self-sommercy. [2:30:07] So my question is, what is the myth of America that you think Trump is trying to lead towards? [2:30:15] So for the benefit of listeners, that piece was written – [2:30:20] In a very narrow window of time, which was after the wheels had been set in motion around intent. [2:30:27] but before the capacity of execution have been assessed by everybody. I still think you are getting something interesting. But no, but that is to say, just to put it at a very specific moment in time, but that is to say... [2:30:39] Here's something that's kind of getting at with this. [2:30:42] One of the sort of founding – like America has always been a really interesting – [2:30:48] country insofar as it was [2:30:51] And so for benefit of listeners, Jackson and I talked about this earlier, but I'm a dual citizen. I'm American and Canadian. I was born in the U.S., grew up there, but I live in Canada now. And what that means in practice is that living in Canada, I spend a lot of my time kind of grudgingly defending the United States against Canadians who are like, how do you possibly live in that horrible place? Because I still consider myself very much American.

[2:31:14] The thing about America, right, is that like the context of American founding was in – [2:31:19] opposition to and in contrast to [2:31:23] The continent, right? Europe, the European powers, and specifically the European balance of power system and what you would call real politic, right? This idea of statecraft as naked power. [2:31:37] pursuit of national self-interest. And it's worth actually taking a little history detour here. [2:31:44] towards [2:31:45] the founding of what you would kind of call modern Europe, right? Like medieval Europe, right? Ancient Europe sort of post-Romans, pre-Middle Ages, the medieval setup of Europe was something that was incredibly – [2:31:57] feudal and an incredibly diffuse sort of kings and priests legitimacy where the sources of legitimacy of who and what was allowed to like act in self-interest was incredibly sort of like intricately distributed into these entities like the Holy Roman Empire where it was like, [2:32:15] Overall, like the thing that mattered was you had the local nobility and you had the kings who derived these really kind of like micro – [2:32:24] self-confidence out of local circumstances, right? And so – [2:32:28] Typically it's like [2:32:30] The king would not really – and importantly, like kings would not have their own armies, right? The nobles would raise like little local armies, and there would be lots of horse trading going around for how people would pursue their little objectives. And overall, all of this was rooted in the church, right, which is like ultimately all of this legitimacy derived from something that approximated both –

[2:32:49] but the Roman Catholic Church coming from Rome, [2:32:51] But also the general sense of bottoms-up, priest- and monastery-driven local sources of legitimacy that people understood. [2:33:01] When all of this changed was in the 30 Years' War, right, which is the big clash post-Protestant Reformation of – [2:33:10] What happened when, you know, when Protestants and Catholics started genuinely fighting over all these German territories in a very critical moment happened, which is France. [2:33:19] a big Catholic country. [2:33:22] right on the edge of all of this, [2:33:24] saw tremendous opportunity to go increase its own standing. [2:33:28] Right in Europe. [2:33:30] And by siding with the Protestants, right, the person who did this, his name was Cardinal Richelieu, one of the most important sort of statesmen in world history, basically said, you know what? [2:33:40] The national interest... [2:33:42] is more important than... [2:33:44] The fact that we're a Catholic country, the fact that we had old alliances, the fact that, like, we used to be able to be counted on for this and that doesn't matter. Like, might makes right. Let's go. And France entered the war on the side of the Protestants. [2:33:57] Crushing victory for France led to a couple hundred years of dominance on the continent thereafter because they did this unthinkable thing, which is basically just like throw a hammer on the ground and be like – [2:34:09] We're inventing a new thing called the national interest and the concept of the nation state. [2:34:14] And then ever since then, [2:34:16] Right. The concept of nationalism. Right. Of.

[2:34:19] The state has this idea where it's like, [2:34:23] People have morals and people have souls and people are judged in heaven on their actions on earth. But nations don't have souls. Right. Nations do not go to heaven. Nation has nations are only judged by their successes or their failures today. Right. Therefore, the actions of a nature and a nation are only judgeable by whether they win or lose. Right. The victors write the history books. [2:34:45] The imperative is to win. It doesn't matter what you think. We don't believe anything. We only believe in self-interest. And over the subsequent couple hundred years, Richelieu's vision transformed into what you would call progressively mounting nationalism, right, of basically complete horse trading, like we're going to do deals and we have no permanent allies and we have no whatever, right? Sounds a little bit familiar now, right? And ultimately – [2:35:10] While this didn't completely finish until around the end of the 19th century and World War I, nonetheless, by the time that the United States was founded, this process was well underway. Got it. And America was founded always on being in complete opposition to this system. It's a new continent. [2:35:27] New start. We're going to base this country off of ideals. Right. The point of this is that we are going to say our ideals are, in fact, universal ones. [2:35:36] The American exceptionalism. [2:35:40] Yeah.

[2:36:02] And that's that. [2:36:04] And in the beginning, in the first, you know, 100 years or so, [2:36:08] The United States was busy enough with just surviving on its own that this – [2:36:13] statement of belief did not come into very much conflict with its logical conclusion, which is, well, do you feel like your job is to spread these universal beliefs to other places? And how does that square with your founding definition of being in opposition to naked nationalistic power grabbing and horse trading that existed on the continent? And the way that the United States pulled off this having its cake and eating it too, [2:36:38] which is, oh, our morals are universal and we want to export them everywhere, but also we don't do real politic, is to simply claim that any international expedition that it went on was simply a domestic issue. [2:36:51] So this is when you talk about the Monroe Doctrine and we talk about Manifest Destiny and all of these sort of really important founding concepts. [2:36:58] That were initially applied to just on the continental United States. When America starts going to, you know, into Cuba and into South America and into this place, into that place, the way that this was justified in the national consciousness was on the basis of this is a domestic issue. [2:37:14] Right. We're just expanding what it means to be domestic. And then eventually over time, it's like what happened sort of between World War One and World War Two. And in the 20th century was the United States basically expanded the concept of like this is a domestic and moral issue to just the whole world. Right. And there's a little bit more to it in that. But ultimately, you should read Kissinger's book Diplomacy for all about this.

[2:37:34] Now to round this back to your question, which is, [2:37:37] Thank you. [2:37:38] Trump becomes president. It's like, what are the first three, four or five most shocking things he says? It's we're going to make Canada a state. We're going to annex Greenland. We're going to make Palestine a resort. What are all these things we're going to do? And all of these are domestically framed issues. Right. It's like this does something really important. Right. We're not intervening in somebody else's problem. No, we're not intervening in other people's problems. We're not doing this. Simultaneous. We're like, we want to end wars. We want to do this. We want to do that. But simultaneously, it's like we're just making this a domestic issue. [2:38:08] And, [2:38:09] And specifically, it's like the framing of the U.S. and Mexico tariffs being fentanyl tariffs is like a very smart branding because one is like you can't falsify or argue it. Sorry, what did I say? U.S. Okay, yeah. The Canada-Mexico tariffs being fentanyl tariffs. It's like – [2:38:25] There's no more domestically oriented issue than like Americans are dying of fentanyl, right? It creates this incredible legitimacy grounding for like this is a domestic issue. This isn't an international trade issue. This is a domestic issue. How could you possibly object with what the United States decides to do with its domestic priorities? So that was the thinking there, right? That was I think the device employed, you know, which – [2:38:45] We're now seeing the actions and or possible execution thereof, but who knows? A lot of game left. [2:38:56] What is the myth of America that you believe in? [2:39:00] I mean, I guess I believe in that one, right? Like, I'm a... [2:39:03] I'm still – I don't know if Americans can really believe anything else insofar as like there's no credible alternative that has ever been presented to itself.

[2:39:12] And this is like the people who are – say, I hate America, actually. It's like America is bad. [2:39:17] Only ever argue about America being good or bad in terms of the originally framed argument. Right. This is like you're saying that idea being we have these ideals that are the best ideals and we should spread them everywhere. [2:39:29] The argument has always ever been, are those ideals right or wrong? It's never – [2:39:33] Is the United States a country like any other? [2:39:36] Yeah. Yeah. Is there a myth of Canada that you believe in? [2:39:40] Thank you. [2:39:41] Canada is an interesting country, right? And maybe more broadly, what is – yeah, you've lived here a long time. What does Canada mean to you? [2:39:47] Canada's a fascinating place. [2:39:50] It is a huge and very empty country for most of it, but the consequence of that is that the average Canadian lives actually a very urban life. [2:39:57] The average Canadian is more urban than the average American by a large factor. Because we all live in like four places. Right. Right. You know, a third of Canada lives in greater Toronto or something like that. [2:40:07] We're all kind of huddled in these little strips along the border. There are some interesting aspects of Canada that I really enjoy. [2:40:12] One is that – so the – [2:40:15] The Canadian reputation is really founded on this idea of, like, America is a melting pot, but Canada is a tapestry, right? That's the line that you learn, which I roll my eyes to a little bit because it's like, look, America is equally if not more a tapestry. I think America is a lot more regionally diverse than Canada is in a lot of ways, although that's not to – [2:40:34] say that Canada isn't. [2:40:36] Canada is interesting insofar as it is sort of uniquely – [2:40:40] been able to assimilate a lot of immigrants from a lot of different places and not totally fall over and break. And this has been tested recently a little bit around the margins.

[2:40:51] So recently, like this, this has really kind of come into some pressure. In a way that was maybe more true about the U.S. in the past. Yes. Just to connect it. Yeah, absolutely. So the Toronto Pearson Airport is the new Ellis Island, right? It's just like it is where people go to start these new lives. [2:41:05] In an incredible way, in Toronto especially, it's just like it's this massively growing city that's home to so many people from different places, and it somehow doesn't fall over, right? And so it's worth asking the question about Canada, and to make it a little more specific, we could just make it about Toronto. [2:41:18] which is why does it work? And the reason why it work, I think, works importantly is because [2:41:24] Toronto and Canada generally has very, very well-functioning civic institutions. Some literal examples of this, just to be practical, is like, [2:41:33] In Toronto, you can go to the local community center where there is pool and there are, you know, like different rows. There are computers and there are ping pong tables and there are a lot of kinds of facilities and programming and they're – [2:41:44] Always completely full of people using them really well. [2:41:48] Like this really matters, right? There's no vagrancy. There's no sense of drift and decline down. There's very little sense of sort of like abandonment or whatever. It's just like full of people using them really eagerly. And there's a tremendous kind of. [2:42:05] hope and sort of civic cohesiveness that comes from seeing everybody kind of pulling themselves and succeeding together. You probably also want to keep them great and make them better the more people are using them, too. Totally. Like, it is a virtuous cycle that is working virtuously, right? It's like, [2:42:18] You can go – another great example is that Toronto has the – one of the best public library systems in the world. Toronto has – it's the biggest library system in North America. It's bigger than New York City or LA, and it is incredibly used, not just by people using the library for reading books and things like that, but because it's like it's where you go to learn English. It's where you go for all kinds of sort of like –

[2:42:39] people helping people. [2:42:41] figure their life out. A lot of it happens through the library system. And it's like, because the systems are so well used, they are recognized not just with funding, but also with like, [2:42:51] competent person [2:42:52] People want to work there. It's funny. This rhymes with in your scarcity abundance stuff. You talk so much about how demand is as important, if not more important, important than supply. Yes. And it's almost like a similar shape here. This is exactly the same thing. It's like the fact that they are used is what pulls everything else forward. Right. And so it's like it's really good if you can get it. There are a lot of people. There are a lot of people who are kind of down on Canada right now of like. [2:43:16] There has been some drift into some of the similar kind of ailments that people have sort of complained about in the American left for a little while. But frankly, I think a lot of the story is a little bit overtold. Like there's this very popular graph that you will see on Twitter that is like the U.S. and Canadian economies, and then they like – [2:43:33] diverge right when Justin Trudeau was elected prime minister. It's like, [2:43:37] Okay, like... [2:43:39] That's not what happened in 2015 that caused that divergence. What caused the divergence 2015 was oil prices crashing, right? It's like Canada overwhelmingly is a natural resources economy, and we were a big major oil exporter. And it's like we were – that was the end of a commodity super cycle, right? It's like trust me, Justin was not that effective, right, at immediately implementing his policies, right? Although he was a very effective prime minister at what he wanted to do governing. Right. [2:44:04] But nonetheless, all of this is to say it's like, [2:44:08] When there is another commodity super cycle, Canada is just going to go right back up and we're going to go back to New York Times op-ed pages saying Canada is the new – the new American dream is now back in Canada again. We're so back. It's a very it's-so-over-we're-so-back kind of culture of people overreacting to what's really going on.

[2:44:23] We're in the home stretch. I've got a round of miscellaneous questions for you. All right, let's do it. [2:44:28] We talked a little bit about myths. What are the foundational myths or mental models or unrepidding ideas that really shape how you see the world? We talked maybe about one of them in the gift stuff. But are there any that immediately come to mind as things that have shaped your thinking more than any others? [2:44:46] Okay, the first place I'm going to reach is for, I'm looking at my bookshelf right now, and I'm kind of scanning for what are some great places to influence this. [2:44:55] I'm going to give you a bunch of names here, and I will accompany them with their associated book titles. [2:45:01] Thank you. [2:45:02] The first one that I'm going to point out, this is a book called Crowds and Power by Eliash Canetti. This guy won the Nobel for this book and has been completely forgotten. [2:45:11] It comes from the tradition of books that were written – [2:45:15] Just after World War II in the general tone of like, how did this happen? Oh, wow. As many books were. But this notion of like, how is it that individual people can have this kind of relationship to groups of people? [2:45:26] And overall, what is the relationship between the group and the individual? [2:45:31] The book... [2:45:32] Thank you. [2:45:33] Sort of, you know, in fact, if we have a minute, I'm going to read you the first page of the book. Great. Okay. [2:45:39] This is this is it's a it's a it's a chilling passage. [2:45:43] There is nothing that man fears more than the touch of the unknown. He wants to see what is reaching towards him and to be able to recognize or at least clarify it. Man always tends to avoid physical contact with anything strange.

[2:45:56] In the dark, the fear of an unexpected touch can mount to panic. [2:45:59] Even clothes give insufficient security. It is easy to tear them and pierce through to the naked, smooth, defenseless flesh of the victim. [2:46:06] All the distances which men create around themselves are dictated by this fear. [2:46:10] We shut ourselves in houses which no one may enter, and there is only some fear of security. [2:46:15] The fear of burglars is not only the fear of being robbed, but also the fear of a sudden and unexpected clutch out of the darkness. [2:46:21] The repugnance to being touched remains with us when we go out among people, the way we move in a busy street, in restaurants, trains, or buses. Even when we are standing next to them and are able to watch and examine them closely, we avoid actual contact if we can. [2:46:35] The promptness with which apology is offered for an unintentional contact, the tension with which it is awaited, our violent and sometimes even physical reaction when it is not forthcoming, the antipathy and hatred we feel for the offender, even when we cannot be certain who it is, the whole knot of shifting and intensely sensitive reactions to an alien touch, proves we are dealing here with a human propensity as deep-seated as it is alert. [2:47:05] the boundaries of his personality. [2:47:07] Thank you. [2:47:08] It is only in a crowd – [2:47:10] that man becomes free of his fear of being watched. [2:47:14] Wow. [2:47:15] So that shivers a little bit, right? Because it's like, okay, there is something really, really powerful that reverses that [2:47:22] When a group of people undergo this transition –

[2:47:26] From being a bunch of individuals to being a crowd. Being something else, yes. When you are in a crowd, everything reverses, right? And we talked about gifts earlier and this idea of like the work of transforming something into something. It's like the ultimate thing that you can transform is a bunch of individuals into a group, right? And so this book, Crowds and Power, is all about sort of like the art and the mechanics of it. [2:47:50] of you can call it leadership, honestly, is like a way that you can think of it. But it's just like, [2:47:55] Under what conditions do crowds form? Under what conditions do crowds listen to someone? And under what conditions do crowds... [2:48:03] Take on one group, one mind. Yeah. And under what conditions does a crowd suddenly dissolve? Right. And so you can – I've had a great discussion with Eugene once about this and about online mobs and about, like, who's the main character on Twitter today? And the joy that you get is, like – I remember one tweet. It was a little while ago, which is, like – [2:48:24] Everybody come on over to Blue Sky. They're dragging someone today. [2:48:29] It's like, ah, get on over there. It's like there's something incredibly primal about it. Yeah. Wow. Cool. And so I think about this a lot. This is one of the sort of like books where it's a really fun and very dense and scary read. But it's really good. [2:48:44] similar book in [2:48:47] Totally the same vein, but... [2:48:51] It's Gregory Bateson. It's, oh God, what is the book called? [2:48:56] Stephen Besson: Steps to an Ecology of the Mind, I believe. He was the – so Gregory Bates – I'll have to check on the name of this. Steps to an Ecology of the Mind, I think. It's a collection of essays.

[2:49:08] And overall, the grouping theme of them is he was one of the founders of this [2:49:12] word that has been forgotten, but it's called cybernetics. Yeah, yeah. Which was, he was friends with Claude Shannon. He was a psychiatrist that lived in Palo Alto. So he was friends with all the early computer people. But really, he more than anybody else is really kind of like the founder of communications theory. And this idea, again, this idea of like, it's not what you're told, it's what you receive. And how you create the concept of what is received. And all about, it's like he has these incredible essays on play. Yeah. [2:49:40] And like the role of he has this fantastic essay on. [2:49:45] why kids all seem to have the same set of rules around building towers out of blocks. [2:49:51] which is just magnificent wow right this idea of like [2:49:58] Why would it feel like cheating for you to glue the blocks together? [2:50:01] Even though your goal is for the tower to not fall apart. [2:50:06] But it definitely would be cheating. Definitely would be cheating. But cheating what? [2:50:09] So this is this amazing collection of essays. [2:50:13] That's a good one. [2:50:15] I really like – I want to do some fiction in here. Some of my favorite books around organizing how I think – we talked about this earlier – is there's a book called The Magic Mountain by Thomas Mann, which is – [2:50:28] It was like one of my mother's favorite books, and I hadn't read it until just recently, and I finally read it, and I was like, wow, this is actually really good. I did an inter-intellect salon on this recently that was really fun. It was –

[2:50:40] It was very well registered, and then it was the day there was that Zoom outage. Oh, no. And so only like five people came, and we had the best discussion. Oh, good. No, it was perfect. I would not – if there's 30 people, it's like a lecture. It was five people. We just had the best chat. It was really cool. Oh, cool. So it's, again, a tremendously useful book for like – [2:50:58] organizing all your thoughts. [2:51:01] And to give you a little bit of the idea of what it's about, it's like there's this guy, Hans Kostorp, who ends up in Davos in a sanatorium for people who have tuberculosis, where he ends up staying for like seven years of sort of like flannering around and kind of observing things. And when people are up there, one of the things they do is they kind of like argue about life and politics and Western canon and everything. And there are these two Italian characters named Settembrini and Nafta, who's dialectic. [2:51:26] The meme of Leo pointing at the screen whose dialectic is them basically discussing all of how they think Western civilization works. [2:51:35] And the first guy, Stenobrini, is he's basically reasonable. Like he's this bourgeois, progressive kind of liberal guy who is like all of his opinions are – [2:51:45] They're fine. They're pretty good. They kind of stand up, but they have little blemishes here and there. And, like, he's not the greatest speaker, and the arguments have little flaws. And then his opponent is this guy named Nafta who... [2:51:55] It's like – [2:51:56] he really reminds me of RFK in a lot of ways where it's like, [2:52:00] Like he's all over the place in these wildly crazy directions. He's arguing that the earth is flat. He's arguing like all of his arguments are just completely insane. [2:52:10] And yet they have these grains of truth to them that you're like, oh, but he's right about that thing, though. And it's like and those little like the yin yang is like the we're so back inside. It's like and so and and because of this, he wins every single argument. And but the two. But so not only do the two of them have this incredible discussion over the whole course of the book that helps you organize kind of like how all of Western civilization is like what's inside what. And basically, they're like one of the many, many things that they're arguing over is like.

[2:52:40] Did did Western civilization was Western civilization founded by the church or vice versa, which is more important, sort of like the is the Greco Roman Roman classics, the root of all of this and the church is just there. Or is like, is the Greco Roman classics just the current fad of the bourgeois? And like, you know, anyway, there's lots of this. And it's tremendously helpful helping you organize your thoughts. [2:53:02] recommend it to anybody because it's like... [2:53:04] NAFTA, the second guy, is actually a really good window into understanding Trumpism. [2:53:10] It's like, where is it coming from? What is the... [2:53:14] In what capacity is there an intellectual base here that you can draw on? And I think it's honestly just like – [2:53:20] It helped me really understand a lot of what is currently going on in a way that I haven't found in really anything else to a satisfying degree. Wow. [2:53:26] So that would be one that I would recommend. [2:53:29] Another really good one is that I always, always, always recommend – [2:53:35] All of the great Russian classics, I think, are the greatest books at helping us understand the world. [2:53:41] our world because Russia's just a little different. [2:53:44] Hmm. Um, there's something really amazing about it's like, you know, you know, this is the literary version of you have to go abroad to understand your own country. It's like you have to read Russian books to understand Western thought. Okay, well, top of that list. [2:53:57] Oh, Brothers Kromosov. Okay. It's my favorite book of all time. Wow. Um, [2:54:02] I've read it three times. It gets better every time. I want to read it once a decade. Okay. I think I'm going to read it once a decade in my life. You recently said, with each passing year, I get more convinced that fiction is superior to nonfiction as a way to learn what the hell is going on. Mm-hmm.

[2:54:14] Yeah, well, let's go back to the Magic Mountain as an example, right? [2:54:19] In The Magic Mountain is like the fictional – the device of a novel allows you to have characters – [2:54:25] that can discuss anything they want. Yeah, yeah. And as a result, you can have them have arguments that are so comprehensive – [2:54:32] That would never occur. Like, nonfiction has to deal with [2:54:36] on the ground as they are perceived. Whereas in a novel, you can actually express through any number of devices that [2:54:44] how, you know, how people are actually living in the world, right? And like, yeah. Well, it also suspends people's sort of skepticism. It's sort of like Sci-Fi is a similar thing, right? It's like allows you to see reality... [2:54:54] as it is, but, like, through... It's subversive, in a way. It's a gift, right? It suspends the disbelief of do I believe this into, like, it's not... It's a story, right? It's a... Whatever. And, um... [2:55:07] Again, it's like [2:55:08] The great novels, I think, have a kind of power in the canon of... [2:55:15] it's not like the fact that they are true or not, or whether they happened, right? It's that, [2:55:20] They organize people around a pattern of thought that has durable usefulness. Wow. [2:55:25] Yeah, that's a cool frame. Yeah. [2:55:27] What did you miss about writing? You took a long break. [2:55:30] How did your thinking change without kind of that rhythm or that kind of consistent feedback? That's a great question. I mean, it's not like I stopped writing. It's just I'm writing internally. Yeah. [2:55:41] Hey, like I – [2:55:43] Basically what happened was, you know, a couple years ago I was like, listen, the writing is great, but, like, this is taking a lot of my attention and I need to give it to Shopify. You were publishing weekly for five years?

[2:55:51] longer? [2:55:52] No. Well, if you include the social capital newsletter, absolutely. Yes. Five, six years or something like that. But like my period of really high intensity writing was 2019 and 2020. [2:56:04] When I was ripping a binglong post every week, which was great fun. [2:56:12] I think this is the kind of thing where it's like there are seasons in life, and I would love to do that kind of effort every few years. Yeah. [2:56:18] But not all the time. I wrote 30,000 words in a month last year, and, like, I've not written that much anywhere close to that much since. And it's, like, it's definitely a certain mental state. That's a lot. Yeah. It's like runners talking about their mileage. Yeah. 60 miles last week. And, yeah, and so basically what happened was I was on parental leave recently, and I asked Toby very graciously. It was like, yeah, you can go ride for a while. So thanks, boss. Nice. But now I'm back at shop five. [2:56:48] business and life from being in a band? Oh, everything. [2:56:52] I learned everything. [2:56:54] I learned... [2:56:55] What did you learn from being in a band? [2:56:57] I learned the following things. One is you learn how it doesn't matter how bad the drive was or what you're arguing about. [2:57:04] You have to get on stage and do a show. [2:57:06] People came to see you. You have to perform. You have to... [2:57:10] You have to be enthusiastic. You have to learn how to summon up energy and perform to a crowd. Give them a gift they can receive. You have to give them a gift. Exactly. [2:57:18] Two. [2:57:18] You learn... [2:57:21] You learn all about working the crowd. This is very similar back to crowds and power. It's like...

[2:57:27] All shows are different, but also all shows are the same, right? What a show is, is a bunch of people get together... [2:57:33] and they are still individuals, right? And then the performer gets on stage and says... [2:57:38] Are you ready? [2:57:39] Right. And it's left unsaid. Are you ready for what? But what are you ready for means is are you ready to do a challenge? [2:57:48] I am challenging you to dance. Can you do it? [2:57:52] Right. And then I'm almost pleading for you to dance. I don't know if you can do it. Can you do it? Yeah. Can you hear me? Can I hear it? Right. And then. [2:58:00] When the band plays... [2:58:03] People start dancing and they become one, right? They become one thing. Yeah. Right. And there's tremendous force and energy that gets created in this moment and [2:58:11] where a whole bunch of people undergo this energy phase transition into a single crowd. [2:58:16] where they're at a heightened state of fandom and energy and intent than they were before. [2:58:23] And then as soon as you end that show, your job... [2:58:26] as a businessman, [2:58:28] is to get that energy into the merch table. [2:58:32] Because people buy merch one and only one time. It is in the 20 minutes after your set. Nobody buys your merch online. Nobody buys your merch at any other point. They buy it immediately after the show. Pure emotional dopamine. You are trying to get people to bottle up the feeling that they had in the form of a $50 t-shirt that costs you $8 to screen print. [2:58:53] That's what you are doing. That's awesome. If you can do that, you can do anything. Right? You have the ability to create demand. Yeah. Right? This is what it's about. Why are you interested in scammers?

[2:59:08] As great... [2:59:10] ongoing sort of fascination with oran hoffman if you know oran vaguely [2:59:16] One of the, one of the, one part of, part of the original PayPal mafia, actually, he and I have a shared love of this. [2:59:23] Scammers have to understand how a system works. [2:59:27] You've recommended the Anna Delvey book as a reference. Yeah, like – [2:59:31] Scammers, there's a great book called Lying for Money right there that is sort of a very intelligent walkthrough of all the different kinds of financial scams. Scammers have to understand what actually matters in the system to work. They're kind of the ultimate Nassim Taleb explosion. You remember in – I forget which book it was, which Nassim Taleb book, but he's talking about the Greenwood Traders – [2:59:53] It's like – [2:59:55] There's a market for something called green lumber, and there was this one guy who was just very skilled at it. He rose to the top of the trading market for making markets for green lumber. It was only in retirement that he learned that green lumber meant a kind of age of the wood and not that it was painted green. The answer is it doesn't matter what kind of lumber it is. What matters is do you know how to make a market or not, right? It's like that's what actually matters. [3:00:25] like one of the absolute power players of the oil market in like the late 40s and 50s and then it was only late when he retired there's a story of like he's with his daughter and he looks out at the ocean he sees this big boat he's like what's that boat why is it so big and she's like that's an oil tanker he's like oh i've never seen one before no way um so similarly again scammers is like

[3:00:45] Wow. Scammers have to understand the part of the system that actually matters. [3:00:49] - Yeah. - Right. And it's like the way that you can-- - And most people in the system probably don't understand that. [3:00:54] Many people don't understand it. And it's like the other reason why scammers are so interesting is that – [3:01:00] Basically all – not all, but like many scams invoke a common motif, which is that the person who is being scammed has to want to be scammed. This is really important. This is really important, right, because – [3:01:17] And again, a lot of like... [3:01:19] So a classic element of this is like romance scams, right? It's like how is it that somebody is allowing themselves to get scammed? It's because they want to be loved. They don't want to contemplate the fact that this is a scammer. It's like you will refuse to allow yourself to interrogate this possibility even when facts are screaming in the face that they're getting you to wire money. [3:01:37] right or something right it's like there needs to be a reason why the victim wants to be scammed and if you can understand that then you really have a good sense yeah it's high dimensional yeah exactly so and i like [3:01:49] In the Silicon Valley thing, this is really interesting, which is like why aren't there more scams? [3:01:54] In tech, I always wonder this. Especially with all the gift-giving going on. Yeah. It's just like all this earnest trust, whatever. So I think the gift-giving in some ways is actually part of the antibodies. I think if it were more transactional, there would be more space. Ah, that makes sense. [3:02:10] Because... [3:02:11] For a bunch of reasons, but also... [3:02:14] Yeah, it's interesting. I'm really surprised there hasn't been an episode of like a really hot founder with a really good like AI model or something basically getting a whole bunch of something together and then just absconding with it.

[3:02:28] Right. Knock on wood. Um, I mean... [3:02:32] Maybe in a sense, it's like this does exist. It's just called... [3:02:37] rug pulls in crypto yeah and we have like our version of hamsterdam right in the wire right where it's like if you want to be a scammer we have a designated area for that where it's fine and it's honestly way more taller it's just considered to be in the water no crying in the casino uh [3:02:55] Um, [3:02:56] My second to last question, you're a dad of three girls. How has being a dad changed you? [3:03:01] in every way, right? It's like... [3:03:05] I feel like, you know... [3:03:07] Thank you. [3:03:08] Some people have kids, some people don't have kids. This isn't a comment on that. But it's like, I personally, for me, felt that like... [3:03:13] When you become a parent, that's when you start playing for stakes. [3:03:16] right until that point it's like you're living life but it's the warm-ups [3:03:21] Right. You're not playing for real money yet. Right. You're not actually really applying everything that you've developed in the early stage of your life. Wow. It's like. [3:03:31] The actual thing we're here to do is we're here to sort of like pass on everything that you've learned to the next generation in the form of your kids having been raised by you. [3:03:38] This is – [3:03:40] There's a variant of this, like a question I ask people sometimes, is like, is it based or cut to try and cheat death? [3:03:49] Dennis, you know, and I think my answer to this is that it's like, no, it's like you're cucked to try and cheat death because the way you cheat death is by having kids that are like you.

[3:03:59] Right? Like, always has been. And, like, yeah, it's... [3:04:02] I think... [3:04:04] I'll tell you one thing that's possibly a bit of advice for young parents, which is one of the hardest things about becoming a parent is that kids demand an incredible amount of presence from you. [3:04:13] You can't be half present with a kid. [3:04:16] Right. It doesn't work in the same way that you can be with adults. With adults, you can be present with an adult. You can also be on your phone. You can be thinking about something else. Whatever. Kids will demand 100 percent of you. And this is a muscle that really atrophies when you're a young adult. Right. You're not good at it. And kids force you into the gym on that muscle immediately. [3:04:34] And as painful as it is early on, you know what the cool thing about muscles are? Is that once you have them built up, then you're strengthened, right? It's like then you're more present all the time. You're a lot happier. [3:04:43] You're a lot just more in the world. Kids are like an emergency solve hatch on two really important things, one being attention and the other being just like getting out from under yourself. Oh, yeah, totally. Being about anything other than you. I have a good friend who, you know, at some point in his 20s was just like, I feel like it's like your whole adult life is just leading up to a culmination of you getting kind of bummed out about the world. And it's like – [3:05:06] No, but then you have kids, right? And then it solves all of those problems, right? New problems, buddy. New problems, yeah, exactly. It's like that Marc Andreessen pinned tweet that he had where it's like, you're going to be upset about all kinds of new and interesting things. Yeah, yeah, yeah, yeah. Yeah. No, it's the greatest gift. It's a great answer. It's the greatest gift. [3:05:24] Speaking of great gifts, my final question, we talked, we started talking about gifts. Mm-hmm.

[3:05:29] What is the best gift you've ever received and what gift or gifts do you hope to give? Fantastic closing question. [3:05:37] Hmm. The greatest gift I've ever received. I mean, you know, so like, it's hard not to answer various forms of unconditional love that were given to you by your parents and... [3:05:48] All of the [3:05:50] Amazing. Just being given a sense of gratitude by your parents is itself the meta gift. Totally. I feel very fortunate for that. [3:05:59] All of that has to be [3:06:01] All of that has to be in there. I'll give you actually a closing answer, which is like one of the real kind of gifts that I'm really, really glad that my parents gave me was the gift of having gone to church growing up and having that been a non-obligation but a real option, quote-unquote, to return to later in life. Because it's like many people, I stopped going to church when I was in my 20s and didn't think about it all that much. But then again, similar to like with kids, it's like – [3:06:27] oh, we're right back there. And it's wonderful, right? It's like amazing to be a part of this thing again and have that be... [3:06:32] just right back to going and being a part of your life like you like you never left it's like really wonderful to get to like have that now with your kids and like it's like that's a gift your parents give you right it's like that's not to say that you can't go to it completely on your own absolutely not but like the fact that you could be given it as a gift earlier in your life and just be able to pick it right back up is like wonderful right so that's you know that's something that's top of my mind recently cool um and then the great gift that you hope to give right it's like [3:06:58] Oh, like you hope to give...

[3:07:00] I'm actually going to give you a slightly cop-out answer here rather than just being like, I hope to give my kids the same thing. [3:07:08] I'll give you a much more actionable like gift, which is like throw more dinner parties. [3:07:12] have people over constantly. Like this is, I think the single greatest happiness hack that we exploit all the time is like, and there's a bit of discourse on this online, right? Like Nicole, people who talk about this, but it's like, [3:07:25] People are often flabbergasted to hear that, like, we usually host people for dinner minimum two times a week. So great. Wow. That's awesome. Right. And it's like it's a muscle. Get good at it. Like, you get lots of friends and you get them in the habit of coming over and, like, you have a meal. And, like, you just take care of everything. If your house becomes a place that people go to be happy, right, where you're giving them the gift of not just the literal food but the ability to have your kids running around what you're talking about and everything, it's like, oh, that's just the – [3:07:55] absolute one-way ticket to like being in a great neighborhood and having a great life oh man do it more right there's nothing and by the way i'll give you a free hack for how to do this non-awkwardly [3:08:08] If you are ever in the position where you're like, I want to invite those people over for dinner, but it would be kind of awkward if I did it because we've been friends for a while and I don't know how to do it. [3:08:15] Say it's a barbecue. If you say we're having a barbecue, do you want to come over for dinner? It's so casual. It's casual. You're allowed to do it if it's a barbecue. That works if you live in Toronto, not quite as much in a New York City apartment. But here's the thing. You don't have to literally barbecue. Yeah, yeah, yeah. It doesn't matter what you do. If you say the word barbecue, you can just be like, we're probably cooking in the kitchen, but it's a barbecue. You literally just have to say the word barbecue. You've made it casual in a way that I think –

[3:08:43] is why you were able to do it so much. You've created permission to say yes. Mm-hmm. [3:08:47] I don't know why it works, but it does. [3:08:49] I was with some friends recently, and we were asking, like, what would you make? If you had a national holiday, what would the thing people would do on your national holiday? And I said everybody would have dinner parties. So I'm inspired by that answer. It doesn't have to be a holiday. [3:09:02] Do it every day. Alex, this was a gift. Thank you, my friend. This was really wonderful. Jackson, thank you so much for coming out here. I'm so glad that this is your first Toronto experience. It was wonderful. My basement. It was wonderful. I got a day down here. This is the longest interview thus far. I probably have some cutting to do. But, man, it was a blast. Thank you for listening if you've made it this far. Thank you. Please reach out. I'd love to hear from you. Please do.