17: Alex Danco - Innovation Begins with Gifts

30:53And we all agree on a certain way of pricing it in the future on a future round. And 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, to bring this back to this system by what you were talking about around kings and priests and the legitimacy of this, if you take a lawyer from outside of tech and you ask them to review a safe deal, what do you think they're going to say?

31:35They'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. 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 enough founders have succeeded by this, right?

32:12Enough kings have triumphed. So we can believe in it. So we can believe in it, right? There is reason to believe that this works because it does work. What do you mean it's impossible? How can it be impossible if it happens, right? 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, I still think you could take everything you just went through and draw like a fairly sort of like positive sum, rational actor, I don't know, subversion 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.

32:51whereas when i hear gift it implies like a level of suspended selfishness or a level of just true earnestness that isn't so obvious there so i i'd love for you to try to yeah connect the dots or how do you see the gift idea kind of underpinning all the other stuff you just went through okay so i don't know if you ever spend any time thinking about the uh you know the fox and hedgehog dichotomy of like, you know, the fox knows many things. The hedgehog knows one big thing. 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 are the dark matter of why everything in the world works.

33:39And specifically gift exchange as being a critically important substructure that allows every other kind of human organization to actually function in the real world. You know, 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, like the most critically dark matter of them all. So let's spend some time talking about gift culture. So anybody, certainly I think, anybody I've ever seen who is successful in the world at getting what they want out of life, making forward progress in things, has a common attribute, which is that they're often very generous.

34:29And they're generous in a particular way, which is that you can see them using their generosity, not selfishly, not cynically, but in a genuinely constructive way to create things out of nothing. Abundance, to use a word. Yes. That is loaded. And not just create things. I shouldn't, I don't want to use the word things because that is very unsatisfying. To create structures of ordered people out of nothing. Right? It's like gifts are doing a kind of work that is creating an arrangement of people and understanding that was not there before. Right? And this is a kind of work. Right? It's like let's spend a minute and talk about like work.

35:12You know, so in the world of business broadly and in the world of markets, 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's 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 know, you can you can just there's plenty of work. And 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.

35:48But markets are amazing at describing sort of classically Newtonian sorts of work. There is another kind of work 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 moving this mass from here to there. It's the work of creating something. 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-added material. 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 on the thresholds of becoming, right?

36:34And if you think about it, we have a book in front of us called The Rites of Passage by Arnold von Gennep, all about sort of the gifts that are exchanged in moments where people become something or when a relationship becomes something. This is, I think, one of the – it's something that is so important and ingrained in our lives that we almost forget that it is even happening. This idea that you would close a business deal over a dinner. It's just so natural. Almost the norm. It's so natural that you would forget to think of it as a coordinated exchange of gifts, of breaking bread, in order to make something actually become real, which is this new business relationship.

37:16It's like, yes, you're papering it and you're signing it and you're doing everything. But the actual work involved in solving the coordination challenge of can I trust you? Are we going to do this? Is this new kind of relationship going to come into being? It's like, boy, do gift exchange really lubricate those sorts of interactions. So much. 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 is the blind spot or we're not fully seeing the water on it to an earlier point. And so there's there's no question in my mind that.

37:48Gift exchanges and gift cultures are basically the evolved tacit understanding of how do you cross thresholds successfully. 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 but everybody bought bar mitzvahs. Everybody kind of understanding that even housewarming, even housewarming is a fantastic example. Right. It's like you were crossing a threshold into living in this new place.

38:24We 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, when I talk about gift cultures, this idea of 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 has ever attended church. right because this is really we're talking very foundational 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 yeah lindy right very very lindy very christ-coded and i enjoy sort of deliberately going a little bit heavy on these one, because I am Christian.

39:20I 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, right? There are plenty, plenty of people out there in the world who it's like, 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.

39:51It's not just a bridge, it's the bridge, right? It's the way that you transcend a base case that isn't working. Yes, yes. The base case does not work, right? Normally when 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? Well, we need to be able to pass a threshold beyond cold and dark, right? And part of the way that we, again, like, You can reduce all of this down to just the ultimate cheat code in life is to just be really generous with everybody.

40:23Right. Because generosity accomplishes a couple of things. One is that so gift giving is an unbelievably effective way to communicate information. Right. 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. 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, a whole order of magnitude more. The reason why this is is because 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, the meaning of the object that you got from me is whatever you ascribe to it.

41:23On 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. 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 come up to a level to agree. With a gift, 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. Okay. So yes. So now we're on the same page here. It's like the fact that gift culture comes with a set of obligations.

41:58Again, 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 people actually get this wrong about burning man it's like burning man is not a bartering culture it's explicitly a gift culture the way you're talking about that's exactly right it's the rule the rule of gift culture is not that you have to give me a gift back exactly it's that you have to be grateful for the gift and you have to accept it and you have to accept 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 right abundance mindset yeah it's more powerful the softer it is right right right right right so remember what i said about it's like when this gift is transferred information is exchanged and this is how information grows right you talk about is like, how does ordered structure create and multiply in the world?

43:00It'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. This is really important. It costs nothing for me to say information, five, six, seven, eight, nine, 10, 10, to shout. It costs nothing to shout. 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.

43:38Information is what they hear. Yes. Right? Yes. And so, yeah, it's like if you want to look at how ordered structure perpetuates in the world, it's like you can just think of it as a system of people who are all talking and some people are listening to some other people. And the way that you get people to listen is to be generous. Right. And so 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 one of the very basic rules of startups and or tech companies or any kind of value creation at all is that like 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 demo day is very very important to do and in fact if i think if you look at 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 like internal demo day at shopify not like y-combinator i'm not even talking about y-combinator i mean that's that's a that's actually an even more evolved function of this i just mean inside a team in a company 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 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 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 a gift and performance because i would read and maybe i'm thinking too by a combinator but i would read demos to be as much performance as they are a gift i think that demo day like the yc demo day is actually not a demo day in this sense.

45:31I think it's named demo day on purpose. Right. But I think that is, I think that is a performance, right? That is so demo day. YC is a show you're selling. It's a show. Yeah. Right. Which is different from the demo day that I'm talking about, which is a gift exchange. So can you explain what makes that the, even, 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 that maybe that's cynical so so in practice i think real demo days don't really look like that it's like i've also never really 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 right it's show and tell it's i gift you something interesting and you give me something interesting but most importantly right to get to the heart of why demo day works it's like demo day is a moment when people listen because you're offering things as gifts as opposed to as project management you're opening up that information transfer kind of magic thing that you talked about exactly it's like project management meetings is like a bunch that's a bunch of people talking and nobody listens demo day is a bunch of people tuning out on zoom right right demo day is a bunch of people listening and that's the difference huh right 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 um 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 and i like that i hear that 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 energy has a little bit in in good hands energy yes and okay so this is really important because this idea of i'm going to take the care of showing you why the back of the cabinet is beautiful yes right like matters just you know again 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.

47:50Yeah. And so you've had this 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. My version of this is that the opposite of slop is gifts, right? Instead of using calling it care, I call it gifts. and i'll tell you why i think this which is that like the point of a slop is slot slot so slop is what you get when no one's listening you know it doesn't have a point it doesn't have a point because slop is talking right slop is when nothing is actually received right the goal is not the reception the goal is the production slop is peak production right right right when something is or maybe it's being produced for commercial reasons sure but it's like it's just pretty you just production make make make the output make marvel number 37 yeah exactly and 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 antithetical to slop is gifts because the definition of a gift is something that is received right how much does the specificity in mind of the audience matter.

49:06So for example, one of my favorite ideas that I thought of reading about your gift stuff, this is this classic thing in Make Something Wonderful book from Steve Jobs, where 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, maybe his audience is literally humanity, but it's this very open-ended, whereas there's another view that says like, Like the first – when you first ever texted me that idea that GIFs are the opposite of slop, I almost thought of like a letter in the sense that it has an incredibly specific audience.

49:34A letter is not slop. Right. Right. But you're – I guess maybe I'm – you don't need to necessarily specify. A GIF can be as broad or as narrow as long as it is received. Oh, 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 i mean although usually we come around it 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 this rick rubin would be is 4chan is 4chan art yeah yeah it was given to be heard right it's not slop right so yeah right there are all kinds of uncomfy directions when you're supposed to make art for yourself right at least according to the creative act which i guess would would maybe i 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 but it should be but i don't know if you're making it for yourself i think you're making it for others right you're making what you think your bar of quality right i think that's right yeah um there's something that toby at shopify has said that just resonated a thousand percent with me.

50:55It just hit me like a ton of bricks. He says, you know, when I was building Shopify, I made this online store that was like for me, right? 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 like, Toby, this looks great, but this will never work in the real world. 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? I don't really care about this real world place.

51:23I'm going to make what i'm gonna make on my island what i want and you're all welcome to my island but you have to come to my island because this is what i want to get yeah and it's like and to trust me come come omakase like come i'm gonna treat come be in my hands and you're gonna like it right but i'm gonna make what i think is right right and so you know 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 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 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 right it's simultaneously personal and for someone else yes which is which is again i think when something is for someone else it is personal right like i don't think these things are in opposition at all right it's like there is a vector to it that is the stuff of life right maybe maybe when i guess when i said personal i more meant authentic perhaps but it's it's coming out from versus to go back to the earlier point about demo days it's performance is not always really a personal or authentic 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 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.

52:51Right. Like it is. Yes. 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, oh, you need some you time. You need some time for you or whatever. When it's like, listen, I get that like there are a lot of people who are living very busy lives in service for others and could use a break. But it's like 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 like self-care is a real sort of hedonistic treadmill that you get on where ultimately I think self-care is a kind of slop.

53:29Right. In a way. Like it doesn't feel like it at the time. It feels like it is like, oh, 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 in service of others. Yes. Right? I think the way that you would just describe that in non-esoteric jargony sense is just like be generous all the time.

53:57Why do you think 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 in Silicon Valley sort of pulling this magic trick that allows us everybody to suspend selfishness or disbelief or any things. Why do you think, outside of it maybe just being necessary for creative innovation, why do you think certain industries, perhaps Silicon Valley, perhaps other creative fields, have internalized this phenomenon? In part, or maybe especially so because they don't even – they're not even fully aware of it.

54:35Okay. This is a great question. I don't think people in Silicon Valley would necessarily identify as being that generous. Right. Okay. So first of all, let's go over, for the benefit of any listeners who might not know, the market for lemons problem, right? The market for lemons problem, it's Akerlof, I think, 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? 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.

55:06But you know a lot more about the condition of the car than me, 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 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 don't - You're sort of incentivized to screw me. Well, I'm incentivized. The seller is incentivized to screw the buyer. Yeah, yeah, yeah.

55:39Right? 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. Therefore, the sellers of good quality goods will 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 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, right?

56:14A lot of times the demo doesn't work, right? A lot of times the demo is crap, right? So imagine if you are in a market scenario, if you are trying to go and find customers, if you are 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, right? For listening to you. It's like, 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? But 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, right?

56:58Because that's what it means to make art and take creative risk. 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, 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, like – I mean, I'm going to make 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.

57:31Yes. Not even necessarily the substance. Yes. What is received is the meaning of the gift. Right? Bingo. Bingo. Right. And again, it's like the it's like the meaning of a gift is the gratitude that it creates. But so in Valley and other artistic fields are still highly commercial. Yes. Which is the paradox here. OK, OK, so this is good. So there's anybody who has is interested in gift culture probably knows there is this book called The Gift by Lewis Hyde. The first 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.

58:06This 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. And so this book is like the book on gift culture. 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.

58:46Yes. 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. It has to be totally separated from commerce. It has to be totally separated. Otherwise, it is no longer gift culture. And it's like, 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 cultures. Right. And my favorite example of this is how music scenes work.

59:25Right. It's like any music scene. Right. It's like you have this thing that has to come together, which is in any scene you have 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 and say, 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 entertainment utility 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 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.

1:00:24It's sort of the very, very bottom that makes it possible, but everything on top of it is – But moreover, half of the tickets are going to be guest lists. Half of those guest lists are going to be comped 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. Right. It's like, no, no, no, no. The actual exchange of value here is way more mysterious than straightforward economic 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.

1:00:56Yeah. But this notion of 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 gift 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 all of those exchanges there of guest list to drink tickets to drinks to merch are all – it's like it is an erotic life of exchange of possibility, right, of meaning that is being traded of participation.

1:01:38Right. That is so much more significant and has so much more information being transferred than if this was a purely commercial transaction. Yep. Right. Again, if you go back to like any 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 bandwidth exchange mechanisms. Right, which might be the best way of describing to tie it back what Silicon Valley has found a way to sort of almost like productize a tremendous scale and tremendous effectiveness.

1:02:14It's 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. 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 are sort of this 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.

1:02:46There's a rush to differentiation. One part you say, the hard problem of financing innovation is the uncertainty around how many financing tranches you have until companies are graded on results as opposed to potential. Obviously, everything we were talking about at the very beginning. Can you talk about how 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. All right. So many people have observed, you know, and better articulated than me, you know, read Boom by Bern Hobart, read Build Chain Way, all kinds of people have written about how bubbles do incredibly important work in financing.

1:03:25brand new stuff right carlotta perez right um this is this is this whole idea of like infrastructure is built during bubbles which you've seen technological revolutions in something capital financial capital um you know all very important canon stuff the overall the 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 me and you are going to get together to do a deal we're going to put in 10 million dollars now even though it's not going to get us anywhere close to free cash flow how do we know that the next financing tranche will be there, right?

1:03:58What 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, 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 keep going. Yeah, let's like go, go, go, right? It's like the price of everything is going up. So you have to do the deal now, right? Like this is why bubbles kind of solve that problem for you. So this is one mechanism by which bubbles and number go up solve or at least obfuscate or mask a lot of the problems that are coordinating around these uncertain projects.

1:04:36Well, maybe they also spark generosity. Okay, so 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. Don't discount that. It's really important that in bubbles, when everybody's bags are up, everybody takes people out to dinner more and more things happen everybody buys nfts everybody's nfts everybody does oh exactly it's like 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 this is the challenge this is what silicon valley has benefited from where other quote-unquote creative fields like more traditionally entertainment has not had the benefit of this sort of surplus that drives generosity.

1:05:26At 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. Yeah. Versus now, I think there's much more scarcity, 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?

1:06:05There 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 of aspect of it's the safest possible way of buying both durable and also highly liquid and exchangeable forms of status. There are another there's another type of mindset that says what you buy when you have money to burn is champagne. 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.

1:06:42Yes. I think LVMH is selling non-alcoholic champagne. Right. Of course, as they should. Right. So, you know, it's like in bubble environments when there is all of this exuberance and there's all of this 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, you know, picking up the tab or whatever. Right. It's like, again, maybe patronage itself is sort of a version of this. The Medici's. oh okay so you're you're opening the door into this other fantastic topic which is under what situations is patronage good um this is a big topic i've been thinking about for a long time uh we can go there if you want yeah let's do it for a few minutes um okay so first of all what do i mean by patronage right so i think people when they when they hear patronage people jump to the medicis and the you know the the fugers and the like sure people people of means funding the great artists of the world.

1:07:42Yeah. But that's like a tiny sliver of patronage. There's this other much more everyday form of patronage, which is sort of synonymous with what you would call historically machine politics, which is like there are people with power. What that power allows them to do is decide who gets what job. 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 have complete and total loyalty to the person. This is like Robert Moses. Robert Moses is a great example. It's like it's every local city government 100 years ago.

1:08:20Yeah, yeah, yeah. Right? It's the way that things just used to be. And so you get a couple of things out of this, right? One is you have this supremely non-merit based 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 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.

1:08:57And I bring this up because there is this fantastic podcast that very few people know about that I want to recommend. And it's produced by this local Boston area radio station. 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. 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 patronage system explicitly run by the state treasurer in massachusetts for many years this guy named bob crane and the real kind of story behind this season was actually the story of the massachusetts state like patronage system where it was like which persisted for a long time was very related to a lot of kind of like the catholic ethos of the northeast and it produced this very interesting kind of state capacity right of 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 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 massive alignment again it's like and again 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 right like private businesses that are founder led where everybody knows who's in charge and everybody knows why they're there and who got them there and this and that.

1:10:54It'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 just styles itself as founder-led is like not so far from this concept. And so you can ask like, 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, where it's like, you 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 risk benefits analysis of weighing all of the different stakeholder scenarios.

1:11:29It's like, no, boss says 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 section about gifts. If gift framing is almost about this ecosystem level coordination, at least in the Silicon Valley context, I'd be curious to talk about the ways that trust and accountability and agency manifest in companies and in markets. 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.

1:12:10One 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 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. That's the same thing. Right. So I think in a lot of ways 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 where we're going with agents.

1:12:44Companies are really good at solving for this idea of the O-ring problem. Essentially, 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 way. You've also written about this classic, iconic Venkatesh Rao series called The Gervais Principle, which is really also about companies and how they function with these kind of multi-tiered, for people who haven't read it, the sort of very simple ideas that in The Office, created by Ricky Gervais, he outlays these three modes of companies.

1:13:27sociopaths 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 and Andy. Put another way, the company man, the guy who just does whatever the company needs. And so I know this is a little bit long-witted, but in a world where, at least that we're moving towards, where intelligence is free, software is abundant, AIs, 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.

1:14:03Are we going to live in a world where you just have lots of individual actors and entrepreneurs and you don't need large organizations and they're just coordinated by markets? Are you going to have a looser boundary of the firm? I guess the root of the question is where does organizational hierarchy and accountability actually still matter? 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.

1:14:45Yes. Yeah, that was your riff on your background. My riff on Van Katesh's piece was the this idea that is like as you rise this 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 basically I got no like actual hate mail for that one. But a lot of people being like, oh, God, you basically told all of your readers that they were the schmucks of the global economy and that they were sort of chasing arbitrary detachment from reality rather than real money or power.

1:15:29While 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 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, 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?

1:16:09He'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. Venkatesh 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. 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 Michael Scott is not in some profound ways an unflattering character. Michael is actually really important.

1:16:40Michael is actually load-bearing for the show, and the Michael Scotts of the world are load-bearing for our way of life, right? This is like, yes, it's presented in a very cartoon buffoonery sort of way. In the sense of 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 the question. This is dangerally close to product managers being like, nobody appreciates me.

1:17:14but um um anyway so let me here here's here's here's a way of explaining why the michael scotts of the world are not going to go away even when there's lots of ai right 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 in my professional life. It's called How Complex Systems Fail by this guy, Richard Cook. He is an anesthesiologist, actually, but it doesn't matter, right? It's like what he's writing about is when you have complex systems that contain within them the possibility of catastrophic failure. This is sort of the O-ring.

1:17:56This 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, right? In the case of the power grid, it's like Spain and Portugal go dark for 10 hours. Yes. Due to 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. Unfortunately, the holes in the Swiss cheese all line up. It's actually a break in 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.

1:18:29And yet catastrophic failure does not happen most of the time. Right? It doesn't happen because people construct an array of defenses in these systems that are always operating in very broken and degraded modes in real life. This is a really important thing about the sort of real life operating is that like 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.

1:19:11Sure, you call them broken. You call them whatever. It was like, no, no, no, these systems have been made to work over long, long periods of time because the temporary solutions have actually proved to be quite good and they become real solutions. 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. It's like the planes are old on purpose.

1:19:41Yes. That's a feature. Yeah, yeah, yeah, yeah. But anyway, going back to this, it's like all of these systems constantly run in sort of broken failure mode all the time, right? That's just the default state of affairs. What happens is that over time, right, there is pressure from a variety of directions to fix all the broken windows and fix all the problems, right? Because the old solution is expensive or it looks bad or for whatever reason, there's pressure to modernize. what happens then is that the introduction of getting rid of all of the existing latent forms of failure sometimes introduces new paths to unexpected catastrophe right so for example this is again not i 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 uh 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 right right 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 until the following morning um anyway so it's like the introduction of all this change creates new possibilities for catastrophe that for o-ring explosion or whatever that didn't exist before and again it's like the only way that you can 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 that are mostly successful but occasionally not successful right the paper is like 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 it's like no they're always gambles all the time it's just mostly they pay off right you were expected to maintain production all the time right 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 scotts of the world are making it work right the people who understand this latent combination of people and training and ritual and precedent that sort of forces systems to continuously create safety.

1:22:00Now, why am I talking about safety when your prompt was not actually like about safety at all? 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 is to do work that is really hard for markets to solve. This is why you need big companies full of trust and security information and accountability inside, right? 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.

1:22:32That is what firms have been genetically and Darwinianly selected for over years and years and years. Which also, by the way, makes them less strong at innovation or agency or maximizing sort of novelty or newness, but they're really good at this. 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 going on. They're not going to be the cheapest way to do something. The cheapest way - Or the most efficient straightest shot. The cheapest way to have clean bathrooms is always going to be to outsource to a janitorial service.

1:23:02Does 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. Perfect Days by Vim Vendors, a Japanese movie. 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? Because safety is ultimately required to continuously deliver something of high value.

1:23:33Yes. Right. If there's no safety, it probably is not going to be durably high value over time. Yeah. Right. Right. Now, why? So so backing into the origin of the question, which is like. To what degree are agents going to take over 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 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.

1:24:10trustlessly, the opposite of the firm, trustlessly act in the ecosystem. And so part of what I'm wondering about is 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 the way that the boundary of the firm might evolve and 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 um but it's like what's definitely happening is that individuals are now equipped to do all kinds of stuff at a you know seven out of ten quality level right right like this is this i think everybody sees what kind of work are they going to be able to do 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 right it's like you don't want to be competing in a market of whatever it's like right it's hard work right being undifferentiated one thing that has happened since i wrote that piece and now is that oh three came out and oh three was kind of the model where i was like ah humans had a good run my friend to be old former podcast guest he calls it uh it's like einstein is your butler yeah like i don't know so i don't think any 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.

1:25:39But ultimately it's like, I will still stick with exactly what I said, which is like fundamentally the purpose of a company is to solve O-ring problems. And that requires people and judgment. And people with account. 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 like accountability to agency spectrum. And it 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. But there are areas, particularly around downside mitigation, probably also lots of other parts about company work, where actually you don't want that much agency.

1:26:16You 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 keep things working. Okay. So one is like I would actually say that markets are a form of accountability, right? Because Marcus produced the kind of very stereotypical skin in the game. Skin in the game, by the way, one of those classically misunderstood concepts. 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.

1:26:49Real 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 markets will hold bad actors accountable, but they won't keep systems from breaking. Right. OK, so here's where I will totally dial in on what you just said, which is like I think if you were to describe the prototypical low agency – sorry, low accountability environment, it would paradoxically be a place full of people who feel themselves to be very high agency. Right. Right. And the sort of made up example I will use here is kind of your stereotypical parks and rec style city government.

1:27:29Everybody 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. These are all people who are who genuinely believe that they and their peers are all there for merit based reasons. 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 the the emergent behavior of a group of people like this is low accountability as far as the system why do you think that in that context are there are there commercial environments that are like that sure and take any big company right imagine that imagine your stereotypical big corporate environment full of people that all have 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 you you end up with all of these sort of deadlock conditions 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 we were talking about earlier it's like you know how there is this thing we ask all the time which is like 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 i think i Why is it that these big efforts that we try to do collectively suddenly cost like quadruple what they used to?

1:29:19Why is this? Technology should be getting better. The input costs haven't gone up. The cost of steel or concrete hasn't meaningfully appreciated that much. Why is the overall cost of the project like 4X? 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 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 going to be unaligned, right?

1:29:56So it leads you to this question, which is like, 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. 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, but at a very expensive price. Or you need to have dictatorial control, which like government projects never going to happen.

1:30:26Robert Moses. Or you need Robert Moses. But ironically, startups have that in a way that is like opt-in. Yeah, 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 Danko.

1:30:56No way. He has a whole series of this, but his profession. Beyond survival, Leon Danko. So his profession was – his calling really was sort of working with family business owners who had built their businesses. These are the first-generation business owners who are trying to figure out 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.

1:31:32And getting back to this, it's like 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. 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 effectively these like omnidirectional universal operating system like behemoths.

1:32:11This is like Amazon and Meta and Microsoft and NVIDIA. And then these super pointy, incredibly asset light. Maybe this is the classic sort of Twitter idea of the one person, 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.

1:32:49You have this other analogy that I thought was useful if that didn't totally click for listeners, which is this idea of like a rainforest. and there's the huge canopy trees and then there's the small plants that live on the forest floor. 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 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 let's think about this okay so 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 anticipated you're either building a base model or a GPD wrapper.

1:33:57Or a vibe coding. Yeah. And by the way, I think it's worth acknowledging for people listening. Like this is, I don't think it's quite the way I was framing Pointy, but like Purser and all these VS Code things are kind of that. Like it, granted they're much more capitalized, but it's these companies that are benefiting from the amazing tidal wave of all the, 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.

1:34:26Yeah. Yeah, sure. I feel like the natural home for those kinds of things is sort of like, there's a question is Anthropic or cursor more valuable. Obviously today Anthropic is more valuable, but in the terminal state, I'm not sure. Honestly, great question. Goes back to the distribution question. Yeah. Another thing with this, by the way, would be like Shopify. Like in many ways, the Shopify merchant is a perfect example of the pointy business 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. The abundant shift is going to allow small, single actors to do a lot of things.

1:34:59Well, I would say like on the 3D printing front, it's like there was this massive platform with an API that you made products out of. It was called China. RIP. 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? The way that I would describe being an actual platform, like a computing platform, an internet platform is, so okay, Mark Andreessen had a classic essay a long, long, long time ago is when he was making Ning of like three types of internet platforms.

1:35:35It was type one, type two, type three. A type one platform is like what you would call a headless something. It's just like, 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 deal with the results, you can do it. So the answer to this would be like Flickr. It's like Flickr is a photo sharing platform, right? You can kind of say. But it does actually very little. It hosts your photos. You can fetch the photos. It has good performance. That's it. A type 2 platform is something that is much more involved. This is where you would call it's a place where people go, and then third-party developers can make things that render there through plugins.

1:36:15So 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 a way that you had the Facebook platform, and you would have Farmville on it or things like that. Many kinds of e-commerce platforms historically worked like this. where what I mean by plug-in is that third-party app developers would be given some hooks and handles by which their little application could render something. And then the business logic of their app would live on their own app server, right? So it's like, I'm the app developer. I have my app that is hosted by you.

1:36:52But ultimately, you know, like the business logic and how the app works is on my server, right? This distinction is very important. Got it. a true platform is where i write my code and executes on your slamda it's it's a it's aws right it's google cloud it's microsoft it's it's ethereum is actually an interesting version of this it's like no you are actually both the host and the execution environment shopify shift you were describing yeah yeah so going from two to three yes so shop i recently did this shift from two to three right which is just getting to witness this has been an incredible pleasure right just a as a professional privilege to get to see this in action because it's very very hard to do um that's what i mean by by is there any path i know this is another version but it actually ties to something i wanted to ask about uh is there a path for startups to really become platforms anymore i mean i mean shop i did i mean um i guess yeah what i mean anymore you know yeah like it 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 what's actually i think the best answer i can give you for a startup like entity that did this recently would be like base solana solana there you go like these are examples of this right it's like you are creating both an app store and execution environment type place where people can build stuff with somewhere on the spectrum of permissionless yeah right but also had to inherently kind of go after a category that was less, less in demand, less sexy.

1:38:29Well, or, well, more, more or less depending on your, oh yeah. There, there, 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. And I mean this with great love, right? Crypto, many such cases. Yeah, no, many, many such cases, right? This is what's so amazing about all these crypto builders just with a smile on their face building these absolutely ridiculous things as a way to build these frankly astounding new platform capabilities.

1:39:06Right, right. It's like if this were taken completely seriously by everybody, this opportunity would not exist. 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 capture value on the back of scarcity. Occupy scarcity somewhere. Yeah. I mean, look, you know, I was thinking the other day. It's like, what are some things that what are some uncopyable things? If you gave Sam Altman infinite time and infinite GPUs and infinite money, and he already has infinite agency, Sam Altman. Could he copy it?

1:39:45And it's like, I'm starting to think of some examples of this. I was like, the band Fish. You could never copy Fish. Some people might be able to. John Mayer and some talented musicians might be able to. Sam Altman, not together. No, you couldn't do it. Not even John Mayer. Not even John Mayer and Palladino and whoever his crew are. I'm just imagining Sam Altman. Oh, gosh. I think you could copy The Grateful Dead, but you can't copy Fish. Oh, why? I've been to a lot of Dead shows, never been to a Phish show. Because ultimately, the Dead wrote pop songs that you chanted on, whereas Phish writes incredibly elaborate compositions whose meaning is only executable by them.

1:40:30There aren't Phish cover bands. Got it. There are a lot of Dead cover bands. There are no Phish cover bands. Got it. It just doesn't work. That'd be an example of, like, does Phish have a moat? Well, I think you're pointing, by the way, at a template for... Something. fair i i've been like not to make it out of me i thought about this pot like there are very few things i'm gonna be able to reliably do better than 04 like i we're probably already there at the earlier point with 03 and to the extent i'm gonna be able to do an interview that's interesting it's definitely not gonna be having done better research than a computer or like these and so i i think the fish thing is there's probably something in that well so yeah like maybe maybe this is like what are all the things that they do that is on you know uncopyable it's like well fundamentally it's like you have this fan base that loves you and travels all over to see you and this fan base is really diverse it's not one type of person right it's like it's grudgy hippies and it's investment bankers you have a you have a fan base that is diverse and not i would say the exact opposite of that is the lesson of like silicon valley bank and it's like if you're bank is really bad if all of your customers are in one group chat you want to avoid that kind of scenario mark and recent can text them all uh yeah you want to um so so so you can't you know like it would sort of withstand the sway of all of your customers suddenly you know like succumbing to the same kind of decision to move to a different thing but second i think more importantly it's like they have all these people who love them right and what they love is not a recording or like a captured thing right it's an experience that happens live i don't know i'm riffing at this point this is not something no i think you're by the way i think that's what the most um unique art all has that characteristic right it's like you know if you think about somebody who it's like 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?

1:42:33It's like, you know, why do people come back and listen to your episodes? It's like, I love listening to your episodes for reasons that are not entirely dissimilar as to why somebody likes a band, right? Or why somebody has brand affinity to something is because, yeah, it's over a threshold of caring, right? That is really cool, right? And there's a, I am not at the point yet where I have gone out and sought out other people that 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. The acquired guy, that's a fascinating point.

1:43:05They threw an amended chase at her. You know what? Let's talk about acquired for a second. This is a better example than fish. Acquired doesn't do anything like net new. They do a little bit of original research. Mostly, they're reading books that are already published. Why is it that 03 can't do acquired? Could 03 or 04 for do on the substance yes and on the substance yes but there's a certain kind of gift that ben and david give us with every episode right it's like there's a joy to it and there's a community of people that like to talk about 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 i mean it's hard to articulate why yeah another example of this would be david center and founders podcast there's a definition somebody gave me recently of of the best teacher is someone you want to learn with Yeah.

1:43:59That's how I feel like I could go read these books, but like, I like learning about this, these biographies with David. My last question on this topic that's related might be the same answer, might not be an answer, but broadly how you think an individual should think about building leverage or uniqueness today. Boy, I don't know. There's a 21 year old. You're 21. You're thinking about it's, it's sort of a cliche question, but 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. 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?

1:44:35I was – 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. 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 stop 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 leverage is when you know your aesthetic and you can really use it that's i guess my 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 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 20 year old 21 year old what we were doing all day was like developing our sound right it's 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 we're 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 um and again like a lot of the really great record producers i'm thinking of that famous memo by steve albini to nirvana oh you got to read this this is steve albini the great sort of sound engineer but he also sort of did a lot of production he was there's a famous memo he wrote to nirvana basically saying hey i would love to produce your next record here's how i would do it 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 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's like it belongs in three rooms classic memos wow uh but it's you know but it's in music business cool uh you'd love it i'll send it to you yeah um and it's like yeah that's the kind of work that is developing leverage right like the way that you like thinking of that's like thinking about startup ideas right it's 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 cultivating the craft of like down to some real mechanical nuts and bolts right it's like when you think about developing a sound right so much goes into like guitar tone right so much goes and again when you talk about leverage there's a great quote by um who is it i'm blanking on his name but he's a famous mastering engineer the quote is it's not about how loud you get it it's about how you get it loud um and what literally what this means is that when you produce a record what actually happens is you record all of your tracks you know maybe together maybe separately however you do it and then they all go into the mixing board and then a sound engineer will go make the mix.

1:47:47So 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 a level that is very quiet, actually. Like if you listen to a final mix, like just on headphones, like if you were to get it in Spotify or something, your initial reaction would be like, why is this so goddamn quiet? Like it's way, way, way down. 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 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 and you and so it gives it that particular kind of texture and that's right 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.

1:48:36Yeah, 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. And then there's this macro aspect of it, which is like, you can only master an album when the album's done. You can't think about it ahead of time. You have to have the product ready. And then you go do some moment of zen. You go do some Rick Rubin, right? And then you bring it up, right? You bring it loud. But that requires such an intimacy with the inputs and the detail.

1:49:11Yes. 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. No one sounds like Rage Against the Machine, right? absolutely no one and a lot of that is tom morello right it's like it's like the tone of that guitar and the singer's voice are so unique right and it's like before you even get to the content of the songs and the artistry and like the you know the 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 there it's like yeah you have a unique 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 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 if you talk to people who especially in the early couple years of all of this it's like 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 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 is called there's why there's no goth downtowns i'm mixing up two pieces have you ever seen a goth downtown yeah there's the chris fleming one but anyway in that piece you specifically talk about like creating the crunch yes the the guitar crunch and what that might look like in a in a 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 this sort of median thing, which ties back to the piece on the Gotten Town, which is essentially this idea that like Chris Fleming makes this joke about St.

1:51:32Vincent, which is just amazing. She's talking about all the freaks in New York City that get her. And he's like, no, those are hot people with like slightly vetted idiosyncrasies. Go to Albany. Go to Albany. If you want to see a freak, go to Albany. Yeah. And obviously, like I think you say you tell 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. To your point, I think it's exciting and optimistic to imagine the ways that people are tinkering.

1:52:03And as much as these things can one-shot, to your point, there's probably more people tinkering with technology tools than we've seen in a really long time. are there any either personally or that you've seen any specific 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 dolly and chat gbc may have been less sloppy than the current ones yeah because they were slightly weird weird yeah exactly they were full of problems and they were endearing well somebody somebody at that point was like we're gonna have old ai slop cord nostalgia right right you know 18 months right and then that's exactly what happened where it's like people really hark back to the 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 maybe we just go through it's gotten more immediate yeah yeah maybe on the other side is just perfect right we just go across the uncanny valley no problem but even then if it's if it's exactly predictable i don't know that this is the point that i thought it was something interesting you made about goth is like 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 part of what i was reading there was like this element of like obviously goth people are presumably self-conscious on some level but they're like less seen they're less constantly seen so they have less of like an evolutionarily fitness function around it and as a result are actually sort of more 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 well you know actually yeah i think it's worth being more even more precise which is part Part of what you were saying in the piece in the St.

1:53:58Vincent 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. And this is arguably where we're probably going to go with 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, 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 yeah i like i like this style or not yeah right because this is how you sort of get lunchroom table behavior yeah i'm not like different models we're all wearing the same shoes yeah exactly uh and sort of the this is a somewhat separate point than the fact that like 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.

1:54:56The fact that you would even be able to ask that question just shows me how brilliant you are. 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. He 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 subcultures when there's no friction. Part of that is in the goth idea of like inherently, the suburbs are farther away.

1:55:29There'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 subcultures on the internet? okay so if there's no friction great question um there's a question that i really like to use in like interview scenarios or anything like that which is like what was the first place you posted 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 uh forum yeah okay so the end 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 i posted there a lot uh but yeah the answer is always something like that right right like there's 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 and this is alive and well today right in 2025 right these places are still there it's just 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 it has to be It's definitely unpopular.

1:57:16Which 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 the bands sounded the most unique were the ones that came from the suburbs. They were from downtown Toronto. I think I don't know. I've debated music managers and stuff about this. Like if anyone if anyone created actually interesting music on the Internet today, they'll like aggregators would find it so quick. 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.

1:57:46Right. I would. Chuck Klossman's written about this a little bit. Yeah. Yeah. So, okay. Nadia, Delian's wife. Has this. Has an amazing book called Working in Public. 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. and essentially it's like before github in the old days it's like every project would use their own like version of git or their own like um like version control software or something and 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 to just onboard yourself onto the project right it was like you had to really do some proof of work in order to start trying to contribute to a project right But once you did, you stuck around a lot of time.

1:58:46So it's like you had, there was 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, tight 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, okay, everybody's going to use this. And it's going to be really, really easy to find new projects and start contributing to them. What happens? it's like well all of these poor open source project maintainers suddenly sort of became deluged with people who just following instructions or like hey can i contribute like hey can i just make a little 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 the advice that you get is like oh go find a cool project and just go like try to make a pr like go try to do stuff so these poor maintainers of these projects suddenly faced with no friction anymore for people trying to participate 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 towards something that looks like being a twitch streamer where it's like the good maintainers the good like project leaders now are increasingly aware that it's like they're doing a show they have fans such a great the fans want to interact with you you need to let some of them interact with you but not everyone right you You want it to feel like a community.

2:00:07You can't. 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. I think 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. One of the first thing I ever I ever heard you talk about credit to David Perel. I think it was an interview in 2020. You talked about the medium is the message and McLuhan and this idea of hot and cool media.

2:00:36Maybe 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 mentioned this line earlier, information isn't what we're told, it's what we understand. And obviously that's rooted in Claude Shannon, 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 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 that interview and your writing of the Nixon-Kennedy debates, and you say the content doesn't matter, and that's what people miss.

2:01:18Can 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 of the message actually means? Sure. let me actually by to do this let me explain i think a more approachable version of it which is explaining hot and cool media because that it tells you the same thing but i find it a little bit easier to into it let's let's walk through this here's your brain okay here are your eyes right and your ears and your sensory organs that are constantly taking in information about the world okay in between your brain and your brain brain are three or four neurons making relays before you get into the heart of the interesting stuff.

2:02:05And then to do any kind of computation whatsoever to actually make decisions about like, what do I think I'm doing here? You are going to deal with 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 ten relay signals for even very basic things okay now each relay takes call it between 10 and 50 milliseconds all right why don't we experience the world in lag i i think about this but why not if there's this our brains are similar 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 this is the 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 this is milliseconds right how how maybe it doesn't matter but how long like would you recognize 50 milliseconds if you're watching uh audio video lag 50 seconds 50 milliseconds yeah uh 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 from one nerve and they have to diffuse out and reach the other nerve across a very small barrier, right?

2:03:48It's small, but still, it's actually an incredibly slow process. Like, it's like releasing carrier pigeons from one to the other. So why am I saying this? So it's like, you are inevitably dealing with a slow sensory processing 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 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? Like, it 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 – you're not actually perceiving the world most of the time.

2:04:29you are perceiving a model of the world that you have bit that you've built and are constantly error checking against 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 we are this is this is where all that's come from it's like it's like your whole like when you 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 sort of like 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 right so it's like you have a very little in all the resolution it fills in all the resolution right 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 hallucinate what am i hallucinate versus what am i actually going to go get primary source material okay here's why this matters so different sensory modalities take up different amounts of bandwidth so a bandwidth that is one channel so audio only written text only um even visual only right photograph will take up less bandwidth than something that is multimodal like audio and video right or for example like if you ever if you've ever watched like old-fashioned tv 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.

2:06:16Or to give you another example of like this, if you're on Twitter, right, or in a group chat, and there's a lot of context, right, that accompany all the words and all of the jokes and all of the memes and whatever, right? These different formats require different levels of bandwidth in order for you to actually accept the primary source information. So what this - Another way you frame this is like the level of engagement, the level of participation. Yes. Okay. So here's what this – so what this means is that when you are listening to an audio-only track, right? Imagine you are in the dark wearing headphones.

2:06:54Listening to this podcast. Only listening to this podcast. 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. This is called hot media. It's like a wiretap to your brain. It's called high in engagement, low in participation. you're high in engagement because you're 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 were still you were still actually filling in a lot of the gaps right 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 right Unless you were to then drop in some unexpected word and you have to go back and error correct.

2:07:42But 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 because you have multiple channels to integrate into what's going on. Hearing, vision. Just hearing vision. 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 there's actually more total information coming at me but i'm processing less of it the same amount of information 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 you're crowded highway it's a 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 take it to the other end of the spectrum twitter or text messages even cooler than television yeah so like a real example so i'll give you another differentiation between hot and cool which is mono is hot and stereo is cool so one person speaking like a speech is going to be hotter than a dialogue between two people, which is a little cooler, right?

2:09:03When there's two people talking, like we're talking right now, 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 actually cooler than if just one person were talking at you. And more, it also just more, less intellectual. It feels more like you're part of the conversation. 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, right?

2:09:34So it feels very participatory. I'll give you an example here, which is imagine you are in a – so ultimately the choice of the medium used will matter a great deal for how much the listener to the conversation will be actually hearing it coming at them. 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 and you have to basically send a message to figure something out. You have four ways of doing it.

2:10:12You can talk to them on the phone. You can write an email. You can text them or you can leave a voice message. I want you to try to arrange those four ways of doing it based on what will escalate the situation versus what will deescalate the situation. Well, it probably depends on how important it is for me to convey how much I want them to gap fill or not. So 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. You can leave a voicemail. Oh, interesting.

2:10:52voicemail if you're in a phone call you're in this to chat it's back and forth and it's kind of 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 voice so it'd be voice phone email text that is how i would that is how i would arrange it i think you could debate as to whether phone and email could be swapped uh um 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 even you could nitpick but the point of these is that same content in theory yeah but totally different thing is received exactly on which very clearly if you leave a voicemail for anything it's escalation right if you text that's de-escalating right right and then inherently you made this point with david like the the thing about most of twitter and certainly text messages is that like you say about twitter like it's all punchline Right.

2:11:48Like 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 that would probably make it hard to parse what you were reading. OK, so here's the Nixon Kennedy debate story, because this is the very famous example of how this is taught. The Nixon Kennedy TV debates were done at a time where 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. So it's important to get that out of the way.

2:12:19What happened in the debates was they do the debate. It's a fine debate. Afterwards, people are polled as to who they thought won the debate. 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 uh versus you know it always kind of devolves to physical appearance which is funny and like that's not what this is about it's like no here's why nixon's entire personality and style and approach was i know a lot of facts and i am in control of this situation and i'm going to tell you i'm going to blast you with the facts right bam right they're gonna go right at you and you are gonna be really clear about what i'm saying because this this this right kennedy on the other hand was very like is much closer to like an obama campaign or was like hey like we're all gonna be inspired by what we want america to be right you're seeing what you want to see in what he's saying yes yes so that's exactly right it's like kennedy was a master at evoking people's best aspirations, right, for what the country should be.

2:13:35Right. 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 what Kennedy was really good at evoking was like you feeling inspired about where you thought the country was going. So as a result, let's think about this in terms of the different mediums, right? On the radio, right, all of Kennedy's, all of Nixon's bam, bam, bam, bam, bam, came through crystal clear. It's the only thing to evoke. 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.

2:14:11Right. 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, 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 tinny and wooden because his message wouldn't actually reach you, right? Because it's too high bandwidth of modal, right? So it's like he would just like talk, talk, talk, talk, talk, and it's like the grownups in Peanuts, right?

2:14:44That'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 our vibes based yeah whatever okay cool and it's not just vibes based like this is this is i think it's important to make this qualification that it's like 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 ah right he is both of those things how does that work so the thing about trump like first of all is people talk about trump as being the Twitter president, but it's like his communications through Twitter is actually interesting because it's a garish spectacle, right?

2:15:33It's like, it's not actually the medium in which he sounds good. And he doesn't write like anyone else either. No, it's like, it's, it's interesting at getting attention. He's all caps. He's all, he's all caps blasting you. And it's like, it's very unsuited for the medium. It's not super good. Whereas Trump on the radio sounds fantastic right he's really really like again yeah imagine if you're watching a trump rally and you close your eyes 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 like 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 Trump is incredibly good at communicating, you know, exactly what I mean when I'm going to say this.

2:16:25It's like, so when Trump says, make America great again, this is what would have been more of first campaign kind of thing. It's like, you would be tempted to think that like all of Trump's campaigning, make America great again, we're going to bring back the showers that actually have water in them, folks. It's like, 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 speech and how you phrase things and what you are suggesting by those things it's like no no this is not you filling it this is him insinuating and what great you know and yeah exactly it's like it's like again it's like all of the sort of the rhetoric around how you are crafting this idea of like a first of all crafting a rhetoric of otherness and crafting a like america is going going to come back we're going to do this and all that right it's like 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 right cool media is when you are actually filling in different joke cool media is like if trump were to do that on twitter and it wouldn't work right it wouldn't really work the same way that it would work at a rally oh you don't what you know what when it works it's when you're reading in his audio you're hearing his voice in your head yes 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 it is now really obvious that this past election was the podcasting evolution.

2:17:57Podcasting emerging as the dominant form of media for actually really kind of important and influential comps for various important people is really interesting because it's the resurgence of this very, very hot format. Again, if you look at podcasts, this is where I'm super interested you were saying about like about Gabby's difference with millennials or pre-millennials, right? Of like, I have to see the video feed or not. My contention is that the dominant hot media company in the world is YouTube, right? Because the important track of YouTube is the audio, right? YouTube is the radio, right?

2:18:31That is what YouTube's heritage is from. It's like YouTube fundamentally is a radio station that just happens to have video and also everything. But clearly I think that's not everybody. Yeah, 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 if you're seeing the video, it's like not that important. You're sort of discounting it. So you know who pioneered this was Fox News, right? And actually Roger Stone, I think, was originally this idea where it's like you want it to be a talking head.

2:19:09Actually, this wouldn't have been Roger Stone. This would have been a little bit later, but it was like there was a period of time where CNN and MSNBC and 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 when Fox started outperforming, like massively. So they knew, right? They absolutely knew what worked. You got at this point in that piece that made me think of Neil Postman. You say, if you remember one thing from this essay, remember this.

2:19:49Hot 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 repeated use. I recently 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 changing as we move from a text-based society to a TV-based society. You just got it out a little bit. Podcast election, I think that piece was really prescient.

2:20:20How do you think society is changing as we become more attuned to hot media? 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 way in which this is manifesting is in the decline of traditional TV as mattering. TV doesn't matter anymore. Like, it just doesn't, right, in the way that it did five, ten years ago. People talk about White Lotus on the coast, but, like, it's not Game of Thrones? So, not TV shows, right? That's different. I don't mean TV shows. Oh, I see what you mean.

2:21:01I mean like cable news, right, and things like that as the form of discourse, right, by which news would be broken. It's like – 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 – there are occasional exceptions. Like it's not like it's literally dead, but it's like for the most part, it's like there is a better – is like 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 brain candy that there was infinite demand for that used to be fulfilled by tv but it's also better for blast 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 um there's a twitter twitter is a bit of a chameleon because you're getting both at once and that's part of the dissonance to it but again it's like for long form stuff when people are like hey i want to go and do a i want to go and do a long form interview where i talk about my company or i talk about my platform or talk about my whatever it's like they go on a podcast now right or weirdly they will write a blog post right it's like there's an interesting wave of of when like you remember when the trend was like um people would write medium posts yeah or whatever i think that was kind of the beginning of it but then podcasting turned out to just be like better yeah at that thing yeah yeah yeah because there's a 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 and sort of like the the the journey back to oral culture and all of that walter ong and everything that i think it's super related yeah um one other piece of this you say um or i guess broadly if if information is uncertainty resolution which is one of i think the cloud shannon definition yep it's the definition um do we have like certainty overload do we need less certainty do we have certainty overload can you phrase the question again yeah so like information is uncertainty resolution we have crazy information we have so much information information is fundamentally abundant uh i wouldn't call it information right i would call it income you know incoming information yeah information incoming yeah um one of the 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 and as a result all of the information coming in is sort of like accepted as it is and like taken as certainty uh versus taken as like inputs to i don't know reading postman he's talking about how people would sit and watch a seven-hour Abraham Lincoln versus so-and-so debate.

2:23:39They're going through rhetoric and they're deciding for themselves. And it feels like we're all just like collecting data points from people blasting at us. Yeah. Okay. So, I mean, our attention spans and our capacity to make sense of things being nonwithstanding. 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. 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.

2:24:11You have the audio. You have the chat. You have the sounds. Yeah, I guess I'm just thinking the classic 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, TikTok is very cool media because it's like, no, it's 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 for taking over various jobs right um and and you know you can put you can put uh reels in the same category i think uh but again interesting 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 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 youtube shorts is different like just the 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 it's a total huh yeah um even though the format is literally the same right it's like you know right the last note on this that i i hinted at briefly at the beginning and we we 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.

2:25:32And your observation when you quit was that your brain was quieter, your thinking was clearer, 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 to 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.

2:26:07Yeah, I mean, okay. 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, 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. You referenced another piece, maybe in that piece about like everything getting louder.

2:26:42There's a notion of that inside of this too. Like headphones drown out the world. Right. But. 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. There is a, so I'll tell you why I have, I'm back with the vengeance back in the podcasts. And it's that. So I so I have 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.

2:27:17Right. Because that's how they get to sleep. And this often takes a very long time.

2:27:24Well, I'm not a regular listener. Although occasionally I do the, ah, shit, here we go again thing. But I will listen to a podcast while my kids are falling asleep. And it's a really nice sort of 45 minutes where it's just lying there with my kids. And it's like, yeah, I'll go listen to some macro shows or whatever. So because of that, I'm now listening to podcasts again. And sometimes I'll listen to music. But a lot of the time, it's like, no, I'm going to use the time to read other stuff. Why listen to podcasts versus reading? Presumably you read a ton, too. Oh, because I can't read in the dark.

2:27:55All right. No, that's the literal. that's a little i would i would read them too but it's like i'm literally sitting in the dark with headphones on true hot media speech will you quit podcast and just do that like you have i don't know um like morgan freeman just read you your articles ai morgan freeman or real morgan freeman uh you know i i wouldn't i wouldn't say no to that it's an appealing possibility okay um yeah i'm not i don't do audiobooks for some reason okay i've Well, it's because I really enjoy reading books and marking them up with a pen. Audiobooks are a much hotter medium. Yeah.

2:28:31Then reading text? Yes. Text is also pretty hot. I find audio to be much hotter. It can be. Yeah, I think you're probably right. Part of it's because of pace. It's like audiobooks are a treadmill. 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. 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. You recently wrote about America under Trump and a return to something like Manifest Destiny. There's an idea that I've always been fond of.

2:29:05I 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. It gets a little bit to some of the conversation we were having about myths earlier. 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.

2:29:38Quote. That's, I think, a Trump quote. It's not my quote. It should be very clear. Trump says, you're quoting Trump. Trump, if Canada wants to avoid tariffs, it should simply become the 51st state, is interpreted as more like the incarnation 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-sovereignty. So my question is, what is the myth of America that you think Trump is trying to lead towards? okay um so for the benefit of listeners um that piece was written in a very narrow window of time which was after the wheels had been set in motion around intent but before the implementation capacity of execution had been assessed by everybody but but no but that but that is to say just to put it at a very specific moment in time but that is to say here's what this is kind of getting out with this one of the sort of founding like america has always been a really interesting country right insofar as it was and i and so for benefit for a benefit of listeners jackson 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 Like, how do you possibly live in that horrible place?

2:31:09But because I still consider myself very much American. The thing about America, right, is that like the context of American founding was in opposition to and in contrast to 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 pursuit of national self-interest. And it's worth actually taking a little history detour here towards the founding of what you would kind of call modern Europe. Like medieval Europe, ancient Europe, sort of post-Romans, pre-Middle Ages, the medieval setup of Europe was something that was incredibly feudal and an incredibly diffuse sort of kings and priests legitimacy.

2:32:03where 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 whole Roman Empire where it was like 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 self-confidence out of local circumstances right and so typically it's like the king would not really the king and importantly like kings would not have their own armies, right? The nobles would raise like little local armies, and there'd be lots of horse trading going around for how people would pursue their little objectives.

2:32:40And overall, all of this was rooted in the church, right? Which is like ultimately all of this legitimacy derived from something that approximated both the Roman Catholic Church coming from Rome, but also the general sense of bottoms up, you know, priest and monastery driven local sources of legitimacy that people understood. But when all of this changed was in the 30 Years' War, which is the big clash post-Protestant Reformation of what happened when Protestants and Catholics started genuinely fighting over all these German territories. And a very critical moment happened, which is France, a big Catholic country on the edge of all of this, saw tremendous opportunity to go increase its own standing in Europe.

2:33:30and 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? The national interest is more important than 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, 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, we're inventing a new thing called the national interest and the concept of the nation state.

2:34:15And then ever since then, the concept of nationalism, of this idea where it's like 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. Nations are only judged by their successes or their failures today. Therefore, the actions of a nation are only judgeable by whether they win or lose, right? The victors write the history books. 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.

2:34:59Right. 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, while this didn't completely finish until, you know, around the end of the 19th century and World War, World War One. 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 was it's a new continent, 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.

2:35:36Right. The American exceptionalism was always defined as this idea of it being a virtue-based legitimacy system where this idea of life and liberty and the pursuit of happiness and all the other things that we were founded myth on were based on this idea of we're not simply going to pursue as a country naked self-interest. What we are going to do is we are going to base the country on universal freedoms, and that's that. And in the beginning, in the first 100 years or so, the United States was busy enough with just surviving on its own that this 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?

2:36:22And 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, 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. 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 that were initially applied to just on the continental United States.

2:37:01When 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. Right. We're just expanding what it means to be domestic. and that eventually over time, it's like what happened sort of between World War I and World War II 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 than that, but ultimately you should read Kissinger's book, Diplomacy, for all about this.

2:37:34Now to round this back to your question, which is Trump becomes president. It's like, what are the first three, four, five most shocking things he says? It's, we're gonna make Canada a state. We're gonna 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.

2:38:05We want to do that. But simultaneously, it's like we're just making this a domestic issue. 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 i'm u.s okay yeah canada canada mexico tariffs being fentanyl tariffs it's like there's no more domestically oriented issue than like americans are dying of fentanyl right is right 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 we're now we're we're now seeing the uh the the actions and or possible execution thereof but who knows a lot of game left what is the myth of america that you believe in i mean i guess i believe in that one right like i'm a i'm still i'm still i don't i 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.

2:39:12And this is like the people who are – say I hate America actually. It's like America is bad. Only ever argue about America being good or bad in terms of the originally framed argument. You're saying that idea being we have these ideals that are the best ideals and we should spread them everywhere. The argument has always ever been are those ideals right or wrong. It's never is the United States a country like any other. Uh, do you have a, yeah, yeah. Is there a myth of Canada that you believe in? Canada is an interesting country, right? And maybe more broadly, what is, yeah, you've lived here a long time.

2:39:45What does Canada mean to you? It's Canada's fascinating place. It is, it is a, it is a huge and very empty country for most of it. But the consequences of that is that the average Canadian lives in actually a very urban life. The average, 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. We're all kind of huddled in these little strips along the border. There are some interesting aspects of Canada that I really enjoy. One is that so the Canadian reputation is really founded on this idea of like America is a melting pot, but Canada is a tapestry, right?

2:40:21That'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 say that Canada isn't. Canada is interesting insofar as it has sort of uniquely 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, and so – and like recently, like this has really kind of come into some pressure. It's maybe more true about the US in the past.

2:40:57Yes. 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 in an incredible way. And Toronto especially is 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? 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, which is why does it work? And the reason why it work, I think, works importantly is because Toronto and Canada generally has very, very well-functioning civic institutions.

2:41:28some literal examples of this just to be practical is like 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 always completely full of people using them really well 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 hope and sort of um civic cohesiveness that comes from seeing everybody kind of pulling themselves and succeeding together keep them great and make them better the more people are using them too totally like it's it is a it is a virtuous cycle that is working virtuously right it's like you can go and another great example is that toronto has the um 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 right it's where you go for all kinds of sort of like people helping people figure their life out a lot 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 competent 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 so 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 there has been there has there has been some drift into some of the similar kind of availments 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 diverge right when justin trudeau was elected prime minister it's like okay like 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're 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 and immediately implementing his policies right although he was a very effective prime minister at what he wanted to do governing um but but nonetheless like all of this is to say it's like when there is another commodity super cycle canada is just going to go right back up and they'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 we're in the home stretch I've got a round of miscellaneous questions for you all right let's do it we talked a little bit about myths what are the foundational myths or mental models or underpinning 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 is things that have shaped your thinking more than any others 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 i'm going to give you a bunch of a bunch of names here and i will accompany them with their associated book titles the first one that i'm going to point out this is a book called crowds and power by elias kennedy this guy won the nobel for this book and has been completely forgotten it comes from the tradition of books that were written just after world war ii in the general tone of like how did this happen as 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 and what and overall what is the relationship between the group and the individual and the book sort of you know in fact if we if we have a minute i'm going to read you the first page of the book right okay this is It's a chilling passage.

2:45:43There 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. In the dark, the fear of an unexpected touch can mount to panic. Even clothes give insufficient security. It is easy to tear them and pierce through to the naked, smooth, defenseless flesh of the victim. All the distances which men create around themselves are dictated by this fear. We shut ourselves in houses which no one may enter, and there is only some fear of security.

2:46:15The 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. 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. 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.

2:47:00something which never leaves a man once he has once established the boundaries of his personality it is only in a crowd that man becomes free of his fear of being watched wow so that shivers a little bit yeah right because it's like okay there is something really really powerful that reverses when a group of people undergo this transition from being a bunch of individuals to being a crowd yes when you are in a crowd everything reverses right and we don't we talked about we talked about gifts earlier and this idea of like the work of transforming something into something is 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 you can call it leadership honestly it's like a way that you can think of it but it's just like under what conditions do crowds form under what conditions do crowds listen to someone and under what conditions do crowds suddenly yeah 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 um 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 everybody come on over to blue sky they're dragging someone today it's like ah get on over there right it's like there's something incredibly primal yeah um cool and so that i think about this a lot this is one of those sort of like books where it's a it's a really fun and very dense and scary read uh but it's really good a similar book in totally the same vein.

2:48:51It's Gregory Bateson. It's, oh God, what is the book called? 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. And overall, the grouping theme of them is he was one of the founders of this 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.

2:49:30And 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. and like the role of play he has this fantastic essay on why kids all seem to have the same set of rules around building towers out of blocks which is just magnificent wow right this idea of like why would it feel like cheating for you to glue the blocks together even though your goal is for the tower to not fall apart but it definitely would be cheating definitely right But cheating what? So this is this amazing collection of essays.

2:50:13That's a good one. I really like, I want to do some fiction in here. Some of my favorite books around like organizing how I think, we talked about this earlier, is there's a book called The Magic Mountain. Yes. By Thomas Mann, which is, 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, okay, wow, this is actually really good. I did an internet inter intellect salon on this recently. That was really fun. It was, it was like, it was very well registered. And then it was the day there was that zoom outage. And so only like, only like five people came and we had the best discussion.

2:50:49No, it was perfect. I would not, it was just 30 people. It's like a lecture. It was five people. We just had the best chat. It was cool. So it's like, again, a tremendously useful book for like organizing all your thoughts. And to, to, to, to give you a little bit of the idea of what it's about. But 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.

2:51:21And there are these two Italian characters named Settembrini and Nafta, who's dialectic. The meme of Leonid pointing at the screen. His dialectic is them basically discussing all of, you know, how they think Western civilization works. And the first guy, Settembrini, is he's basically reasonable. Like he's this bourgeois, progressive kind of liberal guy who is like all of his opinions are – 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 it's like he really reminds me of rfk in a lot of ways where it's like you know like he's all over the place and he's wildly crazy directions like he's arguing that the worth is that the earth is flat he's arguing like like all of his arguments are just completely insane and yet they have these grains of truth to them that you're like oh but he's right about that thing though and like it's like and those little it's 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 oh funny 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 um and basically they're like one of the many many things that they're arguing over is like did did western civilization was western civilization founded by the church or vice versa, which is more important.

2:52:46Sort of like, is the Greco-Roman classics the root of all of this and the church is just there? Or is the Greco-Roman classics just the current fad of the bourgeois? And anyway, there's lots of this. And it's tremendously helpful helping you organize your thoughts. I recommend it to anybody because it's like, NAFTA, the second guy, is actually a really good window into understanding Trumpism. Right? It's like, where is it coming from? What is the – in what capacity is there an intellectual base here that you can draw on? And I think it's honestly just like 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.

2:53:26So that would be one that I would recommend. Another really good one is that I always, always, always recommend – all of the great Russian classics I think are the greatest books at helping us understand our world. because Russia's just a little different. There's something really amazing about, it's like, 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, what's top of that list? Oh, Brothers Kromosov. It's my favorite book of all time. Wow. I've read it three times. It gets better every time.

2:54:04I want to read it once a decade. Okay. I think I'm going to read it once a decade of 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 yeah um well let's go back to the magic mountain as an example right in the magic mountain is like the fictional the device of a novel allows you to have characters that can discuss anything they want yeah yeah and as a result you can have them have arguments that are so comprehensive that would never occur like like like non-fiction has to deal with facts on the ground as they are perceived whereas in a novel you can actually express through any number of devices how you know how people are actually living in the world right and like well it also suspends people's sort of skepticism it's sort of like sci-fi does a similar thing where it's like allows you to see the see reality as it is but like through it like it's aversive 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 again it's like the great novels i think have a kind of power in the canon of it's not like the fact that they are true or not or whether they happened right it's that they organize people around a pattern of thought that has durable usefulness wow yeah that's a cool frame yeah what did you miss about writing you took a long break how did your thinking change without kind of that rhythm or that kind of consistent feedback oh that's a great question i mean it's not like i stopped writing It's just I'm writing internally.

2:55:40Yeah. Hey, like, basically what happened was, you know, a couple of 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 longer. No. Well, 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. When I was I was I was ripping a big long post every week. which was great fun. 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.

2:56:18Yeah. But not all the time. I wrote 30 ,000 words in a month last year, and I've not written that much anywhere close to that much since, and it's definitely a certain mental state. That's a lot. Yeah. It's like runners talking about their mileage. Oh, 60 miles last week. And yeah, and so basically what happened was I was on parental leave recently, and um i asked toby very graciously it was like yeah you can go right for a while so thanks boss but now now i'm now i'm back at shop five so what did you learn about business and life from being in a band oh everything i learned everything i learned what you learned from being in a band 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 you have to get on stage and do a show people came to see you you have to perform you have to 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 to give them a gift exactly two you learn you you learn all about working a crowd this is very similar back to crowds and power it's like all shows are different but also all shows are the same right what a show is is a bunch of people get together and they are still individuals right and then the performer gets on stage and says are you ready 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 right i am challenging you to dance can you do it 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 when the band plays 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 where a whole bunch of people undergo this energy phase transition into a single crowd where they're at a heightened state of fandom and energy and intent than they were before and then as soon as you end that show your job as a businessman is to get that energy into the merch table 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 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 eight dollars to screen print that's what you are doing um 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 as great ongoing sort of fascination with oran hoffman if you know oran yeah vaguely 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 it's scammers have to understand how a system works you've recommended the annie delvey book as a reference yeah like scammers there's a great book called lying for money right there that is sort of a very um a very intelligent walkthrough of like all the different kinds of financial scams um scammers have to understand what actually matters in the system to work right they're kind of the ultimate social explosion you remember the you remember in i forget which book it was which nasim taleb book but he's talking about the um green wood traders uh there's a market for something called green lumber um and there's this one guy who's just very skilled at it he rose to the top of the the trading market for making markets for green lumber and it's 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 it's similarly it's like there's this great story in the book the prize which is like the the great book about the oil industry okay about this one guy who was 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 yeah um so similarly against scammers is like wow scammers have to understand the part of the system that actually matters yeah right and it's like the way and most people in the system probably don't understand that um many people don't know many yeah many people don't understand it and it's like the other reason why scammers are so interesting is that 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.

3:01:10This is really important. This is really important, right? Because, and again, a lot of like a classic, 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, right? 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, right? Or something, right? It's like, there needs to be a reason why the victim wants to be scammed.

3:01:42And if you can understand that, then you really have a good sense of the law. Yeah, it's high dimensional. Yeah, exactly. So, and I like, in the Silicon Valley thing, it's like, this is really interesting, which is like, why aren't there more scams in tech? I always wonder this. Especially with all the gift giving going on. It's just like all this, like 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. That makes sense. Because. For a bunch of reasons, but also. Yeah, it's interesting.

3:02:16I'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. Right. Knock on wood. um i mean maybe in a sense it's like this does exist it's just called 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 the is in the water no crying in the casino um my second last question you're a dad of three girls how has being a dad changed you oh i in in in every way right it's like i feel like you know 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 when you become a parent, that's when you start playing for stakes.

3:03:17Right. Until that point, it's like you're living life, but it's the warmups. 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 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. Right. This is, you know, the there's a variant of this like a question i ask people sometimes it's like is it based or cucked to try and cheat death um then it's you know and i think 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 yeah right like always has been um and like i asked i think 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 you can't be half present with a kid 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 kind of be on your phone you can be thinking about something else whatever kids will demand 100 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 and as painful as it is early on you know the cool thing about muscles are is that once you have them built up and you're strengthened right it's like then you're more present all the time you're a lot happier you're a lot just more it seems like in the world more kids are like an emergency solve hatch on that on two really important things one being attention and the other being just like getting out from under yourself oh yeah about anything other than you 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 no but then you have kids right and then it solves all of those problems right it's like new problems new problems yeah exactly uh it's like that mark andresen pin tweet that he had where it's like you're gonna be upset about all kinds of new and interesting things yeah yeah yeah yeah um no it's the greatest gift it's a great answer it's the greatest um speaking of great gifts my final question we talked we started talking about gifts what is the best gift you ever received and what gift or gifts do you hope to give fantastic closing question 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 all of the amazing just being given a sense of gratitude by your parents is itself the meta gift totally right so I feel very fortunate for that yeah like all of that has to be all of that has to be in there I'll give you 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 you know 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 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 just right back to going and being a part of your life like you like you never left it's 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 oh like you hope to give i'm gonna i'm actually gonna give you a slightly cop-out answer here rather than just being like i hope to give my kids the same thing is like i'll give you a much more actionable like gift which is like throw more dinner parties 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 um like nicole uh there's a bunch people who talk about this but it's like people are often flabbergasted to hear that like we usually host people for dinner minimum two times a week so great um wow that's awesome right and it's like it's a muscle get good at it like you could you get lots of friends and you get them into the habit of coming over and like you have a meal and like you 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 yeah 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 absolute one-way ticket to like being in a great neighborhood and having a great life oh man i love that answer 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 if you are ever in the position where you're like i want to invite those people over for dinner but it'd be kind of awkward if i did it because we've been friends for a while i don't know how to do it 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 you live in toronto not quite as much in a new york city apartment but here's the thing it you don't have to literally barbecue yeah it doesn't matter what you do you just if you say the word barbecue you can just be like we're probably cooking in the kitchen but like it's a barbecue you literally just have to say the word barbecue you've made it casual in a way that i think is why you're able to do it so you've created permission to say yes i don't know why it works but it does i was with some friends recently and we were asking like what would you make what would like if you had a national holiday like what would the thing people would do on your national holiday and i said everybody would have dinner parties so yeah i um i'm inspired by that answer doesn't have to be a holiday do it every day alex this was a gift thank you my friend this was really wonderful oh jackson thank you so much for coming out here i'm so glad that this is your first toronto experience it was my basement it was wonderful yeah i got a day i got a day down here this is the longest interviews thus far i probably I have some cuttings to do.

3:09:20But 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.