Why ChatGPT will be the next big growth channel (and how to capitalize on it) | Brian Balfour (Reforge)

25:49And now you've seen them really pull back on that organic distribution. So this happens in big forms and it happens even in smaller use cases as well. But once again, the steps of the cycle are exactly the same. And the key part about this too is it, the broad trend is that the cycles seem to be getting shorter and shorter and shorter and shorter. So you actually have a smaller amount of time to play the game. Okay, and the big aha here is, yes, this will end maybe not great for you, but there's this magical period when they're open to customers and users where you can grow like crazy because they want everyone to come and they give you a distribution.

26:28And what you're saying essentially is Chatchee PT potentially some other platform maybe is about to enter this mode. Yeah, well let me first before we get to Chatchee PT, I think the natural reaction when you first realize this is screw them, I'm not playing that game. Right, that's what I feel like most people like how they react, right, because the unfortunate truth is that a lot of companies don't predict that last stage and end up in a really hard hard position, right? So many companies got completely killed during the crash of the Facebook social platform. Apple's 30 % tax, you know, basically destroyed a bunch of types of applications and business models because it just, you couldn't, it just wasn't like margin effective.

27:21Like so many companies built on SEO loops that are in serious, serious trouble right now if that's their only channel. So all of these things, right? And so I think the natural reaction is, yeah, like, why would I play this game if I'm a startup or a company? And you can even see this with like ChatGPT as an example, right? They just launched these like deeper research connectors. One of them was my former company HubSpot. And you know, if you sat inside HubSpot and you were just thinking in isolation, you would be like, well, why would I want to make all of my data accessible through chat GPT and have like all of the usage start to accrue there?

28:03Right? Like it doesn't really make sense in isolation, but we don't operate in isolation. Once again, we operate in the competitive environment. And what's going to happen is that if you don't do it, your competitors are going to certainly go to the new platform and your customer expectations change and you have to rise to those customers expectations. Like they're going to start expecting you to be in these new experiences and all these things. And so it ends up being a prisoner's dilemma, right? Which is like, there is no opting out of the game. You have to play the game. And so it's better to be early than to be super late to this game, especially, especially if you are a startup, right?

28:44that kind of like the key opportunity. And so we'll talk a little bit more about how to play the game more, but it's better to be early as well as than the key, the harder part about it is anticipating that last stage of the cycle and figuring out how to sequence away from something before that last cycle comes. So I think that's the key part. But let me pause there and then I'll talk a little bit about chat GPT and some of my reasoning behind that. Cool. So what you're saying is not only is there going to be this big opportunity to grow. If you don't take advantage of it, somebody in your space will.

29:20So it's not only there's an opportunity, but this is something you need to do because you might miss the boat. And I think about companies like Zingha that grew on Facebook and then became massive companies. And you know, if they didn't do that, they would have missed the boat. Someone else would have eaten that lunch. I don't know. I'm thinking about the technology, She bros podcast on Twitter right now, TPPN, where they basically figured out on Twitter, you can create this live stream and you see it all day in your Twitter feed, just like, hey, they're broadcasting, and it's a really cool distribution channel.

29:50So I think there's a big call to arms here, almost, of just the opportunities emerging, and you basically need to pay attention, you can't opt out. That's right. That's right. Exactly. Let's talk chat to PT. So look, let's go through this cycle. So right now we're in that competitive environment. Like we said, all those players we talked about, ChatsyPT, Claude, Gemini, all these folks, they are battling it out. And we've seen this with the talent awards especially over the past month or so. And so there's no clear winner yet, but there's consensus around the category. The second thing is then, okay, what's the mode?

30:27Has the mode been identified? And who seems to have identified it the first or as further as alone? I think there's, you know, my hypothesis, and I think there's a lot more consensus around this now than there might have even been three months ago, is that the mode is really about context and memory. You know, these models, you know, by themselves, if you compare them side by side, you know, they kind of generate the same result. And so that the actual difference maker is which one has more of your context in, and because it's the context plus the model that produces the best output. it. And then that kind of starts to accrue to this loop around memory.

31:04The more you use it, the more able to store memory around you, which kind of feeds more personalized context, which produces better outputs, right? It ends up being another one of those fly wheels, another one of those another one of those loops. And so if you look at who's are this on this, it definitely is um, Chatchy PT, right? Like they work kind of the first ones to memory. They've been investing a lot in and these different types of data connectors, essentially context connectors, gathering all of this context. And so you can really start to see it in the usage. But the second thing is, in one of the pushbacks I've gotten on my prediction has been, well, what about like Google and Gemini?

31:43Like they have so much distribution through Chrome and like all of this other stuff, right? But it was Dede Doss who's DC at Menlo Ventures. actually published some good data on retention of all of these different ones. And I think the second reason I predict chat GPT is like if you look at history once again, it was never the person who had the biggest distribution at the moment of time. It was the one that had the best retention and engagement. Google had the best retention engagement over the others. Facebook had, it was smaller but had way better retention and engagement over the others, right?

32:20So So the data that Dede published clearly showed that both the retention curves, which I know you and I have both written about at exhaustion, level off at significant portions higher than all the other platforms, as well as those retention curves have been shifting up dramatically over time. You can start to see the effects of memory. And they have the very elusive smile curve, right? the ones that you just like, and the only other times, I've seen, you know, all of those dynamics very few times in my career and they tend to be the folks like slack and in like all of the big winners. It's just like so elusive.

33:04And the smile curve just to just of people haven't done what that is, essentially, pretension goes up over time, it goes down a little bit and then you come back to it and you use it more. Yeah, that's right. And that's usually the result of some type of network a factor or something else. And it's an early indicator that that platform is on a trajectory to escape velocity. The third piece is that, and they haven't really hidden these, but there's all sorts of signals that they're about to launch a third -party platform. They've been hiring for a bunch of roles. I've seen multiple postings on like product manager, engineering roles, all the kind of stuff for, you know, quote -unquote, agent platform, and and all those pieces.

33:46And so it feels pretty inevitable that one of these players will need to launch a third party platform in order to serve all the possible use cases on these tools. There's gonna be some value exchange, which is like, hey, for your agent to be effective, you probably need access to context and memory and distribution, right? So that there'll be some values that integrate to us and we'll give you those three things, right? which is going to drive more users and more usage and we're going to go through the steps of the cycle. You can already see this, they're starting to form preferred partnerships with some of the bigger players which paves the way for smaller third -party players it kind of gives lens credibility to the platform.

34:33It's like, well, if HubSpot and XYZ are doing it, then I should probably do it too. It's like that type of mentality. But that's why I think out of all of these platforms, Chatchy PT has the best shot right now. And then a bunch of folks are always like, well, what about Cloud? I really like Cloud. I use Cloud. Well, the problem with that is like, I think Chatchy PT at this point has at least a 10X difference on MAU. So if you're a developer, right, and you're comparing those two platforms, and you're looking at, you're like, well, Chatchy PT has 10X, a number of users and better retention engagement.

35:13It's like, what's the logical choice of which one you're going to prioritize your scarce resources on, right? And so those are just some of the reasons that my prediction is on ChatGPT. And in the blog post that I wrote about this, I actually then played my own devil's advocate and said, okay, here are some reasons why it might not be ChatGPT. But I think we're in that part of the cycle. that's my prediction. I might be wrong in the prediction chat, but I really think I feel very confident we're gonna see the cycle play out again. Two follow -up questions here. One is, what's your, well, it would be the backup, if it's not chat, JAPT, it sounds like it might be Gemini, Google.

35:51My hypothesis of who's best positioned, but is not executing on it right now, would actually be Apple. Because through the devices, they basically can see everything. So they have the ultimate view into your context, right? And they're sitting at that level. But I don't know what they're doing. That's why, from an execution standpoint, maybe they're going to surprise us with something crazy magical. But we haven't seen any external signals around this. So that's probably just based on what real estate and where people live in the stock would own. And then I think right behind that I would probably put, I would probably put Google because of owning the context of things like email and the distribution points of search and Chrome and Android and in those types of pieces.

36:50But in a lot of people point to them, but my experience with all of their products is like going back to their retention engagement thing is is that if we could take a look inside their metrics, I think what we would see is a bunch of flyby users in their mouths, like they're kind of sprinkling the Gemini bucket everywhere. And I've literally clicked on it accidentally multiple times. And so my guess is a huge portion of their mouths is exactly that of what's happening right now. And so, you know, look, they just acquired a very talented team from Windsor. Just the team, just the team part of the team.

37:31Yeah, we'll see. And things are changing dramatically on a week -to -week basis. So we'll see if they're able to press those advantages in a very clear way. But I think the window is very small for them. If ChatcheePT plays their cards right, because they clearly have the escape velocity right now. And if they just keep pressing that advantage in the right way, I think it's going to be hard for Google to counter in the amount of time that's left. On the cloud piece, I'll just throw this nugget out. I had my Krieger on the podcast, had a product, CPO, and Anthropic and asked them just, you're losing to JetGPT.

38:10What do you, how do you approach the future of cloud? And he very specifically said, yes, they've caught lightning in a bottle. This is just going to win based on what I've seen on Instagram. And so we are specifically focusing on what isn't through off -picking cloud incredibly good at, which is developer tools, coding, back -end stuff. So they're actually leaning more and more into that. And if you've seen that revenue recently, they're making, I don't know, like, approaching 10 billion a year or some crazy amount of money. So they're actually doing super well just in a different use case. Yeah, I'm glad you mentioned this because this brings up something that we skipped, which is there are smaller platforms that have existed, and will also emerge in this environment as well.

38:50And that's kind of like what you're alluding to is it tends to happen is like things end up you know growing into more niches like even if you look at social right like LinkedIn emerged as a subset of the social world but even on these smaller platforms these new distribution channels they go through the same cycle. I'll give something you know really a very opposite example of the ones that I gave. Look at the platform you to me. They are a platform for course creators. I don't know if most people know this, but when they started, their revshare to creators was something like 80 % to creators.

39:32They started very high. That brought on all the course creators, got their whole marketplace going, so on and so forth. I believe it was about a year ago, they announced that they're essentially pushing that revshare down to something somewhere between 15 and 20%. There's somewhere at 25 and 30%. Right, so another example of they close down organic distribution in order to monetize all that kind of stuff. And the same thing will happen in this AI world. I believe cursor is very clear, like cursor is on the path to also probably create some type of agent platform for developers. So that'll be like a smaller ecosystem to play in for some products.

40:12There's all sorts of, it feels like everybody has the same strategy at this point is everybody wants to launch an agent platform. I imagine some of these other horizontal productivity tools will do the same thing, maybe like a notion or an air table or like a Monday .com or something like that. So there are, there will be smaller platforms that will emerge and they will follow the exact same cycle that I am, that I'm also discussing. But yeah, in terms of like the biggest kind of consumer one that that's where I think chat GPT has probably the most escape velocity and yeah, others will focus on different areas.

40:54And just to be clear, I love cloud. I actually use both cloud and chat GPT all for different things. I have lots of love to go around for all these tools. My prediction has no bearing on which product I like the most right now. I'll still love Clot. So I think with the key point here you're making is that there's almost a number of distribution channels emerging. Many of them will be niche. So I think of LinkedIn. If I want to, like LinkedIn for me is a very targeted audience for folks that listen to this podcast. So yeah, even though it's not, I don't know, Google or Facebook or whatever, it's still incredibly valuable for this specific thing that I do.

41:30For sure. So I think this is even more interesting that there's going to be a number of distribution channels that Emerge out of this whole AI wave. The other thing I'll note real quick, you mentioned this idea of everyone's building agents. I just had Brett Taylor on the podcast who's building Sierra. And we actually, he made me realize why everyone's building agents partly. One is because the out came base pricing that you can charge with agents is incredible because one, you can actually attribute their impact on your businesses are why you can actually see this is saving an agent, it's $15 because it's all the case.

42:04And it's attributable and it's autonomous. It's just doing it on its own. So with that, you can charge per outcome, you can say, we'll charge you a dollar every time it solves an issue. So the monetization opportunity is huge and margins go up like crazy. Do you, can I just ask a question about that? Do you think that has longevity in the sense that that makes sense in the current environment that we're sitting in right now because people are kind of comparing these outcomes relative to what it costs them today with peer humans. But once again, competition comes in at some point. And so that feels like that creates a pretty ripe opportunity to, you know, undercut and come into it.

42:47And then you have like whole all like the disruption theory kind of playing out as well. And so it obviously depends on like the infrastructure costs and compute costs to run these things. But I just wonder how much of that is temporary versus versus something that'll be long term. So you're saying that dollar will come down to like 50 cents 25 cents or you're saying Someone's gonna come with a whole new business model and disrupt that whole approach. More the first. Yeah, like it's just competition erodes that away essentially. Yeah. Yeah. Yeah. That's a good point So margins will be higher for a while and then they'll come down Yeah, unless there's something else that that creates a durable pricing power.

43:31I wonder if that's probably the second piece of this. Yeah, that's probably the second piece of that hypothesis. I feel like. Yeah, I think, I guess the opportunity there to the mode would be the data similar to how cursors collecting more feedback on what is people want in their code suggestions, maybe in theory, CERF and has more and more data over time. And there's this network effect. Yeah, that's where we're getting the data. So let me revise that. Yeah, it's like I believe in that as long as it's paired with some modes, the second piece, otherwise it can compete it away. Yeah. Good to engine.

44:04Okay. One more question. What's the, what is your prediction on timeline for when things, when the opportunity appears? And what do you predict? As of the day we're recording, what do you predict? We'll be the next couple things that open that chat GPT and let's just focus on that releases to start to open up this platform to get everyone in there. Yeah, well, look, I'll first give the disclaimer that I feel like any thoughts on timing in the AI marches are very, very hard to predict. It's always shorter. That's where we should buy us. It's always shorter than you think of when something's going to happen.

44:45That's what it's felt like from the seat that I've been sitting in. And but my guess is this, we're going to see the next major steps of this play out over the next six months. And so I think we just saw one of the pieces drop around this, which was, which was chat GPTs recently launched Agent Mode. And so it's kind of a general purpose agent, you know, and I think that starts to introduce all of the users to, to using agents and they're kind of figuring out and placing it in the different tiers and business models, all of those pieces. But it's likely that no general purpose agent is going to fulfill all of the infinite use cases successfully.

45:28And there's two reasons for this, right? Users struggle with horizontal tools. They can do everything and that's exactly why they struggle to adopt and so they typically need more specific entry points. But also the more specific use case you get, that sometimes you need specific UI, specific data, like other specific ingredients, to properly fulfill that use case for a given audience. And so I think their Asia mode was a step in this direction. What I would expect to see play out next is that they will either launch, they will announce the platform or what they're gonna announce with preferred partners or what they're gonna announce versus is basically a set of preferred partners, the beginning pigs.

46:12You know, an initial 10 to 20 folks that are like bringing agents to their platform. And what that does is essentially, once again, it's a credibility card, right? You do special deals with some like right brand names to give the platform credibility and it kind of creates desire from everybody else to come on, you know, to the platform. And then the step after that is starting to open up the platform. And this is where the real, you know, where we'll really start to figure out what this game is going to look like because they basically have to define what the value exchange is. What are they giving you access to, right?

46:53And like, what are they incentivizing you with to come onto the platform? So that's one version of it. The other version of it is just like the replacement to search. There will probably be, you can also see them starting to make more moves here, which is like deeper attribution in some of the results, like those types of pieces. They're bringing in shopping, right? That's one of their recent announcements as well, kind of native into the UI. Essentially, they will form new monetization mechanisms around that stuff as well. And that's actually going to be very important because for them to going back to the about memory and context is that they will want to incentivize as many people to their free tier as possible.

47:39But given the cost of AI, they have to cover it somehow. So they're going to need some monetization mechanism. So the more that they can cover that free usage with things that aren't subscriptions, I think that probably also kind of feeds them out. So I think there's some of the next steps on two different vectors. More of a third party developer a per platform in more of the content, whatever you want to call it, A -O -G -E -O, I don't know what acronym is. Every we've all decided on yet, so let me know if we have. I think those will be the next steps that we'll see. Now that's what I think for GetsheapT, I think the thing that we should talk about is essentially what I would advise folks, especially startups, is you're placing bets.

48:24at this part of the cycle you're placing, but we don't, the winner is 100 % guaranteed, as I mentioned. And so you essentially, at some point, we'll need to make some decisions about, you know, where to place your bets. In the Facebook days, all those other social networks, they also came out, you know, with their own platforms, right? And iOS had Android and some failed initiatives from Windows, only remember what that platform was called, right? like, and you can look back and whoever placed through, you know, the iPhone was actually very in iOS as a good one, which is if you had only aligned your bets to Android, you probably lost.

49:04If you somehow found a way to play on both ecosystems, you could be a winner. But if you only aligned to iOS, you could also be a winner, right? So like, that's just right. Like you, you had to have iOS as part of your betting strategy in order to win. So everybody Everybody right now, you're probably at the cycle in trying to figure out, well, everybody will need to figure out where are they going to place their chips, how are they going to bet? And depending on how you bet, really depends on what your current position is in the marketplace. If your late stage started, let's start with that, or a late stage company, you can afford the luxury to place multiple bets and kind of spread your chips and kind of weigh it out a little bit to see who the winner is and then really throw your muscle behind that winner.

49:56You have that luxury a little bit. But the risk of that is that sometimes the income is way too long to make that decision and that's the key question they will need to answer. The key question for startups is totally different. You don't have the luxury to spread your chips. You have to go all in. You have to choose one and go all in. You have scarce resources, scarce attention from the market. And so it's a totally different bulging, higher risk, higher reward for sure. And that's part of the bettering strategy for startups. And so that's kind of what you have to do, is you have to have to figure out your betting strategy.

50:36And then we can talk a little bit about how you might evaluate and pick the right course for you. But that's where we're all at right now, is where we're kind of, where we just entered the casino, we just put some cash in for some chips and now we've got to figure out what tables and where to place those chips. I love this analogy. Okay, so just to be crystal clear about what listeners should do, what founders should do with product teams should do, the advice here essentially is integrate with, and chat GPT, maybe Gemini, maybe if Apple has something, is actually integrate with what they launch.

51:14So it could be a login thing, could be a search thing, could be a connect and suck up your memory and context. The advice here is, is you need to do this because this is potentially the way that most companies will start to grow and your competitors may overtake you. Yeah. If we had to like really simplify it, it's essentially play the game. Don't opt out of the game. Don't trick yourself into thinking that you can't play the game. That's number one. And then number two, no matter who you bet on, just make it a focus bet. Because if you look back, all the failures are the ones that tried to play multiple games at once with scarce resources, and that just tends to never work if you're in early stage startup.

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53:10That's miro .com slash Lenny. So you were head of growth at HubSpot for a long time. So any of you gave that as an example of HubSpot. Why would they integrate? Why would they give away all their data so that you can suck it up and you never have to go to HubSpot. You're just working through their agent. Would you at HubSpot be like, yes, we got to do this. This is the game we got to play. Yeah, 100 % and that's exactly what I think you see them doing. And I look to be very clear. I have not talked to anybody, HubSpot about this. I have not talked to Darmesh about this, but Darmesh, I think, has also published, publicly published about this, but that the right thing to do is essentially, even though you don't, you understand how the cycle plays out, and you don't necessarily under what you understand, what your exit strategy is, once you get out, It's better to be early, know that you need to figure out an exit strategy and figure out that exit strategy along the way versus waiting and then being super late and then know what the exit strategy is.

54:15And I think that's essentially what you see them doing. They're trying to be as early to this stuff as possible. And I think it's a pretty smart play, even though we might not necessarily see what but what the exit strategy is out of the cycle for them. So going back to that amazing quote that you shared at the beginning of the conversation by I think it was Alex Ram Paul, of that startups win by finding a distribution channel before they can come and copies them. And what you're saying here is this is the opportunity for startups to disrupt an incumbent. This is the opportunity for someone to disrupt Salesforce.

54:55I don't know, service now, all these guys that have been around for a long time. Yeah, it's going to be one of the major ones. Now look, you've already seen players that have been able to hit this escape velocity, you know, the cursors and stuff of the world. And so once again, there's multiple ways to hit that escape velocity, but this is going to be one of the major ways to do it, is to basically hit yourself to a new platform. Look, you did it yourself actually. You hitched yourself to substax. Super early. You took a focus then. Yeah, yeah, I was like, I don't know why that just hit me, but you took a focused bet and you benefited from it in a disproportional way, then those that kind of came later.

55:39And I think that's actually a great meta example here, as I sit here and think about this. Yeah, that's actually the way I thought about when I was moving to Substack, just like I feel like there's those wave rising and I want to ride this wave, even if it may be it's not the best place or me, you know, they take a cut, all that stuff. Yeah, but it worked out really well. That's right. And I think it worked out very well. It worked out really well And to be honest, it felt like it was too late the when I started when you're sure it felt too late Yes, oh, same look. It's a it always feels too late I think to people that join like Silicon or sorry Mark Andreessen as his famous code He's like I came to Silicon Valley in the 80s.

56:15I thought it was over as too late I missed all the opportunities that's fair Yeah, so yeah, there were just a lot of newsletters. They're doing really well. Millions subscribers. I'm like now and what do you say to people now who want to join some stack? Learned from this example a lot of times when people think that it's too late It's it's definitely not too late and so he's only just getting started Especially if you're like on Twitter all day listening to podcasts like this where we're surrounded with this bubble of everyone talking about something When in reality like one percent of people know anything about what you're hearing about every day.

56:45Yeah Yeah, it's so interesting. Okay Okay, so coming back to the advice, say someone is sitting there and talking to their manager, like Brian just shared all this mind blowing advice. We got to pick our battles, we got to pick our platform. What would your advice be for them to decide where to place their bets? Yeah, so I think this is a great question because once again, put my personal prediction aside for a second and I would encourage everybody to think about it from first principles from who their audience is, what their product is, what stage of company they're at, all those current strengths and weaknesses.

57:22You've got to take all this into account. But if I had to boil it down to a few criteria, the main things I would think about is when you're looking at new distribution channels and new platforms to choose on one kind of going back to what we said before, is the better signal is retention and depth of engagement of the users on this platform, then it is like pure kind of user level like mower, some other like number of signups, so you know, one of those vanity metrics. So look at that number one. Number two is there's some element of like user quality and an ability to monetize the users on this platform.

57:59I think the starkest example here would be, you know, iOS and Android. It's like even though even today it's something like Android has 70 some percent of devices, but only 30 percent of the market share by dollars, and that's the exact flip for iOS. So it kind of goes back to what we were talking about earlier, which was if you bet on Android only, you probably lost. But if you bet on iOS only, even though smaller user base, you could, you, you were still able to parlay that into a win later. There, on the third thing to look at is as these platforms emerge, just analyze what the value exchanges.

58:38Right? So, what are they giving you to incentivize you to develop on their platform? And like all these platforms are a bit of a game of whoever understands the rules and how to arbitrage the rules, the best, right, tend to be the ones with the edge and figure that out. And then finally forth on my criteria would be pure scale. Right? Obviously, even if you have those other three, but there's, you know, 200x difference in scale and momentum, then like obviously you probably have to choose the bigger platform. But last but not least is as you go through these criteria, this is, these are how you think through entering the game, game.

59:27And once you enter the game, then you immediately need to move to starting to think about how do you exit the game. Knowing once again that that last step is going to come at some point in the future that there's going to be some closure for monetization, then that's where you have to start thinking through your strategy to exit. And that comes down to things like, okay, well, how are you going to own an important part of the user your experience or workflow or how are you going to accumulate specialized data in context that the major platforms don't have or how do you create different types of micro network effects, like all of these types of things.

1:00:08So just once again, there is the entrance criteria, but once you figure that out and you feel like you're in the game, you immediately need to move towards what's my exit plan and he are knowing this is all coming. It's interesting that another way to think about this model, you've described as building the strategy of building on top of LLMs and becoming a GPT wrapper. Because essentially, this tech allows you to say create a cursor that is incredible. And then you could argue, oh, you're just gonna be this wrapper and why wouldn't anyone, like they're getting all the money here, everyone can copy you, like what's your defensibility long -term.

1:00:49And the answer is what is the mode you will build over time, sitting on top of this thing that will make you more and more valuable on term and not have to rely on this thing. So it feels like you could use the same framework for building a GPT wrapper business to use that rhythmism. So say someone is sitting there today. Is there anything they can do to start making a bet? Is it simply creating an MCP that allows LLMs to suck in your data? Is that the one able to start using these platforms, or is it just a little too early and they haven't released the good stuff yet? It might be just like a tad too early, like we're like right on that edge, but some of the questions I'm asking myself is, I'm kind of going through all of these players and where are customers and target audience live and I'm asking myself the question, okay, if this player launched some type of platform, or how would we evaluate it, you know, so on and so forth.

1:01:50It's hard to, you can also try to cozy up to these folks. I would place a large portion of my net worth right now that if we could sit in the open AI offices like at that front desk, that they are having meetings with potential preferred developers like talking about that. We could probably sit there and log it. So I do think some people are going to be in a place to develop preferred relationships and and making a and if you're here in that spot, then you you should definitely play that card. A lot of a release in charts won't be in that card place. Other than that, I would say well, we still need like one single off these platforms.

1:02:34It's like you can't do much else until you really kind of know what the value exchanges and what they're going to expose for you. but also just be prepared to turn your strategy on a dime and go all in. I think that's probably one of the hardest parts of this is that these things emerge and you have to capitalize extremely quickly and a lot of times it's hard for leaders to do that because they don't want to create a feeling of whiplash into the unknown. We've got all these projects in play. You know all the things. So I think that's probably the last part of what we can be doing right now versus just, you know, kind of staying on top of everything as it emerges.

1:03:14As you were talking, this reminded me, I recently noticed that ChatGPT is driving me to my newsletter more traffic than Twitter. And I feel like that recently shifted. I didn't even know this was a thing until I just started looking through my referrals. I'm like, ChatGPT, who's the hell is going on there? And I think it's like a different version of what you're talking about, but essentially it's like in theory, I could block ChatGPT from, I don't know, I don't even know if I can and for the channel. You can and substack now. Yeah, I just saw the exciting in there. Okay. Oh, interesting. But that's the similar kind of decision is like, is it better for me for it to be recommending my stuff and telling people, hey, go check this thing out, or is it better to block it off?

1:03:53And I think, uh, per your point, I end up like, take it all this, like, it's good. It'll, it's in that, it's better that it's like the frontliners newsletter than something else. So someone else will come in and eat that market share. Yeah. That's right. If you don't do it, somebody else is. And I think that's also kind of what all the major media publishers are really contending with right now. I guess I need a licensing deal in the air check stuff. Anyway. I want to go in a totally different tangent. We were planning to talk about this. I know that I said this. We're going to be fully focused on this one topic.

1:04:28But there's something you mentioned to me before we start recording that I think will be really interesting to a lot of people. So you guys are reforger now building actual SaaS products that people can buy. It's not just courses. I don't know if people know that, but let's make sure people understand this. There's actually products for product teams, so maybe just explain that briefly, but the thing that I think is really interesting here is you work with a lot of companies now selling them AI tools. And you have noticed a very big difference between the companies that are really good at adopting AI tools and seeing gains from them from those that don't.

1:05:01Talk about just what you see there because this is in theory going to be really helpful to companies that are struggling with adopting AI tools and seeing gains. Yeah, just to quickly explain that transition. So it makes sense for people, which is, you know, I sort of reforge just with the interest that there was all these incredible leaders out there growing, you know, on the front lines of some of the fastest growing companies and they have all this amazing knowledge and and I wanted to encode it and use full and practical ways for others. That took the form of courses and content product, all that kind of stuff at the beginning.

1:05:38Along the way, everybody kept asking us to essentially build the tools to implement what we taught. Because with anything as you can learn as much as you want, you can listen to my podcast, your podcast, Lenny, whatever as much as you want. But if you don't actually put it into action and implement it, then it's not really going to create value. right? And so people kept asking us to really close that gap and we said no for the longest time and then about a couple years ago when AI really started to inflect, it really created this moment that, oh wow, now we, there's this opportunity not just to encode this knowledge into content, but also into the products, the software, the tools that we use ourselves.

1:06:14And so we started to take a really big bet on that. And started to develop this new platform for AI Native product teams. The first product we launched is called Reforge Insights, which acts like your AI product researcher. It aggregates all the feedback from all the sources, uses AI to analyze it, helps you explore it, but also we'll start to identify one of the gaps, the things that you don't have in your feedback today, and auto -generate the research to go gather all those new insights. So complete the full cycle. We're going to want to do other major products as part of this platform before the end of the year, but we'll save that for some future episode.

1:06:53So that's kind of been our journey. And so we've seen inside companies that are going through this transformation from two perspectives. One is obviously selling in that tools. But the other perspective is for 10 years, companies have been coming to us to help them try some sort of transformation with our learning product. Most people, most companies are not coming to us to just like throw a bunch of courses in front They're trying to solve some big business problem, some transformation. Now that used to be things like, we've got to figure out this growth thing, right? Or I'm going from sales led to product led.

1:07:31Or I'm turning, I have more project managers and I need to transition to product managers, right? Like something like that. Like, or there's some business problem, they're going through some transformation and they saw us as part of that transformation and we got to partake in quite a few of those types of transformation. Now of course, the transformation that everybody's going through is, okay, how do I become more AI native? How do I adopt this stuff? And so we've seen a pretty wide spectrum in from both perspectives of how companies are approaching this. And I'm sure everybody's seen the like AI, I call it, we've been calling them like the AI manifesto memos from CEOs out there that proclaim we are now AI native.

1:08:17You know, it's some grandiose way, right? And, but there's behind the scenes, there's actually some incredibly stark differences in the actual teeth of what backs up those memos and backs up those executive decrees that, we should all be AI. And so just to kind of point out a few of them, which is one is that the most impactful thing that you can do is form really hard constraints. So there's other parts that are like, okay, you want to communicate this, you want to establish an owner of who's going to drive this, you want to build in incentives and rewards. And you see this all playing out in things like building it into your career ladders.

1:09:14Or some people are starting to introduce this as questions into their performance reviews, like all those types of pieces. And, but the thing that is actually moving the needle are the companies that are defining incredibly hard constraints. So one company that we worked with develop this constraint that they benchmarked against other companies of their revenue size and the team sizes for their stages and they set a benchmark that we will be one -fifth each of our functions will be one -fifth the size and and what that did is to create a constraint that you couldn't hire above that level and it forced people to essentially find ways to adopt AI and do things to to replace that.

1:10:00So that was one. I mean, you've seen these other ones. I can't remember from what company that's might have been Shopify or another who was like, you are not allowed new head count until you prove to us that you are not able to accomplish this with AI. That's like another hard constraint. But you also see these other constraints on the smaller level, which is executive saying, I will not do a product review or review a PRD unless it comes with three prototypes. You know, And so that's the hardest one. Those are the biggest constraints. But I think the biggest change that I'm seeing is in the things that separates I would the top few percent making this change.

1:10:41And everybody else is essentially making the hardest decisions. And that hardest decision is going to come down to exiting people. So in every transformation, what we see is essentially three groups of folks. You see you're we call them the catalysts the people kind of leading the charge the people who are Experimenting you know doing this on their own time like all that kind of stuff. You then have you're what we call your converts These are folks that will make the transformation. They will adapt But they need structure they need permission. They need a clear outline. They need a clear plan, right?

1:11:19And I don't say this in a negative way. It's just that you know, that's how some people operate right and and so you And so that's where things like all the things that we were talking about before, which was like the decree, the permission, the clear budgets, the rewards, like all of those types of things. But then, inevitably, you have a certain percentage that are anchors, right? And they're dragging their feet. They're kind of, you know, silently creating friction in the background and like all those pieces. And there's a big difference in how I think companies are treating and thinking about their strategy for those folks.

1:11:58One group is kind of like, ah, we're going to work with them very passively. Others have set a hard deadline. They're like, they're going to either make the transformation by X -date or we're going to exit folks. And a lot of people look at this as being really harsh. I think a lot of people would think that, especially individuals. But let me kind of explain it from a more of like a CEO perspective. A lot of these companies are seeing this AI transformation, the ones that are taking them more seriously, as this isn't adopting new tools, this isn't a light change. This is a fundamental culture change of how we operate as a company, right?

1:12:37And you can't have 20, 30 percent, whatever meaningful number of it is of your company, trying to operate in a completely different way, in a completely different culture. or cultures thrive on density, right? And that's why there's sometimes the best ones feel like cults, you know? And so as a result from that perspective, it's like, hey, like we, for us to be successful, for this to be the best thing for all employees, we all need to be operating around the same culture or principles and stuff. And if that's not you anymore, then we're defining a plan to exit it. But I would say that less than 10 % of companies we see are taking this hard stance.

1:13:20But I would say they are probably the ones that are far this long, getting the most adoption and are seeing the most results of the ones that are taking those hard stances. So there's a bunch of other stuff I could talk about, but that's kind of the high level of what we've seen across a bunch of different companies. That is incredibly interesting. I'm glad we went there. I have a newsletter post coming out soon, probably before this episode that Tetris on some a lot of advice along these lines. I'm excited for you guys to keep seeing these insights into companies and sharing more of this because this is I think what a lot of people are looking for.

1:13:55Just like things aren't quite clicking at our company. We keep hearing everyone just getting so much more productive. All these companies are running more efficiently and it's not working here. And so I think this is the kind of advice a lot of people are looking for. So thank you for sharing all that. Brian, is there anything else that you wanted to touch on? and anything else you wanted to leave listeners with before we get to our very exciting lightning round. Well, actually, just a couple more points on this topic. We should go. There's probably two more things I would say about this. One is that, so if you're a CEO listening to this, I would say that most CEOs or most executives are incredibly disconnected from the actual AI adoption taking place inside their companies.

1:14:37I think a lot of executives who have done these to decrease and all that kind of stuff think it's kind of happening naturally. But we talked to both groups. We talked to tons of end users and we talked to tons of executives. The story we hear from the end users, the PMs, the hinge, all that kind of stuff, that we talked to kind of using all this stuff. One of the main questions we ask them is, we're talking to somebody who's picked up a prototyping tool. Say, well, how many other people on the product and design team are using this? Almost 90 % of the time it's like, It's like me and this one other person and everybody else hasn't taken it up.

1:15:14Right, and so there's a huge disconnect. And we heard one story, and I can't say the name, but it's a company we all know. It's a major tech company, tech forward company, CEO's been out there talking about being AI native. We talked to one of their, principal PMs, person was early to the prototyping tools. This person shared prototype with the designer, the Inge manager, a designer and in -manager escalated it to the VPs. It caused this whole conversation month later, kind of the, it was kind of still stalling out. This PM happened to then, you know, attend a happy hour where the CEO was at and approached the CEO and told the CEO about the experiment that they were running with prototyping as well.

1:16:03And the CEO was like, this is fantastic. like, why, you know, like, like, where is it at right now? It's like, oh, well, X, you know, XYZ happened. And the CEO had no idea. And then the CEO was like, okay, let me take care of it. And in the next day, like, get it, it happened. So there one is that you have to go to the ground floor on this stuff. Some of the best companies like Shopify and others are measuring actual adoption and usage. They've gone to the extreme, like, I kind of on that, on that front to get a bunch of signals in close to the ground, but it's just that, it just goes to show that this is, you know, I don't think we wanna talk about quantum -quo founder mode, but the reality is, it's not just about getting into the weeds of your product, but with something that's sizable, you gotta get into the weeds of the transformation to like really understand what's going on and adopt it.

1:16:57So that's point number one. And the second point I would say is, for read on, we do this podcast called, Unsolicited Feedback, you know, Fried Massive, I had this great quote on it. He was like, look, the slowest, your output is constrained by the slowest part of your system. And I thought that was, that stuck in my head because it's absolutely true. And so if you think about AI adoption as a system, there's all parts of the system that could be slowing adoption. It might be that people don't feel permission or they don't have the budget, or they don't have the knowledge or like all of the destructive, like all these types of things, right?

1:17:33But in a lot of these cases, it's things like IT, legal, procurement are the slowest part of the friction and are kind of setting the pace of all of this output. And you can also see this in just product teams, which is, you know, a lot of, there's been all this talk about, you know, product managers are becoming the new bottleneck because engineers are speeding up. Well, that's because people are speeding up one part of the product system and not the other parts. It makes sense. They adopted all of this tooling for engineers because they're the biggest headcount and the most expensive and all that type of stuff.

1:18:07But product is an output of design, PMs, and engineering. The system is there not to produce code. It's to ship product. Shipping product is the function of those three things. If you just accelerate one part of the system, you're just going to move to the bottleneck to another part and your actual product output, the output of the system doesn't accelerate either. So, I think you really got to, people have to really understand those two things. It's like, what is actually happening on the ground floor? And what is the slowest part, what is the thing that is causing the slowest part of the adoption, just like attack them ruthlessly if you're really serious about making this transition?

1:18:46What a wild time we're living through. It is a wild time. Yeah. Yeah, we heard that all these ways that we're also used to. Okay, this is how we do it. Yeah, yeah, it's exciting and exhausting at the same time, man. That's how I think about it. It's such a simple way of describing the world. Yeah. Oh my God. Okay, Brian, is there anything else before we get to our very exciting? That's it. Let's do lightning around the same time. Yeah. All right, Brian, I've got five questions for you. Are you ready? Let's do it. Let's do it. Okay, what are two or three books that you find yourself I don't like how many most other people.

1:19:20My God honest answer is that I have not had time to finish an entire book since I had my second child. So from a complete book standpoint, I have not been able to, things that I've been, you know, that I actively read on a regular basis, just like other content out there that'll throw out there is, gosh, Jayman Ball from Ultimate or Capital writes his great newsletter called Cloud Adjudgment, which is kind of mixture of market thoughts as well as market stats. That's really useful to help me keep a pulse on the market. I was just reading through some stuff from NFX that's been pretty good lately on all of this.

1:20:08I know James Courier and I share, we lived a lot of the same cycles through social and stuff, So I tend to identify with that. So I don't know those are two things that That I love reading and sorry. I'll give one more shout out to a different podcast which is from From two guys at Spark Capital in the Beal Hyatt, which I know from my early Boston days and Frazier I'm sorry, I'm blanking on the last name right now who was head of product at Open AI and they've got a great form or malware, it's just those two riffing on some ideas and stuff. And I highly suggest that one. I like that one a lot.

1:20:45Here's my reading tip that has changed my reading habits. Brian Johnson, the longevity guy, he has this advice for better sleep, which includes, before you go to sleep, read for 10 minutes in bed. It does, put you to sleep. Part of it. I don't feel like I retain anything that I read that close to bed that you feel like you retain it. I do, I do. I'm reading fiction like it's nonfiction you want sorry. Yeah, you want to read something calm not like I'm learning So I'm reading I'm reading fiction and it's really nice and knowing that this is gonna help me sleep better makes me There's an incentive there's a reward there.

1:21:19They're already yeah, they're talking about rewards and creating behavior change Yeah, exactly and the reason to do it is his whole thing is you want to get to a low resting heart rate and then help slow your Rest your heart. Yeah, I got some other sleep tips on that for and if you want to go down that path But we'll say that's nice. I'll be for the third podcast. Okay Next question. Do you have a favorite recent movie or TV show that you really recently enjoyed? It's not new, but I just rewatched Silicon Valley that I hadn't watched a number of times. And it's painful because the first few seasons, I went through almost every one of those moments in my first startup, like hiring the gray hair and seeing the funding falling through at the last second, like all the crazy stuff.

1:22:02But kind of going back and watching that, there's just some extra nuances and stuff that I feel like they wrote really well that I thought was really good. So I've really been watching that. The other thing is that I've watched it just more of like a pure entertainment kind of calming thing, kind of turn the brain off is Owen Wilson's new show on Apple TV stick, which is about him as a form of a professional golfer and all that, you know, I won't ruin the show and stuff, but it's a very nice, some calming, little bit fun type of show. I've been seeing that on my Apple TV, maybe I should check it out.

1:22:43Good to. Your favorite product, you recently discovered that you really love. It could be a gadget, it could be an app on your phone, it could be something in your computer, it could be nothing at all. You can't see it, but I do have, I just changed my whole setup. So now I have an ultra gear super wide curved screen with a very nice standing desk for my believe. It's called Ergo Naufus. Yes, it's, yeah, I think it's Ergo Naufus, ERG ONO FIS. and it's a very nice sleek, standing desk, very stable, very quiet, very much enjoying. Excellent tip. And the curd monitor, very cool. Okay, two more questions.

1:23:34Do you have a life motto that you often come back to and find useful in working in life, something you share with folks, something that you think about when times are hard or just generally? Look, it's a little cliche at this point, but I used to, somewhere around here, I used to have the quote printed out about the man in the arena, right? It's just like just lots of, lots of, especially in times like this, where so many things are changing, and there's so much competition, but so much opportunity for great. I just, I really both respect and enjoy the game and spending time with folks that are kind of in the arena, figuring this stuff out, tinkering with things, and just, yeah, that's kind of, a lot would keep coming back to, especially, you know, been at it, reforge for 10 years.

1:24:23That's a good portion of my life. And we've gone through some great periods and some tough periods. And so I tend to come back to that. And that's what's always separated, reforge from so much other content and advice as it's people in the arena, sharing their wisdom, not just a bunch of influencers. And it's said that your mouth made that quote so cringey. I know, I know, that's why I said it's a little cliche cringe right now. I'll be a good guy for everyone. Final question, Brian, you don't know this, but you're parenting advice on Adam Fisherman's podcast, really impacted my parenting philosophy, specifically the slang you had about independence.

1:25:02Oh, and I'd love for you to just share that insight about how you think about raising kids. Yeah, and I wish I could remember where I grabbed this from so I could attribute it properly. really. But basically, the philosophy is like your job as if you think about going from when they're born until they're essentially 18 and leave the home, your job as a parent is to essentially make them more and more independent. And so what that involves is continuously looking for opportunities for them to make even bigger and riskier decisions for themselves as they grow up and you're there as support to those decisions but letting them make those decisions on their own.

1:25:55So that by the time they're 18, they are a fully independent person able to think through those decisions themselves. And I'll look like my sons are young, right? they're five and three, so it's not like I'm having them make a life and death decisions or where we might buy our next house or stuff like that. But it's even small things at this age of, you know, my oldest like five and a half is really starting to learn and get curious about like money and how you spend money and where new things come from and how you earn money. and so rather than just like buying things for him, you know, we've, he's got like money from his grandparents and stuff saved up and we're trying, we can be like, okay, like you can buy that thing, but you're gonna spend this and try to like teach him the consequences and like all that kind of stuff.

1:26:48And then when he breaks something, right? Like, so it's just small things like that, but thinking about the time from zero to 18 as the spectrum of independence and being a supporting role and what you're essentially doing, you're just trying to move as many decisions, as many the percentage of decisions you make for them down to zero by the time that they're 18. Like, and that's kind of something that I've kept in the back of my head since really seeing that. Thank you for sharing that. I know I didn't tell you that. I was gonna ask you about this, so that was a beautiful way of writing it. Yeah, I didn't know where I couldn't remember that whole podcast.

1:27:27I had no idea what I said, but you can say it. That's a good one. Brian, two final questions. We're going to focus on you if they want to reach out. What work can they find the products you guys offer, whatever you want to plug, and also how can listeners be useful to you? Check out ReForge .com, check out our new products, like ReForge Insights, they're on the website. You can find me personally on my writing, including a bunch of the stuff that we talked about today. Now on Substack, so just recently moved. So you can either go to my website, brindalfour .com where I have some info or just blog .brindalfour .com where all of my new writing is taking place.

1:28:06But those are the two major pieces. A last but not least is that, as I mentioned for Edmossavut, who I used to work with, he used to Slack. We just have this fun podcast, the two of us get on there and riff like we were having dinner every couple of weeks about different like product and strategy types of things. And so it's a fun format for us. So if that's something you enjoy, it's called unsolicited feedback, where we give feedback and advice to nobody that ever asked for it. That's amazing. Yeah. Perfect title. Ryan, thank you so much for being here. Yeah, thanks for having me again. This is great.

1:28:43Bye, everyone. Thank you so much for listening. If you found this valuable, You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or a leaving review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at Lenny'spodcast .com. See you in the next episode.