686: How VC Shapes Startups with Benjamin Shestakofsky (Strategy Skills classics)

0:27Welcome to The Super Bowl. Strategy Skills Podcast, where strategy partners teach you the tools and techniques to solve mankind's greatest problems.

0:44Benjamin Shestakofsky: Hello, this is Krista Farova. Welcome to another episode of the Strategy Skills Podcast. Our podcast sponsor today is strategytraining.com. If you want to strengthen your strategy skills, You can get the overall approach used in well-managed strategy studies. It is a free download. You can get it at firmsconsulting.com forward slash overall approach. And firms consulting has S. So F-I-R-M-S consulting.com forward slash overall approach. And if you are currently updating your resume, you can also benefit from downloading McKinsey and BCG winning resume. It is a resume that got offers from both firms.

1:23Benjamin Shestakofsky: And it is also a free download. You can get it at firmsconsulting.com forward slash resume PDF. And today we have with us Benjamin Shostakovsky. Benjamin is an assistant professor of sociology at the University of Pennsylvania, where he is affiliated with AI at Wharton. He recently wrote a new book called Behind the Startup, which he wrote in a very interesting way. He spent actually, I think, a little bit over a year working at a startup and studying it. And we're going to talk about that later today. Welcome, Ben. So great to have you with us. Thanks, Chris. Great to be here. I remember when I was doing my MBA, sociology was my favorite, favorite class.

2:04Benjamin Shestakofsky: So what did you like about it? I just loved understanding the dynamics of how people interact and how to build relationships and creating a bin-to-bin situation for all parties. So let's start there. How did you became interested in sociology and then became interested in becoming ethnographer? And what is ethnographer? Some of our listeners may not know. So let's start there. Sure. So I also became interested in sociology through, in this case, it was through my undergraduate education. I was at Wesleyan University, and I think I was just really fascinated by the breadth of topics that can be viewed sociologically by kind of this approach that sociologists take of trying to understand human interactions, how human beings form groups and make meaning with each other, but how the ways in which we do that are actually shaped by our broader contexts, right?

3:07We can think of all sorts of contexts that might matter, whether it's your nation or your organization or your family. There's so many aspects of who we are and how we experience the world that end up influencing the relationships that we build and enabling us and constraining us in different ways. So to me, it's always just been a fascinating field of study because those insights can be applied to almost any domain of our lives. Um, now, as far as how I became an ethnographer, uh, for those who don't know what that term means or how social scientists use it, usually, uh, when we're talking about ethnography, we're talking about a research method where the, uh, researcher actually participates in activities alongside the people who they're studying.

4:04So in my case, I'm an organizational ethnographer. Uh, so, you know, What I'm really interested in doing is going into organizations, assuming some sort of role in an organization where I have the opportunity not just to kind of engage in an interview-based study where I ask questions and people answer, but where I can actually learn by directly observing what people are doing. and actually maybe learn some things, in fact, by doing them myself and picking up that kind of tacit knowledge that you can't always gain just by talking to someone or by reading about something.

4:44Benjamin Shestakofsky: Benjamin, and in doing this work, do you ever think about, you know what, it's very interesting to observe, but actually want to become the leader within an organization and do things right? Do you ever have those thoughts? How do you deal with that if you do? Sure. Yeah. So, I mean, in the study that I write about in the book, you know, I went from my life as a PhD student at UC Berkeley into being immersed in the life of a new startup where things were very exciting and interesting, You know, as is the case with many early stage startups, everything was just changing very quickly and there was a lot of enthusiasm.

5:35And yes, the environment was especially seductive compared to the life of a graduate student. And there's a very big difference between, you know, being in an organization where you can complete Project A, Project B, Project C, you know, in a matter of hours or a matter of days, get instant feedback from people, really feel like you're a valued member of a community versus, you know, anyone in your audience who's ever pursued a PhD. that's usually, as you may know, a much different experience, much more isolating, usually virtually no positive feedback and projects that can span months or even years without understanding if this is going to amount to anything.

6:20So yes, being in that environment was in fact very appealing and seductive in a lot of ways. And I did think very hard, as I described in the appendix of the book where I describe my methodology, I thought very hard about actually what it would mean for me to give up the academic life and actually just stay in this organization. But ultimately, I think I decided that I think my training had just trained me to think like a sociologist. And that was the level at which I ultimately wanted to participate. participate.

7:02Benjamin Shestakofsky: Benjamin, and being trained as an ethnographer and sociologist, what are some of the things that you do differently from people who don't have that training that other people can incorporate some valuable insights, approaches, and so on? Sure, sure. So in sociology, we often contrast what's known as quantitative research with qualitative research. And of course, Quantitative research usually involves methods like conducting surveys or conducting experiments. You know, probably the kinds of A-B tests that a lot of companies are involved in obviously would be generating quantitative data that then can be used to inform decision making.

7:45What we do as ethnographers doing qualitative research, whether it's doing the kind of close participation based observation that I was talking about or in-depth interviews, we're much more interested in really understanding in a deep way the texture of people's everyday lives. You know, it's very important to people who take my approach to understand meaning. How is it that people are interpreting the things that are going on around them? You get a very different type and level of understanding when you take that approach versus when you just look at humans as a bunch of data aggregated into reports, right?

8:32Understanding how people make sense of what they're doing, taking a close look at process. So if you want to understand causal relationships between two or more variables, it can be really helpful to take a very close look at, you know, this action tends to be followed by this action, tends to be followed by this result. And if you're not closely observing the patterns of people's behaviors on the ground, it can be very difficult to tease apart, you know, say maybe, you know, there's a relationship between X and Y. But if you really want to understand the mechanism that's causing that change and then potentially intervene based on your knowledge of what that mechanism is, it's really important that you understand and can see and directly observe what is happening and how things unfold over time.

9:30So I think those are a couple of the things that, you know, maybe a sociologist in an organization would be looking at that could be sort of tools that other people could think about.

9:42Benjamin Shestakofsky: Benjamin, and do you feel that the fact that you studied sociology and studied how to be an ethnographer impacts your personal life as well? You just have that mindset all the time, or can you speak at all? Yeah, no, I think that's true. I think that a lot of ethnographers talk about this, that, you know, part of the practice of ethnography in order to do this work systematically, it's really important to constantly be both inscribing what we call field notes. So as you're making observations, to be writing down what you're observing to the best of your ability, and then to actually kind of take a step back, read those field notes, and kind of come at them with an analytic lens and think about, well, what are the theories that I have already, the things that I've read, the things that I know that I can bring to bear on these observations to help to make sense of them?

10:38And I think for a lot of ethnographers, they will tell you that once they have developed this mindset, once they're in the field for a prolonged period of time, that they can't switch it off and that they go about their daily lives, almost observing the world around them as sort of a text to be analyzed, you know, as a series of actions and reactions. that require us to put in some broader context to really be able to make sense of how people are behaving. And so, yeah, I think it can be really hard to switch that off for people who are trained in this way.

11:24Benjamin Shestakofsky: Very interesting. When you're watching, for example, a show, are you constantly observing and doing the work as if you are ethnographer on the field, or are you able to at least rest when you rest? When I'm resting, can I turn it off? Yeah, I think so. I think I can turn it off when I'm resting. Yeah. Although, you know, I mean, I think as with most of us, my mind tends to race even more when I'm resting, but at least it's not, at least I'm not thinking about, hmm, what's this? What's that? How do I make sense of this thing that I'm seeing right in front of me right now? How do you take field notes?

11:59Benjamin Shestakofsky: Is there a specific format? What do you do to take field notes? Yeah, there are many ways to do this. The way that I was trained is that you start with what's called jottings. So you don't, as you're, you know, there's this tension that exists when you are doing ethnography because you are simultaneously a participant and an observer. So that means you're participating in the activities of the setting that you are embedded in. But at the same time, you're watching and you're recording your observations so that, again, you can analyze them later. So one way to sort of balance that tension is to take what's known as jottings, which are sort of shorthand field notes.

12:46And often what I see is that ethnographers don't learn, you know, a specific technique of shorthand, but they typically just come up with their own notations, abbreviations, ways of expressing enough so that later on, when they go back to their jottings, they can flesh them out into more full sentences, you know, and paragraphs that would constitute field notes that, you know, someone could actually read down the line. But yeah, it's important to usually start smaller. And then as soon as you can, after you leave the field to do that work of fleshing them out. And some people, depending on the setting, you may be able to type them.

13:33You may have to write them in a notebook. There are some settings where people are trying to be as unobtrusive as possible. And thus, they try to take as few notes as possible because they don't want people to even be thinking about the fact that they're a researcher. So there's a lot of ways that this plays out depending on the setting people are in.

13:51Benjamin Shestakofsky: And what triggers usually taking field notes? What specifically you are looking for that is worth noting down? Yeah. Well, usually when a social scientist starts an ethnography, they will go into the field with some idea of what it is that they're looking for, whether it's something they expect to see based on prior studies that they've read. We're always trying to build on, you know, what's come before us and hopefully not try and reinvent the wheel, but try and deepen our understanding of the research that's already come before us. So hopefully a good ethnographer has gone into the field with some idea of what they expect to find.

14:35Now, it's also very common that ethnographers don't find what they thought that they would find. And, you know, that's actually a big part of, I think, how good research gets done, because when there's something that surprises us, that's what tells us, okay, well, there's some shortcoming of our existing theories, of our existing ways of understanding the world or settings like this. If I'm seeing something that is new, is puzzling, then that means that I actually might have something to contribute to the world because I'm seeing something that other people aren't describing or that other people's theories haven't really accounted for yet.

15:20Benjamin, and for your recent work with company you call All Done, what were the things you thought you will find before you started that project? Yeah, yeah. So I was one of these people. I went in and I was really interested at the time. This was about a decade ago when I started my research. And I was really interested in the time at kind of startup cultures and how they intersected with kind of youth or youthful cultures. Can I tell you a little story about kind of my background and how it played into this? Okay, so a couple of years after I graduated from college, a friend of mine told me, he said, I'm starting a startup.

16:09And I would like you to come work for me. And I said, okay. I'd been working at the time for a broadcast television network in their standards and practices department, which is not a very glamorous place to be. It's kind of the department that says no to everybody. Um, so I said, okay, I will get involved with this startup. Um, and this friend of mine had convinced some wealthy individual to give him a lot of money. Uh, we hired a bunch of people to, you know, start building this thing. And, uh, after maybe about a year, uh, my friend, the founder, uh, he was able to secure a feature story about the company in the New York Times magazine, the Sunday magazine.

17:04Okay. So this story goes to press the day that the website is supposed to launch and immediately it crashes. It was an unmitigated disaster. And it really, for me, this experience, now I went on to you know, worked for this company for another year or two and then went on to grad school. But this experience always stuck in my mind as something that was very interesting. This one, just fascinated by the fact that there's some wealthy individual out there who wanted to, who was persuaded by my friend who was in his early 20s that he had an idea that was worth funding, even though he'd never built a company before.

17:47And then B, this often yawning gap in startups, between sort of the rhetoric, between how, you know, how you have to talk a company up in order to sell it to all the stakeholders who need to be invested in it in order for it to grow. You know, all of that talk and then the on the ground realities can actually be very different from all that talk. And people are always sort of throwing whatever they can at the wall to try and fix all the problems that are emerging. So like I said, I think I originally went into the field for my research with a different company with the idea that, well, I'm going to be studying startup culture, this kind of interesting melange of hype and reality and how these things clash.

18:41But really, I had no idea what I would find there. And what I ended up finding that was so fascinating to me was the fact that all of the software development that was going on was being supported by a massive offsite workforce. There were about 200 people working behind the scenes in the Philippines and a group of 10 working, all these folks working from home as contractors, Las Vegas. were there were about 10 of them. And, you know, this was a time when sort of machine learning was coming to the fore. And I think I was sort of discovering along with a lot of practitioners, just how much work has to be done behind the scenes to support, you know, these new algorithmic systems that were driving technology.

19:36So that's kind of the direction I ended up going, was being fascinated both by how these companies get funded and by all of the different types of labor that it takes to sustain them.

19:48Benjamin Shestakofsky: So your recent book is based on your observations of working for a startup called All Done. I mentioned it earlier today. And you joined them right after they raised their first round of VC finding. And they were growing very quickly. And what you were doing basically is looking inside a startup and asking, eventually, once you kind of saw the lay of the land, asking what VC finding model does to this type of companies and to the people inside of them. So take us back to the days of you working for that startup. What was it like for you to be inside the company and the key observations you would like to share with our listeners?

20:26Yeah, sure. I mean, what it was like for me when I got there, I was just thrilled. You know, it's not it's not every day that a researcher gets to do work like this. There's not a lot of studies by researchers of early stage startups like this. So I was thrilled. I was terrified also that I, you know, I had I had told them, you know, I had this past experience working for a startup. and I told them, like, I want this to be a win-win. I hope that I can contribute to you based on, you know, the experience that I bring to the table, you know, and at the same time that I'm gathering data about what I'm seeing.

21:16And so, you know, I was terrified maybe that also that I wouldn't actually end up having anything to contribute and that they would see no reason to have me around. And it turned out it was just the right time for a researcher to show up at a startup because this was an early stage venture. Like you said, they just raised their Series A and they were just trying to scale up and trying to hire up. And I think when I got there, I might have been the only non-technical employee who was in sort of an entry level position. And so there's just a million things that have to get done that nobody wants to do.

22:00And there was actually plenty of work for me to do and, you know, lots of interesting things for me to see. And as I got more and more involved in the work, you know, I ended up getting more and more involved with these remote teams as well. And I think for me, just empirically, the observations that really stood out to me the most, you know, one of them would be just seeing how, you know, how this impetus that comes with being a venture-backed startup, this impetus to always be growing, also itself begets an impetus to always be experimenting and changing, right? It's sort of the job of a venture-backed startup to get those numbers up.

22:50And you can do that by really throwing anything and everything against the wall. And, you know, I think some of the things that surprised me were just how big that tool bag of potential experiments was, how much of it was based just on random hunches, how many of them failed. You know, there could be over a dozen experiments running at any given time. Just so much action, you know, so much data coming at people at once. And at the same time, you know, what I really saw from my position as a non-technical worker was how this kind of drive to constantly be growing and constantly be experimenting, it just creates a lot of problems for an organization.

23:45and those problems have to be addressed very quickly and often with whatever resources are at hand. And so that's where I think a lot of this low-wage labor came into the equation. For instance, after the Series A, this company is trying to put its money into hiring up, recruiting a bunch of new engineers and designers so that the technical side can grow much faster. But that means that there just isn't much time to do much software development. And in fact, at the same time as they were hiring up in San Francisco on the development team, they were hiring up on this team of data workers in the Philippines who were doing all sorts of, behind the scenes, routinized operations.

24:35Folks who are familiar with Mechanical Turk or platforms like that will be familiar with this kind of click work. Input comes in, snap second of human judgment, make a choice, create an output. It's almost like algorithms being done by hand because developers often just didn't have time to code things up. So they brought in a lot of these human resources to kind of stand in for the algorithms or support the algorithms and take them that last step before they had really fully developed the software. So that was surprising to me and fascinating. And then, you know, similarly along the line of organizational problems that BC was creating, well, eventually they did achieve sort of the level of internal growth and the level of user growth that they had promised.

25:30But then, you know, they started thinking about the next round of funding. And in fact, user growth then became much less important than revenue growth, right? Showing that this was a company that couldn't just, you know, get people to engage with the product, but also could monetize it. And that created a whole set of problems because there were a lot of users who knew a certain way that the product worked. They knew a certain B structure and business model. And all of a sudden the company decided they had to pivot to an entirely new business model. And they had this team of 10 hardworking customer support agents who are working remotely from their homes in Las Vegas, who got on the phone with literally thousands of users to explain that there's this new payment structure coming.

26:26The users might have to pay five to 10 times as much for the exact same product. And yet they had to persuade people to, you know, to stick with it and keep trying it and promise that there would still be value there for the users. So, you know, I really saw even in this age of, you know, platforms and algorithms and all that, just how important the human touch was to a company that is really, you know, on the cutting edge of change.

26:59Benjamin Shestakofsky: Benjamin, and what was the reason they were growing fast? So, you know, the incentive here to basically they were almost before they raised their Series A, they had basically just almost run out of their funding, their seed funding and their angel funding. And they had to get that next round for the company to survive, or I guess that first round of VC for the company to survive. And in order to get that funding, they had to demonstrate that they had a substantial growth curve. That is what investors are looking for with an early stage company. Not only that it's serving some population of users, but that that population is growing and growing at a rapid clip.

27:53And in fact, I think the first three months I was there, the user population grew something like 76%. So, you know, it's simply from, you know, from what I was told and what I saw, that was simply what investors were looking for. Just like there was an awareness among the executive team that, you know, once they'd hit that benchmark for user growth, revenue was going to have to be more convincing, right, for people to want to put their money into this company. So, you know, I think the investment landscape was always on the minds of executives when they're thinking about their strategy.

28:36Benjamin Shestakofsky: And what was attractive to the users to use this company? I'm trying to understand why they're growing so fast, why the market was so interested. Yeah, so this was a two-sided platform. And it was a platform that connected buyers and sellers of local services. So these could be everything from plumbers to wedding photographers to math tutors, anyone who you might hire to do a job for you that's kind of an in-person job. These are the kinds of users that were coming to the platform. And so, again, two-sided platform. So you've got two sets of users who have to be satisfied. On the one hand, you have the sellers of the services, and you have to persuade them to, you know, register, start up a profile, and actually pay for the privilege of contacting buyers who come in looking for someone to do a job for them.

29:39So their engagement with the platform is potentially very deep. And on the other hand, you have these buyers who are probably coming in through a Google search. And it's kind of, you know, if you have good SEO, oh, it's easy or it's, you know, relatively easy to get those numbers of buyers up, but they may not necessarily, they may just be stopping by briefly, have much less of an understanding of the value proposition, much less of an understanding of how the platform even works. They're sort of just getting funneled in to, you know, to submit their request for a service provider. So both sides of the market are there and both sides had to be satisfied.

30:26Benjamin Shestakofsky: And how did they usually acquire those users from both sides? Yeah, yeah. I think that SEO is a really big piece of this. And in fact, this also called back to those folks in the Philippines who were doing sort of routinized, you know, information processing work because they had a large team there who were doing just a lot of SEO writing. And, you know, when you have a platform with, you know, a large number of users who have established profiles, then there's a lot of content that can be generated about them being put on various pages. So, you know, I think SEO is really the bulk of the strategy here.

31:14Benjamin Shestakofsky: Very interesting. It's a risky strategy because you can lose that traffic very quickly. Yes. Did you experience situations like that? Not when I was there, but I certainly know that over the years, the search engines are always modifying their algorithms and that there have been points when the SEO traffic has been reduced. And then, of course, people have to scramble and try and figure it out and try and get it back to what it was. Were they using any other ways to acquire customers, such as cold outreach, anything else? collaborations? Yeah, there was not the kind of dedicated sales force that you see at a lot of startups.

32:03And I think that this was something they were pretty proud of, that they had been able to bootstrap this process and keep the costs very low. I think there was, when it came to sellers, I think there was, you know, a bunch of outreach that was potentially, you know, I don't know exactly how to put it, but maybe sort of semi-automated, you know, gathering databases of people to contact and sending the relevant information to the right people, that sort of thing. So I think that's more or less where it came from.

32:43Benjamin Shestakofsky: Was there a lot of focus on acquiring new users? I mean, in that early stage, yes. And that's, I think, why the SEO was kind of in full throttle. But, you know, eventually it got to the point where, like I mentioned, where they had to kind of step back from that goal and start thinking about a revenue goal. and those two things can be in tension with each other, right? When you have folks who are very happy to be there because they are paying relatively little for the product, obviously that supports user growth, minimizes churn, but there's a revenue problem there that was recognized. And so that's where, you know, when this new business model was introduced and the prices increased dramatically, I believe it was something like almost 50 % of kind of the most active users had more or less fallen off.

33:54So, you know, then it's sort of a process of tacking back and forth between those goals.

34:02Benjamin Shestakofsky: Benjamin, and you earlier mentioned doing a lot of experiments at the same time. Could you share some of the experiments that were successful? Sure. So, I mean, some of the things I remember were often things that, again, no one necessarily had any idea ahead of time that there would be such a large impact. And yet there was like one of the ones I remember was that the again, this is a platform catering to local service providers. And so the service providers have to enter in their profiles or in the administrative system, how far they're willing to travel for jobs. And I think the engineers realized that if they tweaked the jobs they were sending to not just send right at that cutoff, but maybe a little bit past the cutoff as well, that user engagement was increasing by, I forget what the number was, but something like almost 50%.

35:02It was really surprising. I mean, I think probably a positive result was expected, but not that positive. That's one of them that I remember that was kind of an interesting standout. But of course, there were also just myriad micro experiments too, right? What if we change the placement of this button? What if we change the color of this button? You know, what if we give new users this bonus when they start versus that bonus when they start? Really, anything that people could think of would be plugged into an A-B test. And, you know, that was sort of not surprisingly for for kind of this modern era of startup development.

35:49That was really the the ethos just to experiment with everything. And yeah. And like I said, sometimes there were really big wins. And obviously for a growing company, even a small win can become a bigger win as the growth continues. and you have this multiplier effect with some number of new users coming in to enhance that benefit even more.

36:15Benjamin Shestakofsky: Being a part of a growing startup is very stressful. It's a lot of work, long hours. And on top of that, you had another full-time job, basically being ethnographer and noting everything down and collecting the information. How were you able to manage so much pressure? I don't really know other than that I just did it. I think it really helped me to have just the consistent practice. So I had rules for myself where every day when I got home, I would be reviewing my field notes, flushing them out into my jottings, flushing them out into field notes, and then rereading them and then writing some analytic commentary about them just to make sure that I was not complacent, right?

37:03That I I kept asking questions of myself, asking questions of my data, looking for, you know, what's the next thing I want to find out about? What's the next thing I want to explore? What are the puzzles? What are the things I don't understand? And I think that sort of practice can help to keep an ethnographer sort of alive to what's going on in the field for them in a way that otherwise everything can sort of just melt into the work and you lose sight of the research. or I guess to put it in the terms I used before, you can become so consumed with the part of yourself that's participating that you can sort of lose track of the part of yourself that's observing.

37:49And so I think just developing this sort of dedicated practice to cultivate the observer side and to keep it active and to keep it alive is really important for all ethnographers. And I think just having sort of a, just like anyone who's sort of dedicated to their craft, I think that having that dedication to your craft, really wanting to get it right, and knowing that, you know, this is social science and you're creating a data set, and you're going to need that data set later to answer the questions that you want to answer. So I think those are the kinds of things that motivated me through the stress and the exhaustion.

38:44Benjamin Shestakofsky: And you speak about it in such a calm way. I feel you have a lot to teach on this topic. So to dig a little deeper on this question, what would you say are habits or practices you personally cultivate that you believe have contributed to your professional success and impact, both in your academic career and also during your time as a participant, observer, and also hardworking part of the team at the startup you call all done? Yeah, well, maybe I'll start there. I mean, like I said before, I wanted to be there and I wanted to be a contributor. because, you know, for the research side, I couldn't be doing the research if I wasn't able to stay.

39:32So, you know, there are a lot of habits that I had picked up either through my work experience or kind of reading research about how things work out there. You know, I personally try to under-promise and over-deliver. I would do tasks at work that I had not been asked to do, that I don't think anyone expected me to do, but that I felt like would be mutually beneficial. So like when I got there, I asked if I could write an article for new hires about how the platform kind of how the platform ecosystem worked and how buyers and sellers flowed in and interacted with each other. And, you know, I did this like not only to help future people understand, but really for myself to try and get a deeper understanding of what was actually going on here.

40:35How does this thing actually work? You know, and the same thing went for I wanted to learn more about users' experiences. So I offered to write blog posts where I would interview users. And so that kind of helped me get another perspective that otherwise I wouldn't have gotten. And, you know, I don't know. I mean, I don't know if this is personality or something I tried to do intentionally, But I'm just I'm not really someone who likes to take credit for things. And, you know, I would try and share it, share the credit when things went well. And and just try and when I was there, try and really be there.

41:22And, you know, I'd stick around till the last people were leaving. And, you know, these were all things that I think helped people feel that, yes, I was not, hopefully I was not just taking as a researcher, but that I was also contributing.

41:43And like I said, I think this goes for both the research and all aspects of my professional life. But I am someone who tends to be kind of obsessive. And I need to know what my practice is, whatever it is that I'm doing. So if I'm writing, I need to know that, okay, well, I figured out how do I write best. I write best first thing in the morning. So as much as possible, I'm blocking out my schedule during those hours. And that's what I do. And that's what I know I'm going to do, right? And it gives me kind of that calmness and peace of mind to know that I'm doing what's best for me and what's best for my work.

42:28But yeah, just being, I don't know, like I said, with those field notes every day, it's like being thorough, leaving no stone unturned. Perhaps I have the luxury of doing this because I work in a field in academia where things happen really slowly compared to most fields. but it really suits me to be in a place where, where I can kind of try and really look at all the angles and poke all the holes I can in an argument and get all the feedback I can to have other people help me poke the holes before I, you know, try and try and push something through.

43:08Benjamin Shestakofsky: Benjamin, anything else you would like to share about your book that you want our listeners to know? Maybe something you wanted me to ask and I didn't. Sure. I mean, so the book, I think one of the things that I'm really excited about, about this book is kind of how it looks at this funding model of venture capital, which is a model that I think a lot of people in business and aspiring entrepreneurs sort of take for granted as, yeah, of course, this is the way that innovation is going to be funded. This is obviously it's the dominant way that this happens, you know, not only in the US, but but around the world at this point.

43:55And to me, you know, I look at, of course, VC backed startups can create exciting new products. They can create incredible wealth. But at the same time, this book also looks at how the VC funding model tends to produce massive inequalities. And as a sociologist, social inequalities are kind of our bread and butter, trying to figure out how is it that the context that we find ourselves in end up leading people down different sorts of paths, where they have different sorts of challenges and opportunities that they're confronted with. So, you know, it's a complex story about how organizational inequalities play out in a startup like this.

44:45But I do write at length about how, you know, on the one hand, these remote offsite contractors got employment opportunities from this company that they valued. On the other hand, this was 92 % of the company's workforce were off-site contractors, and virtually none of them received stock options in their compensation. So they were not able to share in the wealth that they were creating at the same time that this company was, in fact, producing really massive amounts of wealth. Now, of course, this is not unique to the company I studied at standard practice in the tech industry. But I do think that for many different stakeholders who are involved in the tech industry or want to be involved in the tech industry, I do point to a variety of alternative funding models that, you know, that are out there or that are being explored currently.

45:50that unlike venture capital, they don't have as much of this dynamic where you have an external stakeholder who comes into a firm and whose fiduciary duty is to maximize the value that's returned to them rather than to all the other stakeholders. There are really interesting examples out there. One of my colleagues here at Penn, Jess Olingel, has written a book about Craigslist, which is in fact, you know, a privately owned company that certainly does not look like most of the VC-backed companies that are out there, but it does sort of balance the profit motive with these kind of classic Internet 1.0 values.

46:36And they really they make good money on Craigslist and they only charge, I believe, employers and landlords to use the platform. There's, of course, very successful tech nonprofits out there like Wikipedia, like Mozilla. There are labor platforms that are nonprofits like Amara, which is a captioning company that pays workers better and treats them better than a lot of similar digital labor platforms. There are platform cooperatives out there that are actually platforms that are owned and operated by the workers who use them to get work. Um, there's one called up and go in New York that, um, is a platform for house cleaners and 95 % of the money that comes through the platforms actually gets back to these low wage immigrant workers, um, rather than a big chunk being siphoned off, um, to, uh, either investors or to, uh, back into, you know, growing the technology at a massive scale to inflate the valuation of the company.

47:42Um, so there's just a lot of models out there, um, that exist that people are talking about, um, and that people are, you know, having success with. And I think for people who are, um, you know, interested in entrepreneurship, but are also really motivated in, um, you know, in making a difference and maintaining control over a company such that its primary duty does not become expanding its valuation as rapidly as possible. I think we do so much experimenting in the tech world with the technology. It would be a great idea for us to do more experimenting with the funding models and see what else works for people.

48:28What else can we promote to try and make a tech economy that benefits more of us, where the benefits are more broadly shared?

48:37Benjamin Shestakofsky: Benjamin, where can our listeners learn more about you, buy your book, anything you want to share? Sure. They can go to benjaminschestakovsky.com. There's a link there to the book's website. And I'm on Twitter at bschestakovsky. Thank you, Benjamin. Thank you for the work you are doing. And I'm looking forward to see what you're going to do next. Thank you so much for having me. Thank you, everyone, for watching or listening to us. Our guest today again has been Benjamin Shostakovsky. Check out his book. It is called Behind the Startup. And our podcast sponsor today is strategytraining.com. If you want to strengthen your strategy skills, you can get the overall approach used in well-managed strategy studies.

49:20Benjamin Shestakofsky: It is a free download. You can get it at firmsconsulting.com forward slash overall approach. It is firmsconsulting.com forward slash overall approach. And if you are currently updating your resume, you can also get McKinsey and BCG winning resume. It is also a free download. It is a resume that got offers from both firms. So you can take a look at it, see what you can take away and how you can improve your resume. You can get it at firmsconsulting.com forward slash resume PDF. Thank you everyone again for tuning in. And I'm looking forward to connect with you all next time.

50:00Thanks for listening to this episode of the Strategy Skills Podcast. Stay up to date on all of our latest training by signing up for our email updates on firmsconsulting.com. We look forward to helping you develop your strategy, critical thinking, decision-making, and communication skills next time here on the Strategy Skills Podcast.

50:26Thank you.