Uncapped #26 | Ali Rowghani

0:28We live in a world of hedging. worked directly with Steve Jobs for many years. You started and ran the YC Growth Fund. You've been an angel investor in amazing current companies like Cursor, Decagon. You've got your own fund now. You've also been like an advisor to a bunch of people in our ecosystem like me over the years and so many others. And so you're just someone I've looked up to and wanting to talk to you on the show for a long time. So thank you for doing this. Oh, it's a pleasure. I'm psyched to be here. The thing I want to start with that is so interesting to me is the Pixar experience.

0:58and you were there for 10 years around 2000 to 2010, give or take. And what's shocking to me above all is it seems like year after year after year, they just released like bangers and everyone was good. And most movie studios, I feel like some of the products are good, some are not. But like here we had Monsters, Inc., Finding Nemo, The Incredibles, Cars, Ratatouille, WALL-E, Toy Story. Like it's just up. It's just crazy. Yeah. And so I guess my first question is, and I don't think I skipped like a bunch of misses or something. How did that happen? Like, how is the quality bar? What went into making that happen time after time?

1:39You know, Pixar was a miracle factory. That's how I thought of it. You know, you start with a blank sheet of paper. And then four years later, you have Finding Nemo. And then you start with another blank sheet of paper. And four years later, you have The Incredibles, Ratatouille, Up, and so on. So like the interesting question is exactly what you asked like how is that possible? And I think for me I thought a lot about this question. I think for me it kind of boils down to really three big things. One of them is we only made movies that the directors themselves felt really passionate about. It wasn't filmmaking by committee.

2:15It wasn't like some executives ordering up a movie or like let's do a Mad Lib style with focus groups or whatever else. None of that. It was like what was the story that somebody who was really talented truly wanted to tell and then we put all of our eggs in one basket Like there was no thinking in bets. There was no hedging stuff wasn't getting killed along the way No, no, and it was once we were committed to a director and to an idea it was like all in and It was this focus almost like it had to be great the future of the studio depended on it So it would be great What percent of the studio would work on a given movie while it was being worked on?

2:52At the beginning, before we could have multiple films going at the same time, 100 % of the studio worked on one film. So I would say for the first three movies or so, 100 % of the studio worked on the film. And that started to change with Toy Story 2, which I think is kind of the seminal movie in Pixar history. Because Toy Story 2, it was a new creative team, not the creative team that made the first couple of movies. New creative team made that movie. And when the creative team finished up on Bug's Life, which was the second movie, They turned their attention to Toy Story 2, which was supposed to come out just one year later.

3:20And they looked at it and they were like, this isn't good enough. And so they replaced the creative team. They took over the movie nine months before it was supposed to come out. And if you know anything about animated filmmaking, nine months before the movie comes out is like not when you start over. These films take multiple years to make. And they rewrote and remade the movie from scratch. And it almost like killed the studio to do that. But, you know, Ed Catmull talks about that was the moment in Pixar history because faced with a choice of like, Like, do we release something we're not proud of or do we kill ourselves to read something we're really proud of?

3:51The studio made the choice to stop everything and focus on making it great. And that established a culture, like a set of norms and this notion of like we don't think in bets, like we're all in no hedging. Like and I think that really means something. So that's the foundation of it. And then there are two other things in terms of the process that I think are super important. One is like the Pixar films were made and remade and made and remade like a dozen times before the audience ever saw them. And not many people know that. But what we would do is we'd have this process called story reels. And we would expect the directors to write essentially a moving comic strip version of their movie and temporary version of the movie.

4:30Produce that three to four times a year. And it was shown in public within the studio. And, you know, we'd get the brain trust of the studio, creative brain trust together. And they'd give a bunch of notes on this thing. So there was a rapid prototyping process. And the thing that was important was not how bad the movies are when they started, but that they were showing like improvement from screen to screen to screening. And so this like making and remaking, making and remaking process was really important. So that's two. The last thing is there was an incredible sort of like open feedback on the films, meaning like you were expected as a director to hear the feedback of other filmmakers on your movie.

5:07You had the, you know, the decisions were yours in terms of what to do, but but you had to hear it, you know. And so we built this sort of culture of it being safe and OK to show work that wasn't finished, to show imperfect work. and that just meant that the work in process work always got better as opposed to someone working for two years and finally showing you something and you saying like okay that's crap you know if it's that kind of a kind of a culture then the feedback is shattering and it's not sought but if it's feedback where it's like okay to like show incomplete work and the leaders of the studio when they're making films are showing their work when they know it's not very good then it i think breeds this culture of like always getting better.

5:47Yeah. That decade, like the 2000s, I guess Apple was and is also very much like that. Like, you know, you back, you go back and you think about going all in on the iPod and then the iPhone. Like that was also, I guess it couldn't have been a thinking and best culture there either. Right. Certainly in terms of the quality bar, that everything they release to the public has to be great and that you take the time to make sure it's great. I think in that sense, probably. I don't know if Apple had, I think from just hearing from the outside, there were lots of things that were working on that they killed along the way that they just didn't think was good enough.

6:19There was rumors about a television set and all this other stuff that you and I have heard about. So I think there probably are some similarities, but different businesses, different process. I think I didn't fully realize this until we were chatting before, but Steve Jobs was CEO of both, right? He was running Apple through this, I guess, turnaround and getting the sort of iPod and iPhone and everything else in those years. but he was CEO of Pixar during that same time. Yep. And for at least some number of those years, you worked directly with him. So I guess I don't know other people who have worked directly with Steve, so I kind of want to ask a few questions about that.

6:55What was, I guess, just to start, like, what was he like? Like, what was working with him, like, in a sort of regular cadence business? What was that like? You know, he was the most impressive, like, business creature I've ever been around in a room. And it wasn't because he was famous or it was like, oh, there's Steve or anything like that. And in the end of the day, for me, it boiled down to a set of basic skills that he had. You know, his ability to break down a problem in real time, his ability to communicate it really clearly, his ability to inject urgency and kind of like cadence and urgency and importance to everything that we did.

7:35All of this stuff kind of was in service of like, all of his basic skills were in service of trying to create as fast as possible a map of the world, a map of reality in every discussion that would help guide the discussion and help us get to the truth. And so he was so good at developing this, generating a map of the world. And even if he was wrong about certain things, you fed him new data and he would recalculate it. And you always had the feeling being around him that like, wow, I thought this game we were playing was like level one to three. But then you saw somebody that was like at level 20 and it was like incredibly inspiring just the way he did the basic stuff.

8:17So like what are some of those, it's like those basics like communication and like understanding and pulling things out of people. What specific sort of things stuck out to you there? Like can you share more of those like basics done really well? Because I feel like, I can't remember where I saw this recently, but someone's talking about like, if you don't know what like your equivalent of practicing scales is, you like, you don't need to figure that out. And I feel like when you're talking about basics, like that's something that doesn't get discussed enough in like business. Yeah. Because especially as a CEO or an executive or an investor, you kind of don't even know what your basics are a lot of times.

8:49Like what were those? Yeah. So, I mean, it was really some of the things I mentioned. And I think what happens with most of us, you know, certainly with me, is like you get pretty good at communicating. You get pretty good at like exchanging ideas or like trying to decipher something or developing your own mental map of the universe or a mental map of a particular problem, particular discussion. Yeah. And then you feel like you don't need to refine it more. Yeah, and you don't even think about it anymore. Like, you just take it for granted. Like, I'm pretty good at this, you know? And it reminds me of, like, I was a German student.

9:15I went to Germany. And for the first, like, six months I was there, my German was terrible. And every day I would come home and I would work and work and work and work to get my German better. And I got to a certain place where I could no longer embarrass myself and I stopped working. You know? And the thing with Steve was you got the impression that he was, like, always sharpening the saw. He was always, like, you know, it was always it could be better. With everything, it could be better. I could communicate better. The email could be better. I could motivate better. I could communicate. Like he just, it just felt like he really worked at it.

9:43And, you know, I've been asked a lot over the years, what was it like to work with Steve, et cetera. And, you know, I would say some version of this talk about basic skills, you know, not knowing if it really landed or people understood. And then on the 10th anniversary of his passing, I read an obituary that was written for him in the Wall Street Journal by Johnny Ive, who's obviously the famous head of design and worked probably more closely with Steve than anyone. And there was a line in that obituary that really stuck with me. It said something like, Steve was obsessed with the nature and quality of his own thinking.

10:15And he worked so hard at it to be able to always think with a rare elegance, vitality and discipline or something like that. And when I read that, I was like, that's what I meant. That's it. That he worked on his own thinking. So he was not just thinking about like the business, the products, his team. He was thinking about his own thinking as like the generator function of like everything he did and everyone he interacted with and every idea that he like critiqued. Do you think that was like an internal process or did he practice that with others somehow? Like, did he let other people in to give him feedback on his thinking and that's how he did it?

10:56Or was he just so reflective and so focused on it? And I guess the reason I'm asking is if somebody else wanted to do that, if I wanted to try to be better at that, what's like the path to improving my own thinking? The honest answer is I don't know. Like he may have had certainly early in his life people who like, you know, mentored him or that he learned a lot from. But I think, honestly, it's mostly a solitary thing for all of us. And the nice thing, in a way, is we live in a world where a lot of our communication now is recorded. Like, if you think about all the meeting recorders on Zoom, and you give a talk in front of a big group, or this podcast.

11:31You can go watch this, yeah. Yeah, you can watch it. And then you can always ask yourself, like, how could I have been clearer? How could I have asked this better? How could I have been more motivating? How could I have injected more urgency into it? And the important thing is recognizing that there are 20 levels to the game. They're not just three and don't be satisfied with like getting to level three and you're pretty good Because like Steve was at level 20 and then when you when you were so good at the basic stuff The stuff you use every single day to generate your mental model of reality and find the path the strategic path forward Those basic skills over a career Compound more than anything else because these are skills you use every single day It's funny that you say that about it being solitary one of the things that I feel sad about for myself and I think this is probably true for everybody, is I think people don't think enough.

12:13I think people don't just quietly think very often. And any downtime we have, we're on our screen, and people just rarely, I think this is why walks are powerful, honestly. It's one of the easiest ways to just go think. Right, yeah. I mean, another thing about Steve is, he thought really quickly on his feet, for sure, but whenever he had big presentations to give for Apple or whatever, he would spend two months preparing. He would go into this hermit phase, and we would rarely see him during that phase at Pixar. he would come around less and he would just be working on this presentation and so i think there are a bunch of lessons by himself well no i'm sure he had a team but like it was primarily like a lot of focused attention on his presentation and rehearsing and rehearsing it and making it better um look i think the lesson for all of us and especially like the lesson for like anyone trying to get something off the ground or early stage founder or whatever is like like just always focus on sharpening the saw, always focus on that.

13:07Don't assume like, you know, you're good enough ever. There's always better. And if you focus on like the basic stuff, like that, like really compounds. So I guess like think about your own thinking, because if you can make that better, the like downstream impact of it's really profound. What did you learn that you can share about Ed Catmull or John Lasseter, who are the other leaders? I think Ed Catmull was the architect of of the Miracle Factory in my view. And he, you know, like this idea that like, we have to make everything great, which by the way, like if you think about it, you know, again, applying it to like, I mean, what greater aspiration would anyone trying to start anything have than to try to build a Miracle Factory of their own?

13:52And so like, you know, I think really for Ed, it started with like having an extremely high bar for what was great, you know, and always trying to, you know, you perform to your own expectations or you perform down to your own expectations. And like he helped, he and John both, who was the chief creative officer at Pixar, held the studio to an incredibly high bar about what was good. And they were willing to pay the costs of, you know, whatever cost was necessary to maintain that bar. So I think that's the key. It's easy to say, but there's costs associated in their personal and emotional, financial.

14:23There's a lot of costs associated with maintaining a high standard. That's right. So I, you know, I mentioned the Toy Story 2 story. The other, the other story at Pixar was Ratatouille where, you know, the film wasn't coming together and the director of the film was replaced. Another director was put on the film and then the film was essentially, and then they delayed the release of the film by I think six or nine months or maybe a year. I don't know, some period of time, which in animation is a big deal and it makes the movie a lot more expensive. But then Ratatouille becomes like one of these incredible, you know, members of the sort of like canon of Pixar.

14:52There was this great tweet from John Collison and it ended with basically like the world's a museum of passion projects or something like that. Basically just that like every good thing you see in the world, like somebody had to sacrifice a lot to produce anything at a high standard. That sticks with me. That's right. And it hurts. Yeah, yeah. And we live in this world where, particularly investors, and look, investing isn't like Pixar in a lot of ways, but we live in a world of hedging. We live in a world of thinking with bets, backup plans, contingencies, etc. And in a sense, that's very rational.

15:24But what if you didn't live in that world? What if you positioned yourself against that? And what if you tortured everything you worked on to try to be great within the context of a company? And I think that is the core of a miracle factory. Because what you say about how did they repeatably produce success with no flops, it's because they had that mentality. Everything had to be great. It's funny. I would say the thinking in bets mentality is, it's not discussed that much, but it's extremely central in tech, like to how startups think, to how investors operate, to even how people working at startups manage their careers.

15:59I think people think in bets in a real way. And you're kind of describing the extreme opposite. Yeah. And personally, I don't think startup founders should think in bets. There's an argument for investors thinking in bets. It's just a different game. But startup founders thinking of bets I don't think is the right thing. You have to choose the quest that you have extreme conviction in, and you'll sort of die trying to make this thing work because it's so hard, and if you're not committed, pot committed, then it's just that much harder. Okay, I want to move over to Twitter, now X. You were COO there from 2010 to 2014, and obviously those were crazy years.

16:38I guess on some level it seems like for the company all the years are crazy years, but there was a lot going on then. Can you just like tell me about what was happening at a leadership founder level? Like what were the big chess pieces moving around at that time? So when I joined Twitter, we had less than 100 employees. We had no revenue. We didn't have a business model. We weren't sure we were going to make money with ads or some other charge memberships. Like there were all sorts of - The site was going down all the time? The site was going down all the time. The fail whale. The fail whale. Yeah, there was a logo for those who don't remember.

17:07The company built its own logo for the site crashing and site going down, which was the fail whale. That's funny. It was kind of a bit of a laughing stock company. It clearly touched a certain cultural zeitgeist. It had about 15 million users. We just ran Twitter.com. We didn't have any mobile apps. We didn't have any mobile engineers at the company. And about eight months or so after I joined, there's been a lot of founder turmoil between Jack and Ev. And Ev was the CEO when I joined. And he was out. And Biz kind of walked out with him. And so we were sort of founder-less about eight months into the tenure.

17:37And it was both a sort of like hyper scaling challenge because the opportunity was so large and effectively a turnaround because, you know, all the leadership was pushed out. There were a lot of wrong people in the wrong in various positions. It's a very interesting case study because it seems like it had unstoppable product market fit and then was just not run well. That's largely right. It's better than the inverse, I guess. Yes. Yeah. Yeah. Sometimes part of market fit is so powerful that it allows you to make a lot of mistakes at the top. Reddit had this for a long time. Yep. Yeah, that's right.

18:07Yeah. And so, yeah, so I joined it when it was in that state. I left about four or five years later and we'd gone from no revenue to$2 billion in revenue. We'd gone from 15 million users, 300 million users. We'd gone from just one office in San Francisco to 23 offices in 14 countries. And when I look back, I think there are a couple of things we did great and a couple of things I wish I could have over again. I think the two things that we did great, one is I think we got monetization right. And the core of it was I think we figured out before any social platform that if you can make the ad unit and the content unit the same, in our case, tweets, then you have the ability to make ads feel more like content.

18:44And you can judge them based on relevance. And you give advertisers the ability to participate in a conversation. And like my favorite example of this, you may remember, the year when the Super Bowl, like when the lights went out at the Super Bowl, Oreo, which was Oreo cookies, which was an advertiser on Twitter, right at that time when like the lights are out, it sends out this tweet, promoted tweet that talks about like dunk after dark. That's good. So, you know, dunk your Oreo cookie and milk is dark or whatever. Right when the, so, and it got a lot of attention, a lot of buzz and it was just clever.

19:15It was content or was it an ad? I don't know. It made people laugh. Right. So I think we got that notion of the ad unit and the content unit being the same, right? And the nice thing was it was graceful as the platform shifted from desktop to mobile. Facebook at the time, you may remember, kind of stumbled because its ad units were built for the desktop, which is the majority of the users. That's how they interface with Facebook until that changed. And so they kind of had to figure out what their ad units would look like in a mobile world. I think Twitter kind of nailed that. But the second thing is, you know, we scaled the company globally really fast and generally pretty well.

19:48And as a result, there was a big global audience and we built a global business quickly. I think those were the things I think got right. I think the things that I regret or big learnings for me were probably the biggest one is the company never showed enough curiosity about its own users. And we had a mental model of who a Twitter user was that way lagged the reality of what Twitter users were, you know, across all these countries, across all these devices, you know, using it in a narrative way. I can imagine that the early adopters and like the middle of the pack of the curve are completely different.

20:22And this is an interesting thing in any business, which is your mental model of your customer naturally lags. There's inertia in how that model moves relative to reality. And you have to, if you're going to kind of keep up with who your users actually are and what their needs are, you have to actually develop a ton of discipline and a ton of rituals and processes to keep up. I remember Patrick Collson asked me years ago to attend one of their all hands. And this is all I talked about. All I talked about was like, hey, your platform is starting to take off. And let's talk about the ways in which your views of your users are maybe outdated to who your users actually are today and what they're doing.

21:06So that was a huge thing at Twitter. And, you know, unfortunately, you know, there are big product launches that we that we had. One of them was the conversations feature. You remember the blue line? I do remember that. It was so hard to use. Yeah. Well, what happened was probably our most engaged users of Twitter were people who were using the platform to subtweet their friends, often with false identities, kids usually. And that feature broke Twitter for them. So our most engaged users in the United States, we launched a feature that broke Twitter for them. And that was simply because we didn't really understand who they were.

21:36We were building for ourselves. That seemed nifty. And so that's a really dangerous thing to do. The other thing, the other learning for me was we were too precious. I mean, we were too precious about 140 characters. were too precious about the reverse chronological timeline. And I think one of the things I give Elon credit for is he like - Started experimenting. Yeah, sacrificed all the sacred cows. He basically trusted that the network was strong enough that he was free to experiment. Yeah, yeah. Whereas I guess old Twitter was afraid of breaking the golden goose. Yeah, or they had this, there was definitely part fear, but part I think there was a belief that our differentiation was in making the product exceedingly real time and shorter tweets that are reverse chronological, make it more like the pulse of the planet, more real time.

22:22But I think the mistake was that actually wasn't what the majority of humans wanted. It was just what a subset of humans wanted. And also of course you can design the algorithm to make it so that when important stuff is happening, it comes to the top, which is how I think it basically seems to work now. Yeah, that's right. It must be interesting for you to watch Elon do what he's been doing with it, which is so different from what you were doing. And I'm sure there must be a lot of things that he's doing that you think are really good. I'm sure there's some things where you're just like, what are we doing?

22:49I'm curious to hear your observations. Look, I think he made a bunch of unforced errors. I think the check marks thing was really poorly handled. Letting people buy the check marks. Shouldn't have done that. Shouldn't have been handled the way it was handled. Where the thing that verified your identity was suddenly for sale. And of course, somebody bought the drug maker's handle, the check mark, and then tweeted. I did feel like the blue checks thing was driving a lot of people. It made this multi-class system and a thing that I think didn't feel good. So I actually, I think what you're saying is like it wasn't necessarily a bad idea.

23:18It was just the way that it went down. Yes, the rollout was bad. Yeah, it wasn't as thoughtful, you know. But look, I never expected him to change the name. Yeah, that was surprising. Yeah, I mean, I think it's in a sense indicates that he has something bigger in mind and maybe that's cool. You know, he took a lot of costs out of the business. I also wonder if it was just like a sign to say like nothing sacred. Like even without a big plan to just pick, I'll change the name, like says something, I guess. Oh yeah, for sure, for sure, yeah. Yeah, yeah. Took a ton of costs out, yeah, of course. Yeah, but I think you're right.