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It has been a long time since I emailed this group, and I’m writing with book recommendations and an update on a change to this email group.

Before I had kids, I read countless books each year. It was my main hobby. This year I’ve only read a few. I just don’t crave books like I used to. I crave the ideas and stories that you’d find in a great book more than ever, but for the first time in my life, books have fallen behind as the best delivery mechanism. I’ve replaced books with posts, videos, podcasts, and most of all, conversations.

Don’t get me wrong: there is still nothing better than a dense, unique, non-repetitive book. But I’ve learned much more from conversations than books over the past 2 years. So, I will be morphing the nature of this email.

From now on, it will be weekly, and coincide with that week’s podcast. The subject headers will be in the format "Weekly Podcast - [guest name]," so look out for those emails. I will continue to recommend books as before, on an ad hoc basis, and as part of these weekly emails. The new format will include the following (and all of this may change, would love your feedback):
  • Backstory: some detail about how the podcast episode came together
  • The Big Idea: the single idea I’ll remember most about the show 
  • Five favorite quotes from the episodes
  • Related content
  • Tags (e.g. companies discussed)
  • Outstanding questions: things I’m still curious about
  • Wishlist: guests I now want to host a result of this episode
  • Other weekly recommendations (books, articles, other podcasts, etc.)
I intend to use this format to experiment with ways of slicing and dicing the podcast content beyond audio, to see what you all prefer and how I can make a given podcast conversation more useful to more people. If that format is less interesting to you than the old book club format, now would be a good opportunity to unsubscribe so I don’t flood your inbox with unwanted stuff! I hope most of you will stick with me and continue to learn with me. Below is the first version of this new format, but first:

Hiring (2 places)
  1. My firm (OSAM) is hiring front-end software engineers (we are working primarily in HTML and .Net and using Microsoft Azure). We are building an investor platform that allows users to build extremely customized investment strategies. Check those out here https://osam.com/team/careers
  2. I’m also hiring someone to help manage the podcast. More details here.
Ok, now onto the new format:

 
Episode 176: Ben Thompson, Stratechery

Backstory:

I first found Ben’s work years ago, and he’s been one of my favorite business thinkers ever since. When I want to understand a technology company, I first check to see if Ben has written about that company. I first invited Ben to join me two years ago or so, and due to our two crazy schedules, its been an episode long in the making. I’m glad it took so long because the audience is now much bigger, and he’s explored so many new concepts since I first invited him. He is on a short list of people I wish I could interview every month, and if you listen to the episode, you’ll see why. When I speak with leading technology investors in both private and public markets, his name almost always comes up. He's given the tech business community a new language.

The Big Idea:

An “aggregator” is a company which aggregates demand in a vertical and has three key features: 1) it has a direct relationship with its customers, 2) it has effectively zero marginal costs for serving users and 3) its costs to acquire customers fall over time. Level 1 aggregators acquire supply (Netflix). Level 2 aggregators don’t own their supply but incur costs getting supply onto the platform (AirBnb). Level 3 aggregators have zero supply costs and are among the best businesses in the world (Google). Read Defining Aggregators for more.

Related Content:
  • Podcast with Coda.io founder and Spotify board member Shishir Mehrotra (bundling, media)
  • Podcast with Spotify CEO Daniel Ek (Spotify, bundling, aggregators)
  • Podcast with Benchmark Capital general partner Bill Gurley (demand aggregation)
  • Podcast with Benchmark Capital general partner Sarah Tavel (marketplaces)
  • Podcast with Instagram founders Kevin Systrom and Mike Krieger (demand aggregation and creator tools)
  • Ben’s incredible website www.stratechery.com (among the best $200 I spend each year)
Companies discussed:

Spotify, Netflix, Google, Facebook, Amazon, Apple, Foxconn, Largan Precision, Microsoft

Five Favorite Quotes:

"So many companies base their projections on the cost of acquiring a customer at the beginning. The problem is at the beginning, you're serving your ideal customer - the one that really wants your product. Usually your marginal customer gets more and more difficult to acquire."

"SEO is an industry where people pay money to be better Google suppliers."
"This is what regulators have to get through their heads is people are going [to Google]. No one is forcing people to go to Google. No one is forcing people to go to Facebook. They're going there by choice...People using Google instead of using Yelp is a problem of you not liking what customers chose to do. But there's nothing you can really do about that…If you don't understand the nature of their power - which is customer choice driven - your regulations aren't going to work."

"All parts of our economy were previously based on scarcity. In almost every case, that scarcity has disappeared. The way you win on the internet is to be the starting place where people go - Google, Facebook, these aggregators - or you're highly differentiated and you leverage the fact that you have zero distribution to reach anyone."

"Previous publications were more broad based. Future publications will be very, very narrow and they'll take advantage of the fact that their addressable market is not just New York, or it's not just the United States. Their addressable market is the entire world. And I just need to get x number of subscribers wherever they might be and I will succeed."

My outstanding questions:
  • Why hasn’t here been an aggregator in writing? I pay to subscribe to Ben’s newsletter, and a few others, but I’m already sick of spending $200 per new subscription. I’d like a Spotify or Netflix style bundle subscription for writing. I’m reminded of Daniel Ek’s point that every new media company is built first on an archive or IP catalog that already exists and provides a new way of accessing it, perusing it, etc. How might that happen with writing?
  • Are there good examples of “niche aggregators,” that control demand in a smaller area and have bene successful as businesses? If so, what are the best examples?
  • Is he right to wonder if the iPhone is the naturally endpoint for technology platforms: a general purpose device that we don’t need to improve upon much? If so, does that mean that today’s tech companies will dominate for decades to come, similar to how the big three car companies did? This is neither good nor bad if true, but something that will be important for all investors.
Wishlist (guests I want to host as a result of the podcast)
  • Jeff Bezos (Amazon)
  • Reed Hastings + Ted Sarandos (Netflix)
  • Mark Zuckerberg + Sherly Sandberg (Facebook)
  • Jay Z (Tidal, and an all time favorite artist)
Other recommendations

Spillover: Animal Infections and the Next Human Pandemic by David Quammen

Like everyone, I’ve done a deep dive on pandemics in response to the Coronavirus and found this book to be the best resource for an overview of the history of animal-to-human viruses. It drove home how much more humanity has encroached into environments that have many more species (tropics), disrupted those environments, and then spread viruses that start there through a more interconnected world.

Aliens, Jedis and cults

No post has sparked more fun conversation for me of late than this one. You can pretty quickly put famous pairs of people in the alien or jedi camps, and it’s a fun game to play with friends. It also lead to the idea of “access to source” in an organization.
This also reminded me of “Geeks, Mops, and sociopaths,” another of my favorite posts.
Patrick Collison’s list of huge projects completed quickly

I keep going back to this page. Marc Andreesen wrote an instantly famous blog past recently called “It’s Time to Build.” Patrick’s page is even more inspiring to me.
Ten Principles for How to Run a Company

This post by Niko Canner is a great companion to the other posts above. I’ve found it to be a great exercise personally. Building is hard, but I can’t think of anything more meaningful and ultimately rewarding. 

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Let me know what you think of the new format for highlighting this week’s podcast guest—specifically which sections you like and which you don’t.
Copyright © 2020 Patrick O'Shaughnessy, All rights reserved.


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