Lenny's Podcast: Product | Career | Growth
00:26:35 · Brian Balfour
[00:26:35] S1: Yeah. Well, let me first... Before we get to ChatGPT, I think the natural reaction when when you first realize this, is screw them. I'm not playing that game. Right? Like, that that... That's what I feel like most people, like, how how they react. Right? Because, because the unfortunate truth is 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 basically destroyed a bunch of types of applications and business models because it just you couldn't you feel like it was just wasn't like margin effective. All so many companies built on, you know, SEO loops, right, that are in serious, serious trouble right now if that's their only channel. So so all of these things. Right? And so I think the natural reaction is, yeah, like, like, why would I play this game if I'm a startup or or a company? Like... And you can even see this with, like, ChatGPT as an example. Right? They just launched these, like, deep 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 ChatGPT and have like all of the usage you start to accrue there. Right? It doesn't really make sense in isolation, but we don't operate in isolation. Once again, we operate in a 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. 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, you... There is no opting out of the game. You have to play the game. And and so it's better to be early than than to be super late, to this game, especially if you are a start up. Right? That that... That's kind of like the the the key, that... That's 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 it's it's better to be early as well as than than the key...
00:28:53 · Brian Balfour, Lenny Rachitsky
The harder part about it is 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 ChatGPT and and some of my reasoning behind that. [00:29:12] S0: 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. So 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 Zynga 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 at lunch. I don't know. I'm thinking about the Technology Bros Podcast on Twitter right now, TBPN, where they basically figured out on Twitter, you can create this like 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. So so I think there's like a big call to arms here on most of just the opportunities emerging, and you basically need to pay attention. You can't opt out. That's right. That's right. Okay. Exactly. Chat. Yeah. So let's talk ChatGPT.
00:30:02 · Brian Balfour
[00:30:02] S1: So look. Like like, let's go through this cycle. We are right now. We're in that competitive environment. Like we said, like, all those players we talked about, ChatGPT, Claude, Gemini, all these folks, they're... They are battling it out. Right? And and we've seen this with, you know, the talent awards, especially over the past, you know, month month or so. And and so there's no clear winner yet, but there's consensus around, the category. The second thing is then, okay, what's the moat? Has the moat been identified and who seems to have identified it the first or is furthest along? I think there's... 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 moat is really about is about context and memory. You know, these models, you know, by themselves, if you compare them side by side, you know, they they kind of generate the same results. And so that the actual difference maker is which one has more of your context and and and because it's the context plus the model that produces the best output. And then and then that kind of starts to accrue to this loop around memory. The more you use it, the more it's able to store memory around you, which kind of feeds more personalized context, which produces better outputs. Right? And it ends up being an... You know, another one of those flywheels, another one of those another one of those loops. And so if you look at who's farthest on this, it definitely is ChatGPT. Right? Like, were kind of the first ones to memory. They've been investing a lot in these different types of data connectors, essentially context connectors, you know, 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 Google and Gemini? They have so much distribution through Chrome and all of this other stuff. Right? But it was Deedy Das, who's a VC at Menlo Ventures, actually published some good data on retention of all of these different ones. And, I think the second reason I predict ChatGPT 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.
00:32:15 · Brian Balfour, Lenny Rachitsky
Google had the best retention and engagement over the others. Facebook had... Was smaller but had way better retention and engagement over the others. Right? So on and so forth. And so, the the data that Deedy published, clearly showed that both the retention curves, which I know you and I have both written about at, you know, 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 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 and, like, all of the big winners. It's... There... It's just, like, so elusive. [00:33:04] S0: And the smile curve just to... Just to have people haven't done with that is essentially retention goes up over time. It goes down a little bit, and then you come back to it and you use it more.
00:33:12 · Brian Balfour
[00:33:12] S1: Yeah. That's right. And it's usually the result of, some type of network effect or or something else. And and it... And it's it's a early indicator that these folk... That that that platform is on a trajectory to to hit 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 they've been hiring for a bunch of roles. I've seen multiple postings on, like, product manager, engineering roles, all that kind of stuff for, you know, quote, unquote, agent platform and all those pieces. And so it feels pretty inevitable that they will... One of these players will need to launch a third party platform in order to, you know, serve all the possible use cases, you know, 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 the context and memory and distribution. Right? So there'll be some value issues of integrate to us, and we'll give you those three things. Right? Is going to drive more users and more usage. And and we're going to go through the steps of we're going to go through the steps of the cycle. And you can already see this, right, like, you know, they're starting to form preferred partnerships, right, with some of the bigger players, which paves the way for smaller third party players. It kinda gives Lens credibility to the platform. It's like, well, if HubSpot and x y z are doing it, then I should probably do it too. It's it's like that type of that type of mentality. But that's why I think out of all of these platforms, ChatGPT has, the the best shot right now. And then and then a bunch of folks are always like, well, what about Claude? I really like Claude. I use Claude. Well, the problem with that is, like, I think ChatGPT at this point has, like at least a 10x difference on MAUs. So if you're a developer, right, and you're comparing those two platforms and you're saying and you're looking at it you're like, well, ChatGPT has 10x the number of users and better retention engagement. It'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.
00:35:24 · Brian Balfour, Lenny Rachitsky
And in 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 a ChatGPT. But but I think we're in that part of the cycle. That's my prediction. I might be wrong in the prediction of ChatGPT ChatGPT, but I really think... I feel very confident we're gonna see this cycle play out again. [00:35:45] S0: Two follow-up questions here. One is what's your... What would be the backup if it's not ChatGPT? Sounds like it might be Gemini, Google.