Lenny's Podcast: Product | Career | Growth
00:04:08 · Brian Balfour, Lenny Rachitsky
[00:04:08] S1: to the podcast. Yeah. Thanks for having me. Excited for this one. I'm really excited to [00:04:12] S0: have you back. We're just gonna dive right in. Essentially, you've uncovered a a really important trend, or insight about how products are gonna grow differently in the future, how growth is changing. And this is something that I think a lot of people need to hear. So I asked you to come on to share what you're seeing. I also think it was just very timely. I think you said, like, you're gonna say in the next, like, six months, things might significantly change. So I'm really excited to do this. We're gonna spend this whole conversation on this on this insight. To set us up, what is just the big idea? What's the
00:04:44 · Brian Balfour
[00:04:44] S1: high level idea here? Just like you, I've spent my whole career just, like, really passionate about startups, you know, figuring out how to build products that win, that emerge in new markets. And, one of the things that I have, you know, learned over time or one of the things you hear a lot is from a lot of folks is, to win, you have to, like, really build a great product. A lot of the advice kind of boils onto that. And one of the things that I feel like I've banged my head against the wall in a lot of ways in my career is actually telling people that building a great product is one of those things that's necessary, but not sufficient. And actually, the separation is between those that build really great distribution. And so, this general partner, his name's Alex Rampell. He's, at Andreessen Horowitz, actually wrote this blog post ten years ago, back in, like, I think, like, 2015. In the essence of the blog post, he basically says, one thing, which is that startups is a game of trying to get distribution before the incumbent can copy. Right? So it's this kind of concept of escape velocity. And so on that note, which I think is a very good summary of what you're trying to do in a startup in distribution, is that we're right now living in this environment where that game of startups kind of getting distribution faster than the incumbent has gotten way harder in a lot of ways, and in some small cases has gotten a little bit easier. But if we think about this the way that it's gotten harder and some of the things that probably a lot of founders or or folks working on the side that probably feel is that one is that incumbents can copy faster these days. Right? So that window that you have to get that escape velocity has actually shrunk. It's, it's decreased. The second thing is that a lot of the organic distribution that we've had, especially over the past few years, has really shrunk as well. So everybody's talking about the decline of SEO and clicks declining, but you also see it in some other cases. Right? A lot of these social platforms don't really let you send as much traffic to sites. You know, LinkedIn just changed their algorithm, which has really dropped organic distribution. Obviously, the Twitter to X transition that happened. Right? Like TikTok's almost always been like that.
00:06:57 · Brian Balfour
And then the third way that it's gotten harder is that AI is really good at writing software, right, in cogeneration. And so everybody's kind of feeling this infinite increase of competition, especially at the startup level. And YC is pumping up six of the same thing every single cohort. Right? Like, that's what that's what it literally feels like. So it's gotten way harder. This game, this escape velocity game, has gotten a lot harder. It's gotten easier in some very exceptional cases, like a cursor or something where AI has kind of been like the spark. You know? I know you wrote, the blog post about the race car engine, and I think you said, like, there's, like, the spark plug in the engine. Right? And and so AI kind of really created that, a a new type of spark, a new type of interest of early adopters to to to fuel some some new players in a short period of time. Right? And so it's amazing to see something like Cursor overtake market share of something like GitHub Copilot in nine months or less. Right? Like, that... That's how fast it happens. It's kinda crazy. But the main thing that people need to understand is, okay. Well, if that's the game I'm playing, right, how to get to steep velocity before the incumbent? Like, what are all the ways to do that? And and to really figure that out. And there's multiple ways that this can happen, but one of the major ways, one of the major major ways that we always see is that, this can happen when new distribution platforms emerge. And because when new distribution platforms emerge, startups are usually the fastest to take advantage of them. It's slower for the incumbents to move. It gives startups this opportunity essentially to play this game. So Casey Winters wrote this blog post about two years ago, maybe, like, eighteen months ago about, the AI technology shift. And his key point was the AI technology shift has been a technology shift that has not come with a distribution shift yet. So if you look historically, we've had a bunch of technology shifts from Internet, to the cloud, to mobile, to social, like all of these different types of things. And some of them come with distribution... New distribution platforms, new ways to distribute products, and some of them don't. But the most powerful ones, the most impactful ones are the ones that do come with these new distribution platforms.
00:09:13 · Brian Balfour
And so, his second key point was that these two things don't actually happen at once. Usually you get the technology shift, then you get the distribution shift a little bit later. So now we're a couple years from that post. We are a couple years into AI technology shift. And one of the things that I am seeing is all of the conditions, all of the ingredients for a new distribution platform to emerge are essentially happening. And so I think we're at an inflection point where we're going to see this emerge really fast. And the key thing for everybody to know is that as new distribution platforms emerge, they follow the same four step cycle, and it's kind of a game that you're playing, that everybody's playing. And so just like any game, you kinda need to know the rules of the game. You need to know the steps of the game in order to have any sort of opportunity to win. And that's kinda like the the the thing that, the that I've lived through once again, both painfully and, also in good ways. And it's something that I'm keeping my eye on and something that I've been talking about. So before we go into that, you know, four step cycle, I figured I'll pause there to see if you you have any follow-up questions on that.
00:10:24 · Lenny Rachitsky, Brian Balfour
[00:10:24] S0: Okay. This is amazing. So, essentially, what you're saying is we've all these ways to grow. There's SEO. There's paid growth. There's sales. All these channels have been around for a long time. They're extremely saturated. Everyone's always complaining. SEO is dead. It can't grow with SEO anymore. It can't grow. Word-of-mouth is so hard. There's so many amazing things now. That's hard. Paid is so hard. It's just... It... Like, all this money Taxi rising. [00:10:48] S1: Yeah. All these things. [00:10:49] S0: Yeah. So all these saturated channels. And what you're saying is there's an emerging new channel that has not yet been saturated, and this is a huge opportunity for companies to get on it. And you'll talk about timing because it's a little tricky to even know exactly when to go big on this. That's right. Yeah. But that's a huge deal. This has been a long time since there's a new way to grow that you can actually use as a lever for growth and not just hope for the best. Okay. That's right. You get into the cycles, do you want to tease what the answer is just to give people a little hint, or do
00:11:21 · Brian Balfour, Lenny Rachitsky
[00:11:21] S1: you wanna keep it secret? Well, to be clear, right, like, okay. So, my prediction will... We don't we don't have a clear winner yet. My prediction of the new distribution platform will be ChatGPT, in some ways that people probably already think it's happening, in some ways that it won't. But the thing that is less important or like that is more important than whether I have predicted the exact winner correctly. The thing that's more important is to under the... Stay in the cycle and and evaluate, like, how to determine where you want to place your bets and how to place those bets, which I know which I know we'll talk about because I... I'm... I could be wrong about the ChatGPT prediction and what's gonna happen there. There's... I think there's gonna be two parts of it. There's going to be what they do with, like, a ChatGPT search experience, but I think the bigger thing will be whatever they do with launching a third party platform on top of ChatGPT. There's a bunch of signals that, they're about to, that they're about to launch that. I'm pretty sure it's gonna be ChatGPT. The thing I'm way more sure about is that some new distribution platform will emerge, and it will follow the same four step cycle. That that... That's kinda that's kind of the key. So could be wrong on the first piece. I am very confident on the second piece. [00:12:40] S0: Okay. Excellent foreshadowing. I completely agree. If it's anything, it would be ChatGPT at this point. Let's get into it. What are the what are the cycles that, platforms generally follow?