Lenny's Podcast: Product | Career | Growth
00:34:38 · Casey Winters
[00:34:38] S0: I think the first thing is you have to understand that it's their company, not yours, and that founders have impossible jobs. They're not going to scale perfectly with the needs of the company. Like, it's just something's gonna be off. And it may be because there's a whole lot of hubris by being the one of a thousand startups that made it, or, you know, they just have personal styles, but they can run the company any way they want. And I think it's sometimes surprising when founders actually want to run things suboptimally. Like, I think we've seen examples where founders just wanna build cool shit versus focusing on what customers want, or they're too obsessed with the design. They're always rebranding, redesigning things in ways that confuse customers. And, you know, of course, that's gonna happen, and those are some of the the worst cases. But I think, you know, if you do state your point, you've actually built up the expertise, you're confident, and you are refuted for whatever reasons. You have to find ways to be contrarian and prove you're right. And different founders have different forms of feedback they listen to. It might be talking to other CEOs or other operators or trusted advisors, certain customers. Some might be very data oriented. So you just run the experiment and ask for, you know, forgiveness after you prove it worked, whatever. Like, everyone's got, like, a different thing they respond to. So you try to figure out what actually influences, you know, the CEO and build that case, whether it's through an experiment, the right customer intro, the right external adviser. And if they rebuke that as well, then you gotta disagree and commit or find a new company to join or start your own. Like I said, it's their company. They can make the call. I remember when I joined Pinterest, I was just coming off, you know, a 100 x increase in user growth from Grubhub, and I was ready to drive the same sort of impact at Pinterest. But no one knew who I was. I didn't come from Facebook or Google like most of the other people or Pinterest. No one gave a shit about Chicago startups at the time. So, you know, when they didn't trust my proposals, I just went and talked to the heads of growth at all the startups they did respect. I talked to Dropbox. I talked to Facebook.
00:36:54 · Casey Winters, Lenny Rachitsky
And when they said all the same things I was saying, but I said that they said it, not me, that was sadly more convincing. But I didn't care because I still got what I wanted out of it, which is to, you know, do the right thing to grow the company. [00:37:09] S1: And now you're one of those people that people go to. If Casey says it, it's probably the right way to do it. [00:37:13] S0: Whether I'm correct or not, it is a role I sometimes play in the ecosystem, I will admit. [00:37:17] S1: Is there an example where you were convinced something was the right way to go and the founder at one of the companies you worked at had a different opinion, they were... They had ended up being right? [00:37:25] S0: When I was at Grubhub, one of the ideas one of the founders came up with was to build an app for delivery drivers. So at the time, you know, restaurants had their own delivery drivers. They did not work for us. And we wanted to build an app for the delivery drivers so you could see where the food was along the way. You could know if it's a five minutes away, whatever. Right? [00:37:43] S1: Mhmm.
00:37:43 · Lenny Rachitsky, Casey Winters
[00:37:43] S1: Mhmm. [00:37:43] S0: Domino's was the first to have done this at the time, and we thought that would that would make a bunch of sense. And I was just like, how am I supposed to convince the delivery driver who doesn't have a relationship with us to download this app from Grubhub to actually turn it on to create, you know, anxiety for the consumer of, like, they maybe didn't take the right turn or whatever? I was like, I don't think this makes sense. No one's gonna use it. And, you know, Mike and Matt, like, overruled me and and pushed us to do it. And in the long run, it ended up being quite necessary because of the innovations around DoorDash and Postmates and and later Uber Eats into having their own delivery network and and us needing to counter that, that's, of course, a key piece of technology that needs to lever... Have parity with those new services. So that was an area where perhaps they were thinking a little bit more longer term than I was. And, you know, I was not able to kinda get where they were going on on the longer term time horizon of of how this would be actually ultimately adopted and useful. [00:38:38] S1: This is an awesome segue to the next area. But real quick, how did they get drivers to start using this app? Was there anything really clever they did?
00:38:38 · Lenny Rachitsky, Casey Winters
[00:38:38] S1: This is an awesome segue to the next area. But real quick, how did they get drivers to start using this app? Was there anything really clever they did? [00:38:45] S0: I I think it was fairly low adoption for a while and leveraging, basically, restaurant authority. So if we were able to push on our restaurant customers effectively to say, like, hey. If you use this, it'll get you more orders. We'll get you prominence in the the UI, things like that, to then push down, you know, to their direct relationships with the drivers to get them to adopt.
00:39:09 · Lenny Rachitsky
[00:39:09] S1: Awesome. This episode is brought to you by Ahrefs. You probably know Ahrefs as one of the leading all in one SEO tools used by companies like Facebook, Uber, Shopify, LinkedIn, Pinterest, and thousands more. But Ahrefs is not just for big companies. With their new Ahrefs webmaster tools, you can optimize your personal website like a professional for free. Can scan your website for over 100 common SEO issues that might be hurting your performance in search engines, plus get advice on how to fix those errors. You can have it automatically browse your website's internal external links and get actionable insights from your backlink profiles. And you can learn what keywords your website ranks for and see how you stack up against your competitors. Visit ahrefs.com/awt and start improving your website's visibility. That's ahrefs.com/awt. Okay. So shifting to our last topic that I was excited to chat about is around network effects and marketplaces and SaaS and kind of how those things connect. I feel like you have the clearest way of thinking about and explaining network effects. So maybe just to start, can you just, like, simply explain what is a network effect and then the different types of network effects that exist?
00:40:20 · Casey Winters
[00:40:20] S0: Yeah. No pressure after you say that. Right? Yeah. So at its core, a network effect is when a product or a business gets better with more users or customers using it. And there's three types that I tend to focus on. So the first and probably the most well known is called direct network effects, and that's when every additional user makes the product better for all the existing users. So when someone joins WhatsApp, other people can talk to them that they... That wouldn't be able to talk to them before, and that makes WhatsApp valuable... More valuable for everyone. And then there are cross side network effects where there's two distinct types of users, and adding an additional user on one side of the network makes it more valuable for all the types of users on the other side of the network and vice versa. So when a restaurant joins Grubhub, it creates more selection for users to order food. And when more users start ordering more food, Grubhub becomes more attractive for restaurants to join so they can make more money from, you know, delivery orders. The the last network effect I focus on is data network effects. And that's when the quality or cost of something improves as more data is collected through the product. So when you save content to Pinterest, to a board, it gives Pinterest signal on the quality of that content, its relevance to other pieces of content since they're shared to the same board, and more signal on your preferences. And this allows Pinterest to better recommend more content to you as well as to other people who look like you and share similar interests. So, one thing that's tricky about these network effects is most people talk about network effects in the context of social network, not marketplaces or, you know, SaaS, like my background. And the thing that's really tricky in understanding social networks is they're traditionally described as these direct network effect businesses. But all of them have to become either cross side and or data network effect businesses over time. The only companies that stay direct network effect businesses are these pure communication tools like Messenger, iMessage, WhatsApp, and there isn't a clear path to make money with those. But you wanna sell ads? You're becoming a cross side network effect business. And, also, creators versus consumers creates a cross site network effect business.