20VC Spotify Founder Daniel Ek on Optimising DecisionMaking, Structuring Effective Learning Processes, The Trials and Tribulations in The Transition From Founder To CEO & The Future of Building Prima Materia with Shakil Khan

In this episode of "20 VC," host Harry Stebbings interviews Daniel Ek, the founder and CEO of Spotify, who shares his journey from a non-entrepreneurial background in Stockholm to pioneering the music streaming industry. Daniel discusses the challenges of transitioning from founder to CEO, emphasizing the importance of empathy, courage, and perseverance. He also stresses the role of culture in delegating effectively and creating an environment of safety and transparency. Additionally, Daniel and Harry touch on the direct listing of Spotify, the importance of prioritizing personal life after having children, and the future impact of Ek's new venture, Prima Materia, which aims to tackle significant societal problems with a long-term, impact-driven approach. The episode also features Ek's gratitude to Shaq Shashir for his instrumental role in making the episode happen, as well as his admiration for leaders like the Dalai Lama and Charlie Munger.

• Harry Stebbings expresses gratitude to Shaq for helping make the episode possible.
• Daniel Ek is introduced as a revolutionary entrepreneur and leader of Spotify, with a large user base.
• Acknowledgment of the team effort involving Woody, Christina Stenbeck, Shaq Shashir, Bill Gurley, Alex Nordstrom, and Gustav Söderström.
• Harry Stebbings endorses various services such as Angelist's fund admin platform, Digits financial software, and Cooley law firm.

"Shaq, I thank you for your friendship and I thank you for this episode." "And so with that, I could not be prouder to release today's episode with one of the great entrepreneurs of our time, an individual who's revolutionized his industry." "Woody at TCV, Christina Stenbeck, Shaq Shashir at Coder, Bill Gurley, Alex Nordstrom and Gustav Soderstrom at Spotify. I so appreciate all you did to make this schedule so special."

These quotes highlight the importance of collaboration and support in creating the podcast episode and introduce key contributors to its success.

• Daniel Ek shares his upbringing in Stockholm with non-entrepreneurial parents.
• His hobbies were music and technology, which led to accidental entrepreneurship.
• Ek's early business ventures involved creating websites and managing teams in school.
• He realized the gravity of entrepreneurship after the dot-com bubble burst.

"No one around me was an entrepreneur. No one I knew was an entrepreneur." "I only had two hobbies growing up. Music and technology." "I had basically an illegal sweatshop in school with all the kids who were good at math. I taught HTML and all the kids that were good at art. I taught how to run Photoshop and do web pages."

Ek's quotes provide insight into his initial lack of entrepreneurial aspirations, his passions for music and technology, and his early business experiences, which inadvertently set him on the entrepreneurial path.

• Daniel Ek discusses how he deals with self-doubt by viewing challenges as opportunities.
• He emphasizes the importance of enjoying the journey rather than focusing on the destination.
• Ek encourages embracing the learning process and the satisfaction of overcoming obstacles.

"I don't think I necessarily ever knew that I couldn't do it." "I've always been more focused on the journey itself and liking the pressure of having a lot of people that expect you to come through."

Ek's perspective on self-doubt is rooted in a positive attitude towards challenges and a focus on the process rather than the outcome.

• Daniel Ek differentiates between high variance and low variance problems when delegating tasks.
• He uses the framework of one-way versus two-way doors to assess the reversibility of decisions.
• Ek aims to find leverage in the organization and continuously put himself out of a job.

"My way of approaching a problem is to try to understand if we're dealing with a high variance or a low variance problem." "Is this a one-way door or is it a two-way door?"

These quotes explain Ek's strategic approach to problem-solving and decision-making, focusing on the potential impact and reversibility of decisions.

• Ek describes his learning process when taking on a new role or challenge.
• He aims to understand both sides of an argument to fully grasp a problem.
• Ek uses the metaphor of descending in altitude to illustrate increasing understanding of a subject.
• His learning involves reading, talking to experts, and embracing discomfort until it becomes familiar.

"The perfect point to which I feel like I understand the problem well enough, would be when I can argue the counterpoint to why something works and why something doesn't work." "You start seeing the elements that make up that city. You start to see the nuances much, much further."

Ek's quotes shed light on his methodical approach to learning and mastering new areas, emphasizing the importance of understanding the nuances and core elements of a subject.

• Daniel Ek discusses the challenge of hiring world-class talent without prior exposure to such individuals.
• He stresses the importance of understanding the role and tasks required of the candidate.
• Ek suggests that spending time understanding the role is key to identifying world-class talent.

"How do you know how to hire world class people if you have never seen world class?" "A lot of people just don't spend enough time trying to understand what the role that they're asking the person to fulfill."

These quotes address the difficulty founders face when hiring for roles outside their expertise and the necessity of deeply understanding the role to make informed hiring decisions.## Role of the CFO

• Different types of CFOs (operational, financial, strategic) are needed depending on the organization's needs at a certain time.
• Founders should consider what success looks like for a CFO candidate after a year or two.
• Skills and experience are important to determine if a candidate can achieve the envisioned success.
• Founders should work backward from the desired future success to identify the necessary skills and experience for the role.

"Are you looking for an operational CFO? Are you looking for a financial driven CFO? Are you looking for a strategic level CFO?"

This quote highlights the different CFO roles that a company might be looking to fill, emphasizing the need to tailor the search to the organization's current needs.

• A delegating CEO must foster a culture of trust and transparency.
• Educating the organization on decision-making processes is crucial before delegation.
• Focus on the decision-making process and inputs, rather than just outcomes.
• Spotify's culture tolerates mistakes but requires proactive communication and learning from failures.
• Fostering team dynamics where team members support each other is essential.

"So you have to actually spend a lot of time educating the organization, even before you're getting to a point where you can delegate things to them."

Daniel Ek emphasizes the importance of educating the organization on decision-making as a prerequisite to effective delegation, underlining the need for a supportive culture.

• Bad news tends to travel slower and appear worse than it is, whereas good news travels faster and is often exaggerated.
• Creating an environment where team members feel safe to share bad news is necessary for continuous improvement.
• It's a challenge to encourage openness about failures and mistakes within the company culture.

"I think the natural instinct in people are obvious to try to not talk about the bad things, but to promote the good things."

Daniel Ek acknowledges the human tendency to avoid discussing negative issues, which can be a barrier to fostering an open and honest company culture.

• CEOs often regret letting poor decisions linger instead of acting quickly.
• Patience can be beneficial when it comes to developing talent within the organization.
• Growth is not linear, and it's essential to measure the rate of growth in individuals.
• Betting on talent can result in highly loyal and inspirational team members.

"Now, like many ceos, I would say that my worst mistakes were usually around letting things linger for way too long, and I was dragging the decision forward before acting on it."

Daniel Ek reflects on his past mistakes of delaying tough decisions and the importance of acting decisively for better outcomes.

• The transition from founder to CEO is significant and should not be taken lightly.
• Not all founders should remain as CEOs as the company scales.
• The tech industry often has a misconception that founders must always be CEOs.
• Being a CEO requires adopting new skills and roles, including managing different business areas and stakeholders.

"I think it's one that we should actually pay a lot more attention to, first and foremost, because I think the common belief at the moment, in especially Silicon Valley lore, is that the founder should always be the CEO."

Daniel Ek challenges the prevailing notion that founders should always transition into the CEO role and suggests that this is not always the best path for a company.

• The journey from founder to CEO involves continuous learning and personal growth.
• Motivation from the learning process can drive the transition.
• Understanding traditional industries and their practices can be beneficial.
• Adapting and adopting different business practices to fit the organization's needs is part of the CEO's role.

"And so I was motivated by that journey."

Daniel Ek expresses his motivation to grow and learn throughout his journey from founder to CEO, emphasizing the importance of embracing the learning process.

• Transitioning to a CEO involves both skill development and personal growth.
• The CEO's personality can become interwoven with the company's culture.
• Recognizing and overcoming personal challenges is part of developing into a great leader.

"I think the hardest thing that founders don't realize about becoming a CEO is that you have to change along the path, and it's as much of a journey of learning skills as it is a personal growth journey of becoming a great leader."

Daniel Ek discusses the personal challenges and growth that come with transitioning from a founder to a CEO, highlighting the transformation required on both a professional and personal level.## Personal Growth and Adaptation

• Daniel Ek reflects on the necessity of personal evolution as a leader.
• He discusses the challenges of being an introvert and learning how to engage with new people.
• Ek emphasizes the importance of being authentic while still adapting one's behavior to meet the needs of their organization and team.

"But since it is a teenager at this point, I have to realize that I can no longer dictate what they do."

This quote illustrates the idea that as a company grows and matures, like a teenager, the founder cannot control everything and must adapt their leadership style.

"I'm a huge introvert as an example, and weirdly enough, I don't have a problem speaking in front of very large audiences."

Ek shares a personal aspect of his character, highlighting the difference between his comfort with public speaking versus interacting in smaller, more intimate groups.

"I had to start actually going up to people I don't know, ask them a bunch of questions, which is scary as hell."

Ek describes how he pushed himself out of his comfort zone to engage with unfamiliar people, a necessary change for the benefit of his leadership and company culture.

• Daniel Ek discusses the balance between changing oneself and retaining core identity when transitioning from introvert to extrovert.
• Ek believes that changes should be embraced only if they contribute to happiness and authenticity.

"My view is I don't think you can ultimately change anything about yourself unless you're happy about that change."

Ek expresses his belief that personal changes are only sustainable and positive if they are aligned with one's happiness.

"I'm mostly still who I am, an introvert, but I'm a somewhat well functioning leader in the sense that I can be approachable."

This quote highlights Ek's balance between maintaining his introverted nature while adapting to be an effective and approachable leader.

• Daniel Ek explains that Prima Materia is a holding company, not a fund, focused on solving significant societal problems with technological solutions.
• The company operates without the conventional timelines of venture capital, focusing on long-term impact over immediate viability.

"We're trying to do things that can impact not in the next five or ten years, but has a major impact in 20 or 30 years."

Ek outlines the long-term vision of Prima Materia, differentiating it from the short-term focus common in venture capital.

"It's not like I ever wanted not to talk to other people, right? I wanted to, but I was just shit scared about it."

Ek reflects on his personal challenge with social interactions, emphasizing the difference between desire and fear, and how he worked to overcome it for the sake of his leadership role.

• Daniel Ek discusses the impact of removing timeline constraints on entrepreneurship.
• He acknowledges the benefits of the current industry standards but suggests that some problems require a foundational approach that doesn't adhere to typical timelines.

"There are certain types of problems where the foundations doesn't exist to allow you to get a product to market quickly, where you have to actually solve not one science problem in order to get it to market, but you may have to solve two or three."

Ek identifies the unique challenges in addressing complex problems that cannot be rushed by traditional funding cycles.

• Daniel Ek praises Shaq's ability to identify and nurture talent, as well as his vast network and influence.
• Ek values Shaq's non-traditional, relationship-oriented approach to business and problem-solving.

"He has an insane ability to find talent and to help nurture that talent and see things in others that they may not even themselves realize yet exist."

Ek commends Shaq for his exceptional talent detection and development skills.

• Daniel Ek discusses the changing attitudes of European founders and the increasing willingness to scale their companies globally.
• He emphasizes the need for a supportive ecosystem in Europe, similar to Silicon Valley, to foster long-term success.

"I think all of that was true. I'm not so sure it is true anymore."

Ek challenges the notion that European founders lack ambition or sell too early, suggesting a shift in mindset has occurred.

"What I don't think necessarily exists is the cluster of the ecosystem to the same degree that Silicon Valley and Seattle in particular have."

Ek points out the lack of a robust, concentrated tech ecosystem in Europe, which is necessary for the region to compete globally.## Accelerating Startup Growth with Talent Infusion

• Harry Stebbings suggests that startup growth could be accelerated by infusing them with world-class talent.
• He proposes stacking strategic initiatives with next-level talent, experienced individuals who can contribute significantly at an earlier stage than usual in startups.
• The idea is that this approach would derisk the venture and provide greater opportunities for rapid and substantial growth.
• Prima is mentioned as a potential platform for finding large problems, funding them with patient capital, and injecting top talent, including convincing Europeans in Silicon Valley to return to Europe.

"Maybe there should be five or ten really strategic initiatives where you just stack it full of talent, like insane talent, like next level talent, the types of people that have been there, done that before."

The quote underscores the strategy of concentrating talent in a few strategic initiatives to enhance the growth and success potential of startups.

• Daniel Ek discusses Spotify's first investment in a company called Green Steel.
• Green Steel aims to revolutionize the steel industry by creating renewable steel for car construction.
• The investment was influenced by the realization of the car industry's impending shift to electric vehicles and the accompanying need for environmentally friendly components.
• The steel industry contributes to a significant portion of global emissions, and Green Steel's ambition is to create carbon-neutral cars.
• The project is a large-scale investment, including the construction of factories, ports, and railways, and it is powered by hydro energy.

"This type of scale that we're talking about before. And it's just super fascinating thing here is like, this thing has the potential of really changing the whole car."

The quote highlights the transformative potential of Green Steel's project on the automotive industry and its environmental impact.

• Daniel Ek finds the most challenging aspect of his role is to inspire thousands of diverse employees at Spotify.
• He aims to tell a story that resonates with everyone, motivating them to contribute significantly to the company's mission.
• Ek seeks to harness the collective energy of the workforce to achieve remarkable outcomes.

"How do I tell a story that touches them in a way where they are inspired to do the best work in their career?"

This quote reflects on the challenge of creating a unifying and inspiring narrative that can reach and motivate a diverse group of employees.

• Daniel Ek credits former CFO Barry McCarthy with the idea of Spotify's direct listing.
• The direct listing approach was chosen for its fairness and transparency, allowing market forces to determine share prices.
• Ek values the ability to share Spotify's vision with a broad investor base and the absence of lockups, allowing employees to trade shares freely.

"It's all about fairness and transparency."

The quote encapsulates the rationale behind Spotify's decision to pursue a direct listing, emphasizing the importance of equitable treatment for all investors and stakeholders.

• Daniel Ek hopes his children will adopt empathy, courage, and perseverance.
• He values the ability to understand others, the bravery to forge one's path, and the resilience to endure challenges.

"Empathy for other people, other people's situations."

The quote highlights empathy as a crucial trait Ek wishes to instill in his children, reflecting a broader understanding of diverse life experiences.

• Having children has increased Ek's empathy and improved his prioritization skills.
• Parenthood has made him more understanding of the work-life balance and the importance of being present for significant moments in his children's lives.

"I will never, ever miss one of their birthdays."

This quote illustrates Ek's commitment to prioritizing family events and the impact of fatherhood on his leadership and time management.

• Daniel Ek admires the Dalai Lama for his wisdom and Charlie Munger for his business acumen.
• He is inspired by leaders who possess qualities different from his own.

"I probably look up more to leaders that are very far from me in my own sort of mentality and my own skill set."

The quote reveals Ek's admiration for leaders who offer perspectives and skills that differ from his, indicating a respect for diverse forms of leadership.

• Ek remains focused on Spotify's mission to enable a million artists to live off their art.
• With Prima, he aims to tackle significant societal problems like climate change and health.
• Success for Prima would be materially impacting society by addressing these large-scale issues.

"I would feel very pleased if one of these things had the impact of something that was really material to society."

This quote conveys Ek's aspiration for Prima to have a tangible, positive effect on society, particularly in solving critical global challenges.