Episode 29 Special—2016 Review and 2017 Predictions



In episode 29 of Acquired, hosts Ben Gilbert and David Rosenthal reflect on the major tech themes of 2016 and make predictions for 2017. They identify "aggregation theory," network effects, and "start small" as key strategies that have shaped successful tech companies. The duo also discusses the potential impacts of machine learning commoditization, the implications of increasing automation on jobs, and the societal challenges that may arise. Additionally, they express hope that the trend of companies staying private longer will reverse, starting with the anticipated Snap Inc. IPO. The episode concludes with a variety of personal recommendations, ranging from books and articles to podcasts and apps, offering insights into their interests and the resources that have influenced their perspectives.

Summary Notes

Pilot for Startups and Growth Companies

  • Pilot is a company providing accounting, tax, and bookkeeping services.
  • It is now the largest startup-focused accounting firm in the US.
  • Pilot is backed by Sequoia, Index, Stripe, and Jeff Bezos.
  • The company embodies Jeff Bezos's axiom that startups should focus on core product and customer needs, outsourcing non-core activities like accounting.
  • Pilot offers a comprehensive suite of financial services, from general ledger to CFO services.
  • They have experience across startups and can continue to provide services as companies scale.

"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs. And in fact now is the largest startup focused accounting firm in the US."

This quote emphasizes Pilot's role as a comprehensive provider of accounting services and its status as a leader in the startup accounting space.

Aggregation Theory

  • Aggregation Theory was discussed in six episodes.
  • It is a concept by Ben Thompson that focuses on superior user experiences in a zero-cost distribution world.
  • The theory has been influential in analyzing companies and investment decisions.
  • It suggests that in digital marketplaces, the best customer experiences will dominate due to perfect competition.

"Discussed in six different episodes is aggregation theory by Ben Thompson of Stratechery. This, of course, talks about building superior user experiences as the winning strategy in an infinitely accessible, zero cost distribution world, aka the Internet."

The quote summarizes Aggregation Theory's main idea, highlighting the importance of user experience in a digital environment where distribution costs are negligible.

Network Effects

  • Network effects were a dominant theme, discussed in several episodes.
  • True strong form network effects are rare and highly defensible.
  • There are distinctions between single platform and two-sided network effects.
  • Examples like Facebook and LinkedIn demonstrate single platform network effects, while marketplaces like Amazon show two-sided effects.
  • The telephone is an example of a pure network effect with no utility beyond communication.

"So, discussed in six different episodes is aggregation theory by Ben Thompson of Stratechery. This, of course, talks about building superior user experiences as the winning strategy in an infinitely accessible, zero cost distribution world, aka the Internet."

The quote explains the concept of network effects and their significance, particularly in the context of technology companies and platforms.

Start Small

  • The theme of starting small was discussed in four episodes.
  • Companies should focus on solving a specific problem for a specific customer base initially.
  • Examples include Virgin America, Snapchat, Trulia, and Amazon.
  • Starting with a niche market, companies can then grow and expand their user base.

"And you could also think about this as targeting niche markets and then growing from there."

This quote highlights the strategy of beginning with a focused market segment and then expanding to a broader audience as the company matures.

Growth Culture

  • Growth culture involves using data to iterate on product development and market fit.
  • It was first discussed in the context of PayPal and then in other episodes.
  • Companies like Twitch adjusted their focus based on user engagement data.
  • This approach is vital for startups to adapt and find their place in the market.

"You use the discipline of growth to be honest with yourself about what's working, what are people using?"

The quote encapsulates the essence of growth culture, which is about leveraging user data to guide product development and market strategy.

Adjacent Market Entry

  • Entering an adjacent market is crucial for learning and discovering real opportunities.
  • The successful idea often deviates from the original concept.
  • Customer data is essential to understand the market.

"It's so important to get in the space, have a product in market, be able to learn, and then you'll find what the real opportunity is from there."

This quote emphasizes the importance of market entry and learning through customer interaction to identify viable business opportunities.

Trinity of Startup Themes

  • The trinity includes starting small, focusing on a specific problem, and network effects.
  • These elements combined lead to superior customer experience and defensibility.
  • Aggregation theory is the overarching meta theme.

"The output of if you do these three things is you'll create a superior customer experience."

The quote summarizes the result of effectively implementing the three startup themes, leading to a superior customer experience.

Aggregation Theory as a Checklist

  • Aggregation theory can serve as a checklist for starting, pitching, or refining a business idea.
  • It helps to assess the potential for creating a successful company.

"You could do a lot worse than using these as your checklist when starting or pitching or refining an idea."

This quote suggests that aggregation theory is a solid foundation for evaluating the potential success of a business idea.

The Flywheel Concept

  • The flywheel effect describes how improvements in one business area can propel growth in another.
  • Amazon and Disney are classic examples of companies that have successfully implemented flywheels.
  • The flywheel can be seen as a specific type of network effect.

"Any increase in one piece of your business adds momentum and grows an additional part of your business."

The quote defines the flywheel effect and its impact on business growth, using Amazon and Disney as examples.

Network Effects and Economies of Scale

  • Network effects and economies of scale are crucial for business growth.
  • Disney channels consumers into various segments of their business, creating a content-consumer network effect.
  • Airbnb leverages its lodging platform to introduce experiences, creating a flywheel.

"Disney and the companies they've acquired in their flywheel... you could think about it as kind of a content consumer network effect."

This quote explains how Disney's acquisitions contribute to its overall network effect by channeling consumers through different segments.

Maturation of Technology Generations

  • As technology generations mature, competition moves up the stack.
  • The progression often starts at the hardware level and moves to services.
  • This shift can lead to low-end disruption and new market opportunities.

"The basis of competition moves up the stack throughout the generation."

The quote describes the trend of competition shifting to higher levels of the technology stack as generations mature.

Business Model-Based Disruption

  • Disruption often occurs when a new entrant can offer a similar product through a different business model.
  • This can be a significant threat to incumbents.
  • Examples include Waze's crowdsourced data and Amazon Video's inclusion with Prime.

"Anytime if you're an incumbent in an area and somebody pops up that can offer the same product as you and make money via a different business model, you should be very worried."

This quote highlights the threat of business model-based disruption to established companies.

Aggregation Theory in Broader Contexts

  • Aggregation theory is expected to remain critical in understanding disruption across industries.
  • It applies to politics, media, and the broader societal impact of Internet dynamics.
  • The theory suggests a winner-take-all outcome across industries.

"Aggregation theory is going to continue to be critically important and one of, if not the clearest lens through which to view opportunities and challenges and disruption."

The quote predicts the continued relevance of aggregation theory in analyzing opportunities and challenges across various sectors.

Autonomous Vehicles and Universal Basic Income

  • Autonomous vehicles may prompt serious consideration of universal basic income (UBI).
  • The rise of automation could lead to job displacement without creating an equivalent number of new jobs.
  • UBI could address the disparity between wealth generation by companies and the availability of jobs.

"Autonomous vehicles start to make people more serious about universal basic income."

This quote connects the advancement of autonomous vehicles to the increased discourse around universal basic income as a response to job displacement.

Societal Impact of Technology

  • Technology as a lever magnifies the consequences of its application, whether good or bad.
  • The tech industry may need to address the societal impact of job displacement due to automation.
  • The concept of late capitalism and its potential outcomes, including wealth inequality and societal shifts, are discussed.

"Technology is this interesting sword that has to be responsibly wielded."

The quote reflects on the dual nature of technology and the responsibility that comes with its deployment in society.

Economic Motivations and Human Happiness

  • Daniel Pink's research indicates that job satisfaction is not primarily about money but autonomy, mastery, and purpose.
  • Once basic financial needs are met, other factors become more significant in motivating people.
  • These findings challenge classical economic assumptions about human motivation.

"Daniel Pink has done a bunch of research on this, like, what makes people happy in their jobs, it's not really money. It's autonomy, mastery, and purpose above."

This quote emphasizes that financial compensation is not the primary driver of job satisfaction, highlighting the importance of autonomy, mastery, and purpose as key factors for happiness in the workplace.

Flaws in Classical Macroeconomics

  • Traditional macroeconomics is criticized for being flawed and likened to voodoo.
  • The flawed assumptions include the belief that individuals are rational actors with perfect information and are primarily motivated by money and wealth.
  • These assumptions have been proven incorrect, suggesting the need for new economic models.

"I've been reading a bunch of economists lately and realizing that classical and traditional macroeconomics is kind of like voodoo, right? And not effective voodoo. It's really deeply flawed."

This quote criticizes classical macroeconomics for its ineffectiveness and flawed assumptions, highlighting the need to reconsider how economists understand and predict human behavior.

Evolution of Startups and Public Markets

  • The trend of startups staying private longer may be reversing, with the expectation of more IPOs.
  • IPOs allow the public to share in the growth and wealth created by late-stage innovation.
  • Public accountability can drive companies to address major issues, as seen with Facebook's mobile strategy post-IPO.

"I'm hopeful that 2017 at least starts to see the beginning of the end of this stay private longer theme and startups, private technology companies delaying their ipos indefinitely."

This quote expresses hope for a shift in startup culture, where companies will choose to go public sooner, allowing broader participation in their growth and success.

The Role of Data in Machine Learning

  • Basic machine learning methods are becoming commoditized, with a few widely used techniques.
  • Large companies offer machine learning as a cloud service, enabling smaller companies to leverage these tools without extensive in-house expertise.
  • However, the real value lies in the data, with large companies having an advantage due to their vast data sets.
  • Startups can still find opportunities in domains where big tech doesn't have a data advantage.

"The value isn't the algorithm themselves, the value is all about the data."

This quote highlights the significance of data in machine learning, suggesting that while algorithms are important, the data that powers them is where the true value lies.

The Future of VR and AR

  • The potential of VR and AR as mainstream or niche industries will become clearer in 2017.
  • There is anticipation for native VR experiences that are not simply adaptations of existing games or applications.
  • The creativity of entrepreneurs will be key in developing these new, immersive experiences.

"I think 2017 could be a really interesting year for VR and the whole VR AR industry."

This quote conveys excitement for the potential developments in VR and AR, suggesting that the upcoming year will be pivotal in understanding the direction and impact of these technologies on various industries.

Immersive Technology and Context Switching

  • Immersion in virtual reality (VR) can lead to forgetting you're in a simulation due to fewer distractions compared to mobile phones.
  • Mobile phones often cause frequent context switching due to numerous notifications.

ll have lots of problems with them, but where, as opposed to on a mobile phone, where you're getting 16,000 notifications every minute and jumping between contexts all the time, you really do start to forget that you're in a simulation and just get totally immersed in what you're doing.

The quote discusses the immersive nature of VR as opposed to the constant interruptions experienced on mobile phones, leading to a more focused experience in VR.

Political Avoidance and Societal Issues

  • The podcast avoids direct political discussions but touches on societal issues.
  • There is a consideration of how societal changes, like rising abundance or potential scarcity, might affect politics and society.

I'm curious what you think, because for how political we could get on this show, we stay pretty far away from it, even though we sort of discuss societal issues.

This quote highlights the podcast's approach to discussing societal issues without directly engaging in political debates.

Economic Shifts and Consumerism

  • Speculation about a potential shift from an era of abundance to scarcity of physical goods.
  • Factors contributing to this shift could be rising manufacturing costs and political changes, such as increased tariffs.
  • The impact of such a shift on consumer behavior and political reactions is uncertain.

And I was trying to figure out, is it possible that we start moving to an era of scarcity of physical products, where in years past it's been incredibly inexpensive to manufacture overseas?

This quote raises the question of whether global economic conditions and political policies might lead to a scarcity of physical products and higher costs for consumers.

  • There is a trend toward minimalism and owning fewer things, particularly in urban environments with smaller living spaces.
  • Urbanization is expected to continue and influence lifestyle choices, including the aspiration for smaller, more efficient living spaces.

I'm trying to decide if I live too much in a bubble, but it sure seems like there's a trend toward owning less things just to try and be more minimalist, and especially with the shift toward more people being in urban environments and having smaller spaces, that we may just start to see this from a cultural desire perspective, too.

The quote reflects on the cultural trend towards minimalism and how urbanization may be contributing to this shift in consumer behavior.

Year-End Carve Outs: Recommendations Across Categories

  • The podcast's end-of-the-year episode includes recommendations across various categories such as books, articles, podcasts, music, TV, movies, and apps.
  • Each host shares their personal favorites and insights on why they found them valuable or enjoyable.

So for carve outs for this episode, since it's the end of the year, we thought that we would each do a carve out across a whole bunch of basically all the categories that we talked about throughout the year.

This quote introduces the segment where the hosts share their top picks and recommendations from different media and entertainment categories.

Writing and Communication

  • The importance of clear and concise writing is emphasized.
  • A recommended book on writing suggests using plain English and decluttering prose to improve clarity.

And it's this really great, very enjoyable to read book that harps on the importance of writing in plain English, using one word when you can, instead of two or three or ten, eliminating kind of colloquial phrases that are not adding anything to the piece and really decluttering your writing and having clarity of thought.

The quote highlights a book that offers guidance on writing clearly and concisely, which is a skill the speaker aims to improve.

Creative Thinking and Literature

  • Books on creative habits and science fiction are recommended for their insights into creativity and imaginative explorations of the future.
  • The discussion includes the influence of science fiction on real-world innovation and technology.

Really great. Twyla is an american choreographer and dancer and just has. It's a really creative work itself, but a lot of great advice for how to think creatively and structure your life if you are someone from an entrepreneur to an executive to an actual artist who needs to think creatively in your work.

This quote discusses a book that provides advice on fostering creativity across various professional roles.

Evolving Technology and Warfare

  • An article about digital espionage and its potential classification as a warlike act is discussed.
  • The changing nature of war due to technological advancements and the impact of such disruptions are contemplated.

But all indications lead toward we may have a little bit more restrictions and tariffs on trade to encourage things to be built in America under the Trump administration, I'm curious, even if that doesn't come to fruition, do you think that we start to shift back toward an era where goods are more expensive and we have less physical goods?

The quote explores the potential for increased trade restrictions and tariffs to influence the cost and availability of goods, with an underlying question about the future of manufacturing and consumerism.

Music and Entertainment

  • The hosts share their music preferences, ranging from contemporary artists to classic musicians.
  • Concert experiences and discoveries of new music are shared as part of the year-end reflections.

I'm going to bring it back down and declare 2016 the year of Justin Bieber.

This quote expresses a personal musical preference, highlighting the impact of a specific artist's work throughout the year.

Television and Film

  • The hosts discuss their favorite TV shows and movies, including "Westworld" and "Rogue One."
  • The conversation reflects on the thought-provoking nature of these entertainment pieces and their cultural significance.

But that was the piece of entertainment of 2016 for me. It was so thought provoking.

The quote shares the speaker's opinion on the most impactful piece of entertainment for them in 2016, emphasizing its thought-provoking qualities.

Technological Solutions and Apps

  • The discussion includes recommendations for apps that offer practical solutions for transportation and music streaming.
  • The potential for these apps to contribute to larger trends, such as data collection for machine learning, is considered.

My app of the year is one I just started using, which is reach now, the car sharing program by BMW.

This quote introduces a recommended app that provides a car-sharing service, highlighting its practical benefits and user experience.

Future Speculations and Requests

  • The hosts express interest in learning about current science fiction, especially from women authors, to understand contemporary visions of the future.
  • They invite listeners to share recommendations and engage in discussions on the podcast's community platform.

I love reading Sci-Fi but I'm super curious. I haven't read a lot of current science fiction and I would love to hear, read and learn about what people are imagining about the future today, and especially women science fiction authors, which I've read embarrassingly little.

The quote conveys a desire to explore modern science fiction literature, with a particular interest in works by women authors, to gain insights into current imaginings of the future.

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