The Playbook Lessons from 200+ Company Stories

In this special episode of "Acquired," hosts Ben Gilbert and David Rosenthal, along with various guests, discuss the "Acquired Playbook," distilling lessons learned from analyzing over 200 companies. They explore themes such as the importance of optimism, the impact of Moore's law on market size, the significance of letting winners ride, and the power of a will to survive as demonstrated by companies like Nvidia and Zoom. They also emphasize the value of focusing on what makes a company unique, the strategy of either scaling up or niching down, and the importance of owning the business rather than just being talent. The hosts advocate for clear long-term intentions and the joy of genuinely having fun in one's endeavors. Additionally, they highlight Crusoe, a clean compute cloud provider, and discuss the potential of the Internet to disrupt industries like media and education.

• The episode is a special edition of the Acquired podcast.
• Hosts Ben Gilbert and David Rosenthal share lessons learned from analyzing over 200 companies.
• The episode is titled "The Acquired Playbook" and serves as a collection of key takeaways from their analyses.
• David mentions a past opportunity to write a book about Acquired, which they deferred in favor of continuing the podcast.
• They are recording from hotel rooms at Capitol Camp before presenting on stage.
• The hosts emphasize that the episode is a first draft of their consolidated learnings.

"This episode is something that David and I have been thinking about for a long time, years, in fact."

The quote indicates the long-term consideration and preparation that went into creating the episode, highlighting its significance to the hosts.

• Pilot is a sponsor of the episode and is lauded for its accounting, tax, and bookkeeping services for startups and growth companies.
• Pilot has grown from a startup to a billion-dollar company.
• The service aligns with Jeff Bezos's axiom about focusing on core business aspects and outsourcing the rest, such as accounting.
• Pilot caters to a wide range of companies, including prominent startups like OpenAI and Airtable.
• The hosts offer a promotional discount for Pilot services to Acquired listeners.

"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."

The quote emphasizes Pilot's growth and position in the market, serving as a testament to the company's success and relevance to the podcast's audience.

• Ben Gilbert and David Rosenthal remind listeners that their show does not offer financial advice.
• They acknowledge their own research and potential biases, urging listeners to do their own analysis.
• The hosts invite listeners to join the Acquired Slack community to discuss the episode and share their own lessons.
• They encourage feedback and additional insights beyond the twelve playbook themes presented in the episode.

"As always, this is not financial advice. Please do your own research."

This quote serves as a standard disclaimer, reminding listeners to think critically and independently about the content presented.

• The first lesson from the Acquired playbook is that optimism is a winning mindset.
• The story of Sony's co-founders, Akio Marita and Masaru Ibuka, exemplifies this lesson.
• Sony was founded in post-war Japan, a time and place with seemingly insurmountable challenges.
• Despite the odds, Sony became a global icon, influencing Japanese history and inspiring figures like Steve Jobs.
• The hosts argue that being an optimist is rational because it drives progress and can lead to outsized returns for investors.

"So the lesson that we take away from this is, know, even if things are at their bleakest, it's rational to be an optimist."

This quote captures the essence of the lesson, asserting that optimism is a logical stance even in the face of adversity.

• The second lesson relates to Moore's law and its impact on technology markets.
• The hosts illustrate the exponential growth in processing power and its correlation with the increasing market cap of global technology companies.
• They explain how Mike Moritz of Sequoia Capital realized that as long as Moore's law holds, the potential markets for technology will expand.
• The trend of cheaper and more powerful computing has allowed technology to reach larger audiences and create bigger markets.
• The lesson encourages optimism about the ongoing growth and impact of technology.

"As long as Moore's law continues to hold and computing power continues to get exponentially cheaper, the markets that technology can attack should keep getting bigger and bigger."

This quote explains the relationship between technological advancement and market growth, reinforcing the lesson's optimistic outlook.

• The third lesson is about the importance of holding onto successful investments.
• Sequoia Capital's early investment in Apple and their premature selling is used as a cautionary tale.
• Despite realizing a significant return, Sequoia missed out on even greater gains by selling their Apple shares before the IPO.
• The lesson emphasizes the value of patience and confidence in one's investments, particularly in the technology sector.

"They sold their shares for $6 million before the IPO, and they completely cleared out their position in Apple."

This quote highlights Sequoia's decision to sell early, serving as a critical learning point about the potential of long-term investment strategies.

• Investing in technology companies can lead to significant returns over time.
• The example of Amazon shows that holding shares long-term can result in exponential growth.
• It's not the growth rate in a given year that's important, but the number of years of growth that are left.
• Venture capitalists are interested in market size because it indicates the potential for long-term growth.
• A quote from Paul Graham highlights the vast majority of Amazon's growth occurred post-IPO.

"If you had held that Amazon IPO share for 13 years, you would have a nice ten x from the beginning of this graph to the end of this graph, but you really should have continued to hold."

The quote emphasizes the value of long-term investment in Amazon, suggesting that the true growth and returns came well after the initial 13-year period.

"It's not your growth rate in any given year that matters. Frankly, that doesn't matter at all. What matters is how many years of growth do you have left? That is the ultimate question."

Speaker C explains that the key to investment success in companies like Amazon is not the annual growth rate but the duration of growth potential that remains.

"An astonishing 99.98% of Amazon's growth had happened since IPO."

This Paul Graham quote, highlighted by Speaker E, illustrates the significant growth Amazon experienced after its IPO, underscoring the importance of recognizing a company's long-term potential.

• Nvidia's story exemplifies the will to survive amidst fierce competition and challenges.
• Jensen Huang's commitment to the company's survival is evident in his strategies and actions.
• The hero's journey is a common narrative among successful companies, facing and overcoming adversity.
• Nvidia faced immense competition and technological challenges but innovated to stay ahead.
• Zoom's CEO, Eric Yuan, also emphasizes the importance of survival in the tech industry.

"My will to survive exceeds everybody else's will to kill me."

Jensen Huang's quote, as recounted by Speaker C, reflects his determination to ensure Nvidia's survival against all odds.

"You just got funded. It's not a lot of capital. A zillion other people just got funded with the exact same amount of capital that you have."

Speaker E describes the competitive landscape Nvidia faced, emphasizing the challenges of distinguishing oneself in a crowded market.

"Every day I was thinking about how to survive, how to survive, how to survive. Even today, seriously, I still think about my woke up know how to survive."

Eric Yuan's quote demonstrates his relentless focus on survival, which has been a driving force behind Zoom's success.

• Acquiring new resources can increase a company's value and potential for further growth.
• Tesla's high market cap allowed it to raise significant capital with minimal dilution.
• Andreessen Horowitz (a16z) leveraged its resources to rapidly grow its venture capital firm.
• Standard Oil's aggressive expansion exemplifies the principle of using strength to gain more strength.
• Statsig is introduced as a sponsor, offering product teams tools for feature management and experimentation.

"They basically never took their resources and took that as like a static notion of like, oh, good, now we can do some interesting things with this."

Speaker E explains how Andreessen Horowitz continually used its assets as a stepping stone to further growth, rather than resting on its laurels.

"We're in a strong position. How do we get stronger? How do we do more faster and compound what we have?"

The quote captures the proactive mindset of leveraging current strengths to achieve even greater success and growth.

"Statsig is a feature management and experimentation platform that helps product teams ship faster, automate a b testing, and see the impact every feature is having on the core business metrics."

The introduction of Statsig highlights a tool that enables companies to make data-driven decisions and optimize their product features for better business outcomes.

• Plex and Versaille, Rec Room, and Vanta are cited as successful customers with hundreds of clients.
• Statsig is highlighted as a platform that effectively manages the rollout and testing of AI product features.
• Notion's generative AI features are an example of a product that has evolved quickly using Statsig.

"I mean, I'm looking at the list Plex and Versaille, friends of the show at Rec room Vanta. They literally have hundreds of customers now."

This quote is highlighting the success of certain companies (Plex, Versaille, and Vanta) that have a large customer base, indicating their market success and relevance.

"Also, Statsig is a great platform for rolling out and testing AI product features."

This quote introduces Statsig as a valuable tool for companies looking to develop and test AI features within their products, suggesting its utility in the tech industry.

• Silicon Valley and technology are characterized by waves of innovation tied to advancements like Moore's Law.
• Mark Andreessen's realization that it's never too late to catch the next wave of technology.
• Dr. Morris Chang founded TSMC at 56, proving success isn't limited to the young.

"It's never too late. And there are actually two meanings to this lesson."

The quote emphasizes the theme that opportunities in technology are ongoing and it's always possible to enter and succeed, regardless of timing or age.

"Every time there's a ten x in computing, there's a new market, there's a new paradigm, there's a new technology that gets created."

This quote explains the cyclical nature of technological advancement and the continual emergence of new opportunities as computing power increases.

"Morris Chang was 56 years old when he founded TSMC."

This quote serves as an example that age is not a barrier to starting a successful technology company, challenging the stereotype that tech entrepreneurs must be young.

• The misconception that tech entrepreneurship is solely a young person's game is challenged.
• Historical context shows that experienced professionals have always been instrumental in starting impactful tech companies.
• The recent trend of young internet company founders is considered an anomaly rather than the norm.

"This isn't novel. This is only novel recently."

The quote suggests that the idea of young entrepreneurs being the primary drivers of innovation is a recent and not entirely accurate perception.

"A 56 year old can start an important world changing company."

This quote reinforces the message that individuals of any age can found significant and influential companies, countering the youth-centric narrative of tech entrepreneurship.

• Michael Mobison's insight on not confusing options buying with cash flow investing.
• Investing traditionally involves analyzing and valuing a company's cash flows.
• Venture capital, particularly at the seed stage, is more akin to buying options than classical investing based on cash flows.

"Don't mistake options for cash flow."

This quote introduces the concept that early-stage venture capital is more about evaluating potential outcomes than current cash flows, a different approach from traditional investing.

"Venture capital in the early stage is not at all cash flow based investing. It's actually options investing."

The quote explains that early-stage venture capital should be viewed through the lens of options theory rather than traditional cash flow analysis, highlighting the speculative nature of this investment type.

• Jeff Bezos' analogy of European beer breweries and their approach to using electricity.
• The lesson that companies should focus on what enhances their product for customers and outsource non-differentiating aspects.
• AWS's success as an unregulated utility company providing essential infrastructure to other businesses.

"Focus on what makes your beer taste better."

This quote encapsulates the advice to concentrate on the unique selling points of a product rather than on aspects like infrastructure, which can be outsourced.

"Being a utility company is an exceedingly great business, and particularly being an unregulated utility company."

The quote implies that providing fundamental infrastructure as a service is a lucrative business model, as demonstrated by AWS's success.

• The economic theory of specialization of labor applies to businesses focusing on their strengths and outsourcing other functions.
• Specialization increases efficiency and productivity, leading to higher GDP.

"This is actually the same thing as the economic theory of specialization of labor, but applied to businesses."

The quote draws a parallel between economic theories of labor specialization and the practice of businesses focusing on their core competencies while outsourcing other tasks.

• The concept of scaling up or finding a niche is presented as a strategic decision for businesses.
• Brooks Running is used as an example of a company that successfully niched down.

"Scale up or niche down."

This quote introduces the strategic choice companies face between growing to serve a broad market or focusing on a specific niche to achieve success.

• Brooks Running was a generic shoe company in 2002, making a variety of shoes and losing money.
• Jim's leadership refocused the company exclusively on performance running shoes.
• Brooks cut product lines and distributors, reducing revenue initially but setting the stage for future growth.
• Over time, Brooks became a top brand in running shoes, with revenue growing to 1.2 billion.

"Back in 2002, when Jim came in, they weren't, frankly, they were everything to everyone... And so when Jim came in to turn the company around, the first thing he did was decide, we are going to be a running company, and we are going to be a running company for performance runners... They went from 60 million in revenue down to 30 or something like that... last year, they did close to 1.2 billion."

This quote explains the strategic pivot Brooks Running made from a generalist shoe company to a specialized running shoe company, which ultimately led to its financial success and brand recognition.

• Berkshire's investment in Brooks Running exemplifies compounding growth.
• The company has been growing at a rate of 30% to 40% annually for the last 20 years.

"It's such an amazing compounding story. And Berkshire story, they've been growing at 30% to 40% a year for like the last 20 years."

Speaker C highlights the impressive and consistent growth rate of Brooks Running under the ownership of Berkshire, emphasizing the success of their long-term investment strategy.

• The New York Times scaled up to become a global brand, avoiding the middle ground where many mid-sized newspapers failed.
• The Times invested in top-notch reporters and technology, becoming a tech company in its own right.
• The Internet's barbell effect allows small, focused media companies to thrive by gathering a global niche audience.

"The New York Times became gigantic and a healthier business than ever... The Internet, as we know, can be brutal to people caught in the middle... The New York Times is truly a technology company at this point."

Speaker E explains that The New York Times avoided the fate of other newspapers by scaling up and investing heavily in its capabilities, turning it into a technology company that could compete on a global scale.

• The Internet is reshaping industries by rewarding both large-scale operations and niche players.
• Middle-sized entities struggle to differentiate and compete.
• This trend is visible in venture capital, education, and retail, among other industries.
• Market capitalization of tech companies has increased dramatically since the Internet's widespread adoption.

"The Internet is still rippling out in all of its effects... Those caught in the middle are in a tough spot and they're super undifferentiated."

Speaker E discusses the ongoing impact of the Internet across various industries, pointing out the difficult position of companies that are neither large-scale nor niche-focused.

• Crusoe provides AI cloud services powered by stranded or clean energy.
• Their partnership with Nvidia and use of remote energy sources allows for better performance per dollar.
• Crusoe's environmental approach and cost savings are significant benefits for customers.

"Crusoe's data centers are nothing but racks and racks of a... Crusoe's cloud is purpose built for AI and run on wasted, stranded, or clean energy."

Speaker F introduces Crusoe, a company that harnesses unused energy to power AI cloud services, emphasizing its unique business model and partnership with Nvidia.

• Oprah's decision to own her show's business rather than just being talent was pivotal for her success.
• Taylor Swift's efforts to regain the rights to her music changed the industry's structure.
• Content creators can now bypass traditional media gatekeepers thanks to the Internet.

"Don't be talent, own the business... If you want to be a billionaire in the media business, you should do all of those things, and you should ever, ever give away the rights to your content or sell the rights to your content."

Speaker C conveys the importance of owning content and business rights in the media industry, using Oprah and Taylor Swift as examples of successful ownership leading to wealth and control over one's career.

• Jeff Bezos emphasized long-term growth over short-term profits in Amazon's 1997 shareholder letter.
• Amazon reinvested all retail business profits for two decades, prioritizing scale and long-term potential.
• This strategy required clear communication and commitment to long-term goals.

"We will focus on growth with an emphasis on long term profitability and capital management... we choose to prioritize growth because we believe that scale is central to achieving the potential of our business model."

Speaker E quotes Jeff Bezos's 1997 shareholder letter, highlighting Amazon's focus on growth and scale over immediate profitability, which guided the company's strategy for years.

• Acquired podcast chose to treat their audience intelligently, opting for quality over quantity and frequency of content.
• The podcast's approach was not the fastest path to growth but attracted the desired audience.
• The long-term strategy is to build a community of engaged listeners who align with the podcast's values.

"We're obsessed with this idea of treating our audience like they're smart... we ended up with exactly the listeners that we wanted and the people that we want to spend time with because there is a long game to play."

Speaker E reflects on Acquired's podcasting strategy, emphasizing the importance of focusing on a smart audience and playing the long game to build a community of like-minded individuals.

• Enjoying what you do in business can lead to working harder and achieving more than those who see it as just work.
• Genuine joy in one's work can't be faked and is infectious, aiding in growth and marketing.
• Bill Gurley's "running down the dream" talk is cited as an inspiration for this approach.

"If you can find something that you can do with your business, with your life, where you have genuinely have fun doing it... You are going to run farther and longer and faster and better than everybody else."

Speaker C discusses the competitive advantage of enjoying one's work, suggesting that it leads to greater effort and success, and also makes it easier to attract others to your cause or business.

• The speakers encourage listener feedback and community engagement through their Slack channel.
• They express interest in hearing about favorite themes from their podcast episodes.
• The podcast has covered a wide range of topics over many episodes, and they are open to discussing themes they may have missed.

"All right, listeners, hope you enjoyed our talk from capital camp. Please let us know your feedback. Acquired FM Slack."

Speaker B invites listeners to share their feedback and engage with the podcast community, demonstrating a commitment to listener interaction and community building.