Rob Walling Introduces Jason Cohen and G2i
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When you mention start up for the rest of us, that's G2 i.co/rob, you're listening to Startups for the rest of us.
I'm your host, Rob Walling.
In this episode I talked with Jason Cohen.
You might know him online as a smart bear.
He's been blogging for almost 20 years at asmartbear.com.
He has started 2 unicorns, including WP Engine, of which I was an Angel investor as my first ever Angel investment back in 2011.
And Jason has just been a longtime supporter of Micro Conf and now Tiny Seed.
He has given several talks at Micro Conf, including one that is widely considered to be the best talk ever given at a Micro Conf.
And I think it's the best talk ever about bootstrapping startups.
And we talk about that in this episode.
I actually struggled to title this episode because we talked about so many topics, including mistakes founders make in the early days.
We wrap it up with a discussion about AI and where Jason feels like the opportunity would be if he was starting over today.
But in the end, we cover some meaty topics and Jason is is just so thoughtful and deliberate in his thinking and so clear in his thinking.
I've infinite respect for him and it was a pleasure to have him on the show today.
Jason's actually going to be speaking at Microconf US in Portland in just a couple months.
Tickets are selling fast and we will sell this event out. microcof.com/US if you're interested.
And the promo code you'll want to use is Rob 50 for $50 off.
And with that, let's dive into our conversation.
Jason Cohen's Philosophy of Hidden Multipliers
Jason Cohen, welcome to the show.
Speaker 2
Hey, thanks for having me.
It's always great to talk.
Speaker 1
It feels criminal that this is your first appearance on startup to the rest of.
Speaker 2
Us.
No, I don't understand.
Maybe because I was busy the last 15 years.
I don't know.
Speaker 1
So, yeah, what have you been up to, man?
Growing another Unicorn?
No, it really, I mean, you and I talk often enough that I just and you've spoken at micro comp so many times that it just feels like you're a staple in the ecosystem.
And when producer Ron and I were talking, it was like, how is how has Jason never been on the show?
Like that's it's, it's not great.
Speaker 2
Well, I mean you were an investor and you're an Angel investor in in WP Engine.
So, you know, you're probably happy that I stayed focused on that instead of doing podcasts.
Speaker 1
Heck yes, man, that bought our house, paid cash for our house that it was.
It was great.
So a lot of folks will be familiar with you as the founder of WP Engine as well as a Smart Bear, which was the software company before that.
Both are unicorns at this point.
And you've been a long time Blogger at asmartbear.com.
Hundreds of essays if I were to guess.
But what did I miss in that intro?
Like how else would you like folks to to know who you are and what you do?
Speaker 2
I think that's I think that's good.
That's that's my best work.
Speaker 1
Well, that's your best work in the rearview mirror.
I want to call people's attention to
[email protected].
It's your first book that you have for pre-order right now.
Speaker 2
That's right.
Yeah.
So I'm not here to promote it, although maybe we can do another one which where I am there to promote it, I don't know.
But yes, it's, you know, I've been writing for 18 years, like you said, but one of the things I felt was I've been writing on all these topics, but there's no like central idea.
There's no central framework.
There's no like it's just a bunch of random stuff.
And so when things would come up in conversation or online or whatever, and I'd say, Oh yeah, I wrote about that over here, wrote about, it's so scattered.
And people would say things like, do you have just like stuff about marketing?
And I'm thinking, yeah, kind of scattered over a million things, you know, it's not not very accessible.
So the, the purpose of the book wasn't just to take every every idea and make it organized, but rather I thought, I wonder if I do have any central concepts.
Do I have a philosophy I don't even know?
And so for maybe a year, I, I just thought like, I don't know, I can't, I don't know that I, if I have one.
And so I didn't want to just write an anthology.
But then there was this common thread I found.
And, and at least a lot of the things that I think, which is that they're these small things that make an inordinate difference in companies.
And of course every company is different and all that.
So all those normal things apply, but there's some things which are systematic and mechanical about how companies work or how people buy things or how human nature is how teams work something or even about like AB testing and the math behind that.
Like certain things which are true because they're built into how it normally works.
And that's why these things were a small change can make a big difference.
That's why that's so.
I don't want to say universal, it's not, but so common because it's based in some systematic fact about the world or how things work.
And then another criteria I found that was interesting is, of course, if you can raise money or apply a lot of new money and teams to something, there's many possibilities and that's good.
Maybe you should do that.
But most of the time we have a team, we have a budget, and we need to do things within that team in that budget.
So if the feeling is, man, I'm not growing as fast as I want or I'm not as profitable as I want, or I'm not getting this or that goal that I want, usually the answer is not, Oh, I got to go raise a bunch of money, right?
Like almost always we even if you have raised money, that's usually not the answer, right?
Usually it's like we have people doing stuff even if it's one person and surely we could be doing something a little bit better.
So this is this extra criteria that I thought was interesting to add on top of this, small things make big effects.
It's systematic.
So it's usually true.
You can pretty pretty much rely on it.
And this idea of I've got to do with my current team and budget.
So it has to be doing something differently, but not some kind of big investment or something like this.
And I found that there were these things which fell into this category.
So that's how I define this idea of a hidden multiplier, Multiplier being this notion.
And then hidden is another funny word.
Sometimes these things are hidden just because you didn't know it.
Sometimes you didn't know it, but it's on A to do list with 10 things and you didn't realize how important it was.
So it's hidden in that sense.
I once had a, a great strategist tell me a lot of times what's wrong with a strategy is not that we didn't know something, it's that we didn't realize how important that thing was.
So this these can be like that.
Or maybe you did know it, but you didn't know what to do or you're scared to do something about it.
So without an explanation of what do I do?
It just sort of hangs out there.
And the form I see that in as people will say, I already knew that.
And then you look at their actions and you're like, well, you're not acting like you know that.
So it's like, effectively you don't know that, right?
And so that that's what I mean by hidden this kind of somehow or another, you're not taking advantage of it.
So that's what this book is, is is like 10 of these hidden multipliers, one per chapter, just going in great depth of course, about what is it, motivating it, proving it with examples and then saying, of course, what to do.
Speaker 1
And this is, I was surprised to hear that this is majority new material that obviously use some concepts and ideas from your blog.
But you've you've been hammered on this original work for what, a year now?
Yeah.
Speaker 2
I didn't want it to just be an anthology of or mix rehash of the blog.
But obviously there's some stuff in there that is in the blog because these are, I've had certain ideas in the last 18 years.
Some of them are good.
So you know, that's, that's only natural.
But yeah, I didn't want it to just be a be a rehash.
How Writing Helps Jason Cohen Develop Frameworks
There are a lot of founders out there that are successful and they never, but they aren't public about their thought process or their mental frameworks, and maybe they don't have any.
Maybe they just figured out in its instinct, maybe they get lucky, whatever.
Then there are folks that are successful and they are public about what made them successful.
And then there's two camps there.
I'll see someone do a talk and they they'll say, This is why I was successful.
And you're like, no, it's not like you're foolish either.
You're either you're lying to yourself or you're lying to me.
You know, you're like, you're delusional.
But then there is this small, small camp of folks, and this is all arbitrary designation based on my opinion or your opinion, who have found success and think critically about what they they've done and try to extract higher level learnings that go beyond just their end of one or two.
And that tend to when you, when you hear what they say, Paul Graham's one of these guys, right?
Joel Spolsky, yourself, when you hear what they say, you're like, yeah, I know that generally tracks.
That's a really unique insight that sounds obvious in retrospect, but no one has said it in that way before.
OK.
So I totally put you in that bucket.
And it's very rare.
There are not thousands of these people in the world in in the startup space.
You know, maybe there are hundreds.
I don't know if we could quantify it.
So I guess I'm just wondering how you got there.
Like, have you always been a critical thinker, analyzing your own behavior and what's going on around you and trying to framework things?
Or did this kind of evolve for you as you were starting companies?
You're like, oh, I'm learning a thing and I should just share that with the world on this on this blog that you started in what, 2007 or 8?
Speaker 2
Right.
For me, writing is thinking and and I have this, this drive to teach.
Both my parents were teachers.
I think it's literally in the in the DNA.
And of course, we all know that if you want to learn something the best, you teach it.
On the other hand, can you teach something you've never done?
A lot of people do.
This is just not me, right?
So I think that's another reason people like it is at least this came from experience.
And So what what generally happens is I'll have a thought either because I observe it in some other company, I observe it in our own company, we've learned something, something went wrong, something went right.
And that'll give me an idea for a thing like maybe it's a framework or a concept or a story or something.
But in writing it out, I often find, wait, maybe that's not right.
Or maybe I don't even agree with myself and I haven't even published it yet, you know, and, or maybe I do like it and I'm just even more excited about it because, oh, look, I'm finding other examples.
I don't know, like, you know, I could get more excited.
So I mean, I have hundreds of things in draft that I'll never write because I, I don't actually believe it or I, I haven't figured it out well enough.
I haven't sorted it out well enough for myself to put it out there.
So a lot of these things are, oh, it seemed to be right.
We wrote it down.
Then we tried it at WP Engine, say, especially if it's a framework, we probably, I mean, I could, I can name them where we, we did like we tried and then we, we iterated on that and we tried it again with a different team.
And then we iterated.
And so the result when it comes out, it's like, wow, this, this seems really thought out.
It's like, yeah, that's because we, we actually did this and iterated on it.
And I tried to, I tried to explain it as best as I could.
And if you write for a long time, maybe you're better at writing, you know, hopefully, right.
So OK, now I can do that.
So yeah, often that that's where that comes from.
Having said that, I don't think the goal, at least not for me, is to convince everybody that I'm right.
It's equally valuable if someone reads an article of mine and says, I don't believe this is total crap.
I don't believe this at all.
I believe the opposite.
No, it's this, you know, that's perfect because what's happened is you've gained greater clarity on what you do believe, what is your philosophy or your values or how you operate or what's important or how you, you know something important You've now gotten greater clarity on because I was a foil.
That was not what you thought.
And that that led you to what you do think in more, in greater relief.
And that will make you better, make you stronger and clearer and in whatever direction you're going.
So to me, the goal is that this kind of like, oh, now I think X or now I'm clear on Y.
That's the goal, which is not the same thing as agreeing, right?
So that's fun.
Obviously there's a, there's like AI don't know, constructive and not constructive way for people to say that online.
You get both.
But I, I love it when people have the opposite view.
Also, we all know that for every piece of advice or observation of business, the opposite is true of some companies are successful, and both it and its opposite are true of companies that fail.
We know that all four of those are populated with companies populated with examples.
So once again, there's no way I'm going to think that that means I'm right all the time.
But again, if I can, if, if someone can get clarity that's that's really useful.
Designing the Ideal Bootstrap Business & Weak Links
So how do you do that?
You have to say something useful, something real, something specific, hopefully in a way that's relatively well put so that it's enjoyable to read.
And by doing that, you know, hopefully someone will get something out of it.
Speaker 1
I'm curious, you know, a lot of this stuff that you write about has to come from first hand experience because you've, you've started four companies, 2 are unicorns, but you're also an Angel investor and an advisor.
We kind of a founding member of Capital Factory in Austin.
Am I remembering that correctly?
So you've been exposed to dozens, if not hundreds of startups.
Do you feel like like more of your knowledge and information that you share comes from your first hand experience or from the experience with with other companies, advising on the Internet or otherwise?
Speaker 2
I would say when it comes to specific things like this decision framework with this prioritization or this workshop that's coming from WP Engine, that's coming because we tried things and this seemed to be something that worked for us or for some teams.
And so that seemed worth sharing.
When it comes to more strategic or high level long reaching things, some of that's experienced my own experience, but a lot of that is like, oh man, I've seen this like 20 times, which obviously doesn't mean I saw it in my own 1 to 4 examples.
So the 30th time you hear someone pitch something and you go, Oh my God, you know that that's coming from from a breath.
So I, I would say we're personal psychological stuff obviously starts for myself, but a lot of that isn't talking to other founders where there's certain kinds of things where, you know, 80% of the time that I share.
Oh yeah, I felt like this or I felt like that.
And you know, almost all the time the other person's like, Oh my God, I thought it was just me or I didn't.
I can't believe you're admitting that.
And that that again, is some kind of not universal, but, but, but you know, pretty useful good truth there.
That's coming from talking to other people, right?
That that's the only validation, that it's not just me.
Speaker 1
So you have what I believe is widely agreed to be the best microphone talk that's ever been given.
And I know I make you blush when I say this, but that you just you mic dropped with this talk back in 20.
I don't know if it's 13 or 14, but it's called designing the ideal bootstrap business.
And I was in the room when you gave that talk and I was just I was holding my head.
I was like, oh, like as you were giving it and then you got done and I turned to whoever was next to me and I said, I don't think I'll ever give a talk that good.
That's the best talk I've ever seen.
It was huge.
And I'm I'm serious, like and it has lived on and I still believe I was trying to pull it up on YouTube right now, but I believe it might be the most popular talk on our Yeah, of course it is on our entire.
What used to be the Micro Com channel has now been renamed to to Rob Walling.
But 510,000 views.
Speaker 2
That's awesome.
You know what?
Here's here's something funny about that, which should be inspiring to you or, you know, to the listener and to myself when I'm thinking about things like my own book, which is I thought that that talk was haphazard.
It didn't have a good arc.
It didn't have like a narrative arc.
I I felt like I did have a good personal emotional close to it, but I didn't feel like it was came first full circle.
I felt like it was a shotgun of different ideas rather than a like a conceptual framework, a tree with branches.
Instead, it was just like stuff everywhere.
So I felt when I made it, I am confident that the individual ideas here are useful.
So I think this talk will be useful.
I just don't think it'll be good in in, I mean, literary is too strong a word, but good in in sort of these other kind of structural ways, like a Seth Godin talk is, for example.
So I was like, Oh well, hopefully being useful is good enough, especially for this audience, which I think it is.
And yet, as you say, people loved it anyway.
And so one of the lessons for me about that meta fact about it is I think when it comes to things that are more on the art art side of things, going with what you just feel, what you were passionate about and the things you're excited about, that's actually good.
That's what people are here for.
Probably every single idea in that talk.
You can read A blog post about somewhere.
So that's not really about everything's a brand new invention.
Although I did, there were certain things in there that I, I at the least at the time, I hadn't seen elsewhere, but they probably were elsewhere.
I just hadn't seen it, you know, but it's, it was more the exposition.
So like when I think about my book, there's certain things like maybe it's too long, maybe I go into too much detail about certain things.
I don't write like Hemingway, I use long sentences and semicolons and, and M dashes.
I don't, I don't have tiny little sentences and I don't write for 1/5 grader and all that stuff.
So is that bad?
Because quote UN quote, that's what a business book should be, UN quote, right.
Well, I don't.
And, and, and so I think on that artistic side of things, I'm comfortable saying, welp, I'm going to go with what I am and that that talk is a good example of that for me.
Speaker 1
Yeah, and it's inspired a lot of folks.
I mean, I hear people mentioning it on podcasts and on on Twitter to this day.
So folks haven't watched that.
It's on YouTube and they should go find it.
But I kind of want to contrast that or, or attach that to an essay you you wrote called, excuse me, is there a problem?
Because in your talk about designing the ideal bootstrap business, there's some filters for kind of finding an idea and finding the right type of business for bootstrappers, right?
But if someone has a business that checks all those boxes, it's recurring revenue, it's a good market.
There's maybe no enterprise sales if folks are solo.
In your essay, the excuse me, is there a problem?
You show that maybe that's still not good enough.
Speaker 2
Yeah, it's not.
I mean, there's so many things that have to be have to go right for the for any company to work right.
And you're right that talk, it doesn't cover them all.
And maybe it's too hard to but yeah, like, like what about it has to be possible to get to the customers?
Like even if there is a problem to be solved, can you find them and can you find them cheaply enough in the noise that is the Internet?
And then when you find them, can you convince them to buy you instead of the other 20, you know, alternatives they could buy?
What about your own psychology?
Are you going to be able to last three years or are you going to crash out?
So like kind of no one article, I think maybe a book length and could do it.
I don't know, but one article is going to capture the many things that have to go right.
And So what do you do with that fact that many things have to go right?
You know, how should you react to that?
So I think first of all, whatever is the weak link or one or two weak links, you really have to decide whether that's OK and you have such overwhelming strength in some other areas that it's that you can survive anyway, or whether you really need to do something about it or it's even the deal breaker, right?
So let's say, let's say the overwhelming weaknesses, the markets very small, there's only 100 people that have have it OK, There are certain overwhelming other things that could still make that OK.
Like, well, it's only just me.
So I only need a couple of customers and those few people pay an insane amounts of money.
And I'm OK with the fact that, you know, if I lose 1 customer, the company might be over.
And you know, you can go down the line like, and I and I already know who all hundred are because, you know, my Co founder has worked in the industry and, and literally knows 70 of the 100 people that all ready to call it, you know, so there could be this overwhelming other thing that makes it OK.
So there's again, there's no, there's no like absolutes in, in, in this business, right?
But if there is a, a dramatic negative, there had better be some kind of the question is what else would have to be, what else is true that makes this OK, that makes this still viable?
And if you can't really answer that, you're like, I don't know, we'll we'll be, we'll have good features.
Like, OK, then that's not an answer, right?
Like that's what everyone says.
So another thing is to tackle that thing first.
So let's suppose you're like, well, I have this great idea for a product that would be really cool, but I've never done marketing before, so it's hard for me to get customers.
Well, the typical thing an engineer does is, is go work on the product because it's fun and you know how and it's kind of why you're doing this in the 1st place and all that.
It's exactly the wrong thing to do because the limiting factor here is can you find customers?
And if you build the product, you will have made no progress whatsoever on the question, can you go find customers?
Like I know you could build a product.
You're an engineer.
I I just assume you can build a product.
So doing so doesn't help at all.
It doesn't de risk the company at all.
It doesn't eliminate one of these at all.
So instead you should be going and finding customers.
You can, you can then interview them and find out better what to build.
And anyway, prove out to yourself that this weakness is not so much a weakness after all.
And it won't be a deal breaker after all, because it's not as bad as as, as it seemed like it was.
So there are a couple of things.
It's not the only things, but you know, those are a few things you can do with this fact that it takes many, many things that are all in and.
So probabilities that get multiplied and and that's very bad because even if the probabilities are reasonable, like 70%, yeah, but if you look like 10 of them, the probability is really low.
And by the way, a lot or not 70%, they're like 10, you know.
And so why do a lot of companies, why do most companies die?
That's why because all these things have to go right.
And OK, so again, like, can you tackle the low things first and de risk them or, you know, make see whether that really is a deal breaker or not?
Can you overwhelm some with with with like outrageous other things that that's good.
Niching down is another one, right, Because it starts making the answer to some of these better.
Am I the best product?
Well, if the market is, is enormous, almost for sure not.
But if I said, yeah, but for this exact customer, oh, maybe you can make the best, literally the best product in the as defined by the customer if you've niched down enough.
So that's, that's part of why you and many and I and many people say niche down because it allows you to be the best in fact, and make some of these numbers and things get better.
The market size gets smaller, but some of these other factors get better.
That's good.
Why Narrowing Your Focus Expands Your Reach
Yeah.
In terms of niching down, I get asked the question when should I niche down?
How do I know if I should niche down?
Like what are factors that you think about when a founders trying to be like should I be horizontal?
Should I pick a niche?
Should I pick 33 verticals to start with and see you know, how do you?
What's your framework for that?
Speaker 2
You know, with the caveat that that of course it has to depend on what's going on.
I think you should always be focused on as narrow of a ideal customer profile as you can.
But I think when people hear that, they think, oh, but that means I'm selling only to them and the rest of the market is off limits.
And that's too limiting.
And I don't believe that.
Like in other words, when people say niche, niche down, I think they either think I, I can't talk to anyone else or I could only sell this market.
And that's not how I observe it actually works.
The way it actually works is you, you find this niche and you and you find this ideal customer and you talk only to them.
And because you've been so specific, you can be so compelling with things like your advertising and your homepage message, what the price is and which features you choose to build, because it's so clear who you're building for, because you've narrowed it down so much that you know how to thrill them.
So the first thing that happens is at least those people, when they hit your website, they'll know so you can at least sell them.
That's a, that's a start.
Because if you, if you're not that specific, you never get that benefit.
That's not good.
But what else happens is most of us are not the ideal customer for any product and yet we buy them.
So what's happening?
What's happening is we see the product, there's things that we consider to be strengths and weaknesses, which by the way, other people disagree.
What's the strength and what's the weakness?
So you know, you can't, you can't even just say like a low or high price is a strength or weakness.
It depends on the on the observer.
If I'm a consumer, it's a high price, I probably don't like it.
But if it's a luxury brand, I only like it if it's a high price.
Or a business may not want to buy a cheap piece of software because they just assume it won't do what they need or the company will be gone.
They're only happy if it's cost more.
So it's a higher low price of weakness.
Again, it depends on the the observer.
And that's just true of almost everything.
So what's actually true is that your your ideal customer sees the things that you are as strengths because of who they are.
And the things are that you think are weaknesses that either don't care about or they even are happy about it.
Like a high price is sometimes like a good thing.
So that's the ideal customer.
But everyone else, they're still going through some sort of pros and cons or, you know, trade off analysis.
And many of them will still pick your set of trade-offs.
And because you were so specific about what you are, the trade-offs are clear.
And when the trade-offs are clear, people are more willing to accept the weaknesses.
And there's data on this, which is very interesting.
For example, products that have negative reviews that are specific about what is negative about the product have higher sales and fewer returns than other products with the same rating, like, you know, 4.1 stars or whatever.
Why?
Because you were able to see what the weaknesses were.
And you can either decide, well then I'm not buying it, which is fine.
But if you do buy it, you already knew what it was.
So when it comes and it has this thing you don't like, you knew that you already decided it was OK, so you don't return it.
And the fact that you know what it is instead of just like, jeez, I don't know what's good or bad about this.
The fact that you know what it is gives you more confidence to move forward.
So it's just all a long way of saying, wow, if I'm very specific about what I am, then my ideal customer will definitely buy, which is already a reason to do it.
But like 100 times larger market than that will see that specificity as a reason to buy your set of trade-offs, even though they're not quote UN quote ideal and they buy anyway.
So that's a very long way of saying that's why I think everyone should should niche down in this sense of having this narrow view of who you're perfect for and staying focused on that because you won't just sell there.
So not niche down in the sense that that's the only customer you'll ever accept.
That's not what I mean.
It's the best way to get more customers.
Now, of course, overtime you can expand what that is.
When WP Engine first started, we were only for like small business, maybe medium sized, a lot of times was going through freelancers, sometimes direct.
And sure, four or five years in we saw some some more appetite from larger companies, but not for their home pages.
It was for a lot like it was for small and mid sized companies.
It was for like campaigns in some country or something like this.
It was a different use case for them and it was large enough that we thought, oh, let's let's actually spend 10s of millions of dollars over a couple of years on sales and marketing and this and this and that to actually enter that with this other message.
And it was successful.
But that was years later and it was an intentional thing.
It was because, right.
So of course you can expand that as you scale and you can apply more things to it.
So you can do that.
But even to this day, we have specific types of things that we focus on, right?
And and we have more of it, but that's because we have 1000 people and you know, like there's we can do that.
We have the capacity to have a few things.
So if that can be in your future, But but that's why I say, yes, niche down, but maybe not the way you were thinking where where you're super limited by it.
Speaker 1
I want to, I mean, you, you started talking about W Pangit and I want to go back to the, the early days when you were starting it because you basically built a billion dollar company in what we might call a commodity space of hosting.
Out-Executing Competitors in a Commodity Market
Yeah.
And you're hosting WordPress, which is an open source thing.
So anyone could have spun up exactly what you were doing with WP Engine.
And they did.
And they did.
Speaker 2
There's like there's like 20 or plus competitors easily.
Yeah, yeah.
Speaker 1
So, so how how did it work?
Like, you know, how did you get ahead?
How did you beat out all these other people who were had the same idea or who were copycats or whatever?
And you know, part of this is that these days, if I were to start a startup right now, if I to build a SAS company, you know that you could at least half ass vibe code that in a few weeks, right?
If I only spend a few months building it.
So there it's this thing of like, well, the tech is, is is not a Moat and your tech was not a Moat at the time, right?
Or at least the the underlying hosting and such.
So how did you win?
How did you do so well with this?
Speaker 2
Yeah, I mean, and as we were just saying earlier, it can be hard to tell.
And I think one of the reasons why I'm somewhat credible and how I write is I don't I'm never quite sure.
Is this really the reason?
Did we win in spite of this or because of this?
Or was it just that, you know, and I also don't know and I in fact have even written about how I don't know, right.
So it's all like on offer as things that that that seem good, but the the listener will have to decide for themselves what but for fits in in their own mind and and feels good.
But but my best idea is the following.
The idea of managed hosting, which means it's 10 times as expensive, but it's also like multiple faster.
Like the site loads multiple faster, like 4 times faster.
We used to have a shirt.
My blog is 4 times faster than your shirt was our first marketing swag and things like security and service.
We're also like really good compared to the cheap shared hosting and they still and it still is.
So it was pay more, get more right.
And a shared hosts are just not designed for that.
So there there's no to this day, they don't really have that, but a new company could be.
I think, you know, one of the things you that you can do is, is when other people think it's dumb or impossible, but it's actually is possible.
That's usually it's not a Moat because anyone could do it, but they don't.
So it's a it's a funny kind of a Moat, but we think of moats as it's impossible for someone to do it.
But there's also like, they just choose not to for various reasons.
It could be ideological, it could be cultural.
So the fact that we had great human support is something like, no VC wants you to have that because that's expensive and it comes out of your gross margin.
Maybe it means you're not, you're not, you're quote UN quote, not a software company because your gross margin is less than 70%.
So an emphasis on service is something that like a funded company doesn't want to do ever.
In fact, if you look at our funded competitors, none of them have that.
So the fact that we did do it, it's not that they couldn't have copied us, it's that they wouldn't have because it wasn't in their nature, their culture, etcetera.
In competitive analysis, we often think about their business structure or their features or their architecture and and that you're right, but the the culture and attitude, it does matter too.
Like, let's not forget that companies don't change that very often.
And if they try to change it, they often fail to change it, right?
Whether you want to call it a mode or not, I don't care.
But it's, it's a thing that that prevents that kind of competition.
Another thing is we were really, really good at execution.
Now, traditionally you don't consider great execution A Moat because again, you can't stop someone else from having great execution.
So it doesn't really, it's not really a Moat.
On the other hand, if you've great execution and most don't in your in your field, that's the reason to win.
And there are certain fields where that's not the case because everyone's really good, like AI in hard tech AI, everyone's pretty good.
So it's not true that I don't know, like clogs and simply out execute open AI.
Let's just not this is not, you know, that's not how you would think about it.
But there are other fields and hosting was one and maybe grocery stores is 1 where like, yeah, like you don't want to say nobody, but almost nobody has any kind of innovation or will to do that or ability to do that or the culture to do that or whatever you want to say.
And so if you execute really well, I mean, there just isn't other people doing that.
And so that was one of the things.
So when you have, oh, I'm a first time entrepreneur, I want to stay small.
I don't really know what's going on.
And then, and then, you know, this is my 4th company and I'm, I'm going really fast and I'm hiring really good people.
And then I mean, when we raise money, which wasn't for two years, because originally the idea was to bootstrap it again, it was the 4th bootstrap company.
It's just right.
But even then we only raised $1,000,000, not exactly like earth shattering quantities of money.
And the next round after that was only two again, like so eventually we raised a lot when we were a lot bigger, but at first that's not what was going on.
But still $1,000,000 is a lot more than nothing, as every bootstrap will agree immediately.
And so if we were just better at this and we have great people and even just $1,000,000 of working capital ahead and if we put that to good use and we're not dumb about it, yeah, we can probably simply out execute people and and and that can matter in this field where there wasn't good execution.
So another thing we really nailed in 2012 was the pricing.
The pricing was already pretty good, but we had some, we had some revelations talking to customers and hearing some stories, just some revelations where we reset the prices, not dramatically, just like certain things in 2012.
And that's when we really took off.
That's like where the the growth curve turns, bends and starts shooting up and never stop shooting up.
And so there was this, there was like this resonance that you might say with the pricing that was just exactly right.
Now you could say it was a coincidence because other things it could be again, like I can't even even, I don't know in retrospect because I can't rerun it.
Holding other variables, constants, I don't know.
We were also going to word camps and talking to people maybe and, and that shirt certainly helped.
So I just, I just can't really know.
But but we were reacting to what people said about pricing.
So I, I have to think that has at least something to do with it, if not the majority effect.
Yeah, I think, I think this combination of things is why we just did really well and, and surpassed the, the, the sort of immediate competitors or even people that came later who couldn't grow as fast and, and therefore never, you know, got close in terms of the size.
And I'm not trying to say that size is what matters.
It's not true.
In our case.
That's that's what happened.
Like at Smarter, I wasn't interested in making a Unicorn.
So it's like I myself don't always have that goal.
In this case, that's what we're doing.
So I I know I keep saying that, but it's not like I think that's the only thing that matters and far from it.
Brand as a Moat: Identity vs. Competitive Edge
And I want to ask you about brand and when you feel like a brand, like brand starts coming into play because some folks you'll see him online, you'll see him on Twitter, whatever the start of founders and they're like, Oh, I want to build a brand from the start.
And I want to do all the fun design and the this and the that.
I've always taken the tact of, you know, we, we might say this podcast has a brand, right?
Or or tiny seed or micro conflict.
When you say those things, people have a picture in their mind, but I didn't go out to build the brand.
I wanted to deliver a really interesting product that served the needs of people that then they loved it.
And so then it the brand comes out of the execution for me.
And in the early days of micro comp, there was no brand because they're like, what the is micro?
Well, what is this thing?
Right?
But by the second or third year, it starts to have a meaning to people, right.
So with all that said, I'm curious to hear your take on brand, if you thought about it in the early days, how you built it and when do you feel like that momentum?
Because at a certain point there's a conversation, Oh, you know, kind of higher end, a really good WordPress hosting, What are they?
And at a certain point, the list is two or three companies and WP Engine has always been on that list.
And to me, that's a really strong sign of brand.
So what?
What are your thoughts on all that?
Speaker 2
I think even when you think about people who have a great brand, like personal brand online or like you just said, isn't the origin story always that they were obsessed about some topic and they talked about it and they got good at the exposition and that's where the brand came from?
I mean, even like Mr. Beast or I don't know, whatever your favorite YouTube is on any topic.
Did they set out to create a brand that they now have or were they just you sure they wanted viewers and stuff like they wanted to get become known, but weren't they obsessed with a topic or a thing or teaching physics or teaching, you know, like like there's I think that genuine places where it comes from and we see we see corporations try to build brand all the time and Oh, it it always fails like right, like anytime they rebrand, everyone hates it.
So that wasn't so good.
So that doesn't seem like you can manufacture brand so well.
Is Brandon Mote is an interesting question.
I think the default answer is no.
And the way you can tell is every company has a brand and it's not true that every company has a Moat.
Like just because it's your identity doesn't make it a Moat.
Like how do you tell when brand is really starting to matter either competitively at all or maybe a Moat as opposed to just the identity of the thing.
Like a handle of The thing is when customers are making buying decisions because of it doesn't have to be the only reason of course, but it has to be like top three reason.
Everyone knows this, but like the classic, no one ever got fired buying IBM.
That's an example where the brand is a Moat because the fact that you would, you might buy IBM, even though it's more expensive, it doesn't have the features you want.
It doesn't this, it doesn't that and you bought anyway because of the brand.
OK, see, to me that means the brand really is at least a competitive edge, if not a a Moat, because even when you're losing on dimensions, customers also care about they buy you anyway.
That is that that's what I mean by the brand mattering.
So like, you know, today Apple is like that.
And even even back in the day, Apple was like, that was like a, it was like a, a identity statement to have a Apple product.
So that's not just a brand, that's that's like a statement.
And therefore it's it, it surpasses that.
Again, I don't know if you want to call it mode or not.
It's certainly a thing that you have that others can't take away in that sense.
And it's competitive in that sense.
It's a Moat.
We don't have to try to like have a razor accurate definition of mode I suppose.
But it's but if you call it like a a semi permanent competitive edge that others can't remove, then that level of brand is a Moat.
But the general level of brand is not a Moat.
Like just just having a logo doesn't make it a Moat.
Speaker 1
WP Engine has a brand, a strong brand in the WordPress managed hosting space and it has for since 20/12/2013.
How did you do that?
Was it execution?
First people then loved you.
That's that's what it was.
Just got enough customers and enough people talking about it and they loved it and yeah, OK.
Speaker 2
Yeah.
And a good way to see that is like, let's suppose our logo was different.
Would our trajectory have been different?
I don't know.
But my strong feeling is no.
OK, so that means the brand, the physical brand doesn't didn't matter.
It's not like we picked the right color or something, right?
We did need a consistent logo in in color so that something was indelible in someone's brain.
Something was memorable, something was a handle, right?
So it has to be consistent.
So to me, it's sort of like the the old thing about white space embraces in code.
The studies show that the specific style of where you put the braces and stuff does not change readability or legibility, but the fact that everyone uses the same does.
If, if different files have different styles, then people have a harder time or, or a slower time reading the code.
So the, the main thing that's important about a coding style is that you use one, but what you put in there doesn't matter at all.
It's like pure art, purely like whatever you feel like, you know.
And so I feel like a brand is like that.
You need consistency so that you have an identity, but like the details of that are unlikely to be terribly useful.
I mean, linear is a is a great product starting to beat Jira in a lot of ways because of their design decisions.
And they're focused on an ICP, by the way, laser focus on that.
And it's the user, not the buyer, which is super interesting.
But if it weren't called linear, it was called something.
I mean, what does linear mean anyway?
That actually sounds bad, right?
Like it sounds like a bottleneck or something.
So you know, like, again, it just doesn't matter.
AI as a Solution Space, Not a Problem
Like the fact that they're super opinion on design and that it's fast, that's what matters.
Speaker 1
So I want to wrap us up today by asking you a little bit about AI and specifically AI and how it affects founders who are starting new companies today.
Because you've been building stuff for 20 years, 20 plus years.
But as you look at AI, if you were to start your next company, how would you think about it as an opportunity?
Like is it a feature?
Is it a, would you build a wrapper?
Like what?
What would you what, How would that impact your ideation and your, I guess your thought process and where the opportunities are and where the pitfalls are?
Speaker 2
Yeah, it's a big topic.
First of all, I would, I separate how I use AI operationally to do stuff like write code or write marketing from AI that's in the product that the customers use, whether directly or indirectly.
So first of all, take all that operational stuff.
Let's set that aside because I, I don't think that's what you're asking.
But, but I, I find that in conversation, sometimes people start confusing that it just makes it more difficult to deal with an already complicated or complex question, right?
So let's just ignore that.
It is true that corporate budgets now are heavily biased toward things that are AI, whatever that means.
And it's a fuzzy thing, like the companies themselves are not clear on what that means.
So we have to be fuzzy.
That tells me that whatever I do does need an AI component somehow, because that's where the budgets are.
That doesn't tell me what to build.
But the idea of like, well, I just won't have AI at all.
It'll just be a typical thing.
That could be a good idea by the way, but I would worry that that I'll be fighting a budget battle and an attention battle.
And so that doesn't feel like the easiest path.
OK, so however, the, the wrong way to think of it is I need an AI product.
That may be how the budget is.
So you may, you know, that may be down the line how you, you know, sometimes how you talk about it.
But this is another thing I see people doing wrong constantly, which is thinking of AI as if people want AI as the problem they're solving.
So let me let me put that differently.
People have the same problems today as they've always had.
Marketers want more leads, sales wants to convert more leads to a sale that stay.
Customer service wants to have good customer service and get good, you know, results from from customers.
You know, engineers want to write code that doesn't have bugs, that's maintained, manageable.
Product managers want to build OK, Everyone wants the same crap that they've always wanted.
What what you don't say is like, I need AI in sales.
What you do you do say is if I could 10X my outbound volume with the same conversion rate, that would sure be nice.
So people talk about AI like it's part of the problem to solve or that people want AI.
False.
AI is part of the solution space.
How is it that I can deliver more of what they already wanted because of AIAI has made something possible that was previously impossible that they already wanted.
So as soon as it's like it's an AI voice thing, like I don't know what that means.
Whereas if you said for restaurants, we take over their phone tree because we can do the menu, we can do the ordering, we do hours, but we do it on the first ring and in 40 languages now behind there is voice AI.
That's what's behind that.
The otherwise that's not possible.
But the thing you're solving is your phone.
Your phone calls are are now automated and awesome.
And so I think when you stay focused on the problem that already existed and AI is why you can do something that was never done before better.
That's the right way to think of it.
So I'd be thinking about AI as the solution space, not as people say and they even say in their pitch decks as the problem space.
Another thing I would do is I would say, look, AI doesn't really work.
I know we it's like, but when it does, it's amazing.
Oh, I know when it does is a pretty big qualifier when I research stuff for the book, I would say at least half the time it's simply wrong.
Even when you do the deep summary, the deep, you know, research, it sounds good when they say it.
And then I go read the primary sources and it's like completely wrong half the time.
And So what do we do with that?
Because people say, well, overtime we'll get better, like all right, but you're building company now and people have been saying that for years and they're right, but like you're building company now.
So here's what I do with that information.
10x Improvement: The New Baseline for AI Products
To me, there's three kind of categories of AI products right now. 1 is AI that the incumbents are inserting into existing products.
So it's like Notion and you can talk to Notion and Sheets.
You can talk to Sheets.
That's not going very well.
Like it's not very useful, right?
OK, whatever.
But of course, they're doing that.
What else are they going to do?
I would do it too, but OK.
The second kind is AI for experts.
I'm already a software developer.
Here's AI that helps me write code.
I'm already a marketer, marketing writer.
Here's AI that helps me write articles or through social media or something.
I'm already designer.
Here's AI that helps me design.
So AI for professionals.
Bad news is that you're selling to only those professionals, not like the whole world or something, and you're up against the incumbents.
OK, But if as a startup, that's what you are, the good news is it's OK that the AI isn't perfect because it's an expert.
So when the code is wrong, the expert can fix it.
When the writing's bad or wrong, the marketer can fix it, and so on.
So it handles the fact that the the AI is not perfect.
This is why I like this category.
The third category is AI for noobs or AI for muggles.
I like to say, right, I'm not a software engineer.
I want to make a, an app.
I'm not a writer.
I want to write a book.
I'm not a designer.
I want a website.
Now that's good.
I'm not saying like that's bad.
I, I get it.
Like it's empowering.
It's good.
Like, I'm not against it by any means.
We're talking about what business I would build, right?
And the problem here is you get 70 percent, 80%, and then you're stuck.
And as a noob, you are actually stuck when I vibe code the SAS and I don't know anything about code and I'm like 80% I can't build a SAS company And I don't, you know, there's a lot of like I did this, like I know, but it's not a SAS company, right?
If that's what you were going for, that didn't happen.
And you can go down the line like if you're not this or that it it's not going to and you can't fix it.
You can't take it online.
You can't because you're stuck.
So the good news is that the market's bigger because there's, you know, 100 times or 1000 times where people that want a website, the people that can build a website.
So Hooray.
But here's, here's the biggest problem is that the fact that AI doesn't really work.
It's like a massive hindrance, possibly a 100% hindrance.
So that's OK.
Like if that's what you want to do, like take that if you want, if you, if you like that trade off, go for it, right?
I'm not, I'm not, I'm not judging.
I'm just saying what I think the trade-offs are for me personally, I'm always a problem solution, sort of a entrepreneur.
Like everything I've done is like, oh, I can make this better, you know, whatever.
Like there's this corporate thing that that needs to be done or could be done, I can make it better.
The typical B to B mindsets, that's what I have.
So they're this center part of AI doesn't work yet.
So let's give it to people who for whom that's that weakness is not a deal breaker.
So if I were doing a company, I would be solving a real problem that already existed.
Of course, that has budget, probably budget for AI.
OK, fine, I get it.
I would use AI to make something possible that was previously impossible and and I would do it for four experts so that the fact that AI didn't work well, what did not mean the product was useless or or bad.
Another thing is, is, and this was also true of WP Engine.
Actually, you know, WP Engine from the beginning.
And even now we say like, oh, we make your site fast and of course a fast website is good.
Search engines rank it higher.
People don't bounce off of it as much.
There's data that shows e-commerce sites that are fast convert better media sites get more hits, which means more money.
Like perhaps it goes without saying, but I just said it like fast sites are better, OK, and literally make more money for people like e-commerce and media.
So OK, that's, that's good.
But if your site is 30% faster, is that is that enough to motivate someone to care to search to to migrate their site to, you know, to not migrate away later?
Like is that good enough?
I don't know.
It's it's pretty weak.
The reason we said four times faster is we had customer after customer where that that they literally data showing that.
And anyway, when it's that much faster, you can just feel it.
You can just see like, holy crap, what the hell is going on?
Like if that's the reaction, that's all you have to know.
Like Yep, that's so when it's not just quote UN quote better or faster, more efficient, cheaper, but five times better, three times cheaper.
That right where you could measure it.
But like, you don't even need to to see like, holy crap, like when it's that much, then something mundane and commodity like hosting and how fast it is, how security is even a commodity thing.
If it's a like a not 30%, but 3510X, it's no longer a commodity thing.
That's now a substantially different thing busting you out, differentiating, earning a higher price and etcetera.
So I say that in general, that's that's part of why we went in the commodity market and WP and just because we had a couple of things like speed and scale and security and service, which were like that.
But it's also, I would bring back to the AI conversation when the AI helps me write, but like in the end of the day, like I'm, I'm still writing an article a day, just like a little bit faster.
I don't know that is, that's, that's something, but I'm not terribly compelled.
But when I go from writing one article a week to two articles a day and they're good, OK, that's like dramatically changing what's going on now I'm more now do I want I personally don't want to do that, but like, OK, that's a product, right?
Or I couldn't respond to this many, I don't know, posts on Twitter.
What what are you supposed to do in social media, right?
But now with this, you can't OK, so if it's in if it's in this like multiple of saving money, increasing time, having outcomes.
Now maybe I'll I'll now maybe that's that's really valuable and I'll I'll be interested in that.
So that's another thing I would expect from my AI.
If AI is supposed to be so revolutionary, how come it's only increasing my performance by 20%, right?
It's just not worth the hassle and the and the wonder about where this is all going.
So I'd also be looking for something where the AI can really make me 10X like in coding.
It's not right?
Like all the studies in in real engineering departments is not that AI makes them 10 times better.
The only people who claim that are the people selling AI products, the users of it.
You know, there might be individuals claiming that on Twitter because it's something to say, but all the studies show that's not true.
What I find in coding though, is there are certain places where it absolutely is 10 or 100 X.
Like if I'm need to use a library I've never used before to do something and it's like, oh, just use this.
And it does, it just works.
I'm like, OK, you definitely, you know, in, in 10 minutes, you definitely save me a couple of days.
Like there's no doubt, right?
But there's other areas like a big code base with 100 developers where it's just like, I mean, it's just wrong so much it's it's just wrestling with it.
It's actually kind of slower than just doing it.
So to me, it's contextual.
The question is when is AI coding a Big 10 Xer and when is it not is it's actually the question.
So I'm saying that again, because I would bring that to it because that's also part of my answer of what would I build?
I would build something like that where they like some textually AI really can be like that.
So something as broad as coding that's too broad and it's not even true that AI in that broad of a context is A10 Xer, you know, So I try to find a product where it really is true that AI today with the even you know, with its failings, really is 3 Xing something hopefully 3 Xing more value for the customer, not just saving money.
Saving money is a much weaker, weaker pitch.
Hopefully it's it's 3 Xing the value and it really does.
And the weaknesses and the failings are are fixed by the customer or or we've picked a domain where AI really is much better, not like general AII guess.
So these are the kinds of things I would go through as I would take through it.
Notice I didn't talk about competition at all, and I wouldn't.
My assumption is that every market of any reasonable size will be flooded with AI products.
Maybe it already is, but my assumption is if it isn't already, it's going to be so Oh well.
Like like what am I supposed to do about that and what Moat do I have?
Like nothing, because we all have, we all use the same models, we're all making prompts like, and as you say, tech is usually not a Moat.
OK, if you have very, very, very, you know, we can all pick out special cases where the tech is the Moat.
But that's the point that that's why it's usually not.
So there's no moats there.
Everyone's doing this stuff.
So like, what am I supposed to do when the market is crowded?
We all using the same tech more or less.
And, and again, I think, well, then I'm just going to have such a great vision for my product, my ideal narrow customer, how I build for them, how good it is for that particular customer, because not everyone's going after that particular customer.
So how, how can I just make it an absolutely amazing product for that trusting in the thing we talked about earlier that other people will also like that and want to join in.
And, and so how, how can I find things like that?
Would that that adhere to those other criteria?
There's a lot of ven circles here, right?
But of course there are, because we just said that all these things have to go right for the company to work.
So yeah, that's right.
It's going to be a vendor with lots of circles and a center that might not even be there.
It might not even be a center, which is kind of the point.
But those are the kinds of things I would I would look at.
Now that again, not trying to imply there's no other way to build a company, right?
Of course there'll be successes that don't do what I just said, like like we've been saying.
But in the spirit of that bootstrap machine where, you know, these are the things I would do that I think increase your chance of success or remove some kind of risk or at least lean into some kind of strength you have or go with the grain of what's going on instead of against the grain.
And therefore, just like hopefully make all these little probabilities be a little bit better than maybe they would have been.
That's what that's what I would do.
And of course, no matter what I thought as customers actually used it, I would, I would discover I was right about some things and wrong about some things and stuff I didn't think of, you know, So of course I would have to be following my nose after that, but this is what I would start with and then and then of course be following my nose as soon as I could intersect it with real customers.
Speaker 1
Amazing.
Rob Walling's Final Thoughts and Promotions
It's a great note to end it on.
Thanks for coming on the show.
I want to have you back when the when you release the book, you can talk probably dig into some of the content of that.
Folks want to pre-order it.
I pre-ordered my very own copy this morning.
It's at hiddenmultipliers.com and you and I are going to be hanging out in Portland, OR here in just a few months.
You're speaking at micro conf again.
Think it's been about 10 years since your last micro conf talk and I'm really looking forward to hearing from you in April.
Speaker 2
Yeah, the talk is about what to do when growth slows.
Speaker 1
You know, it's just a topic for many, many people, so.
Speaker 2
It is, I think nowadays a lot of people are seeing that large and small companies and, and, and of course a lot of people want to grow anyway, whether it's slowing or not.
So it's just a useful thing anyway.
It's.
Speaker 1
Going to be good, yeah. microconf.com/US, if you'd like to pick up your ticket, it's April.
I think it's 14th through the 16th in Portland, OR.
And then if folks want to keep up with you on X Twitter, you are a smart bear.
And of course, asmartbear.com where all your essays live.
So thanks again, man.
It's great.
Been great having you.
Speaker 2
It was fun, thanks.
Speaker 1
Thanks again to Jason for joining me on the show today and I I meant it when I said I want to have him back on when his book is live.
I think there's so much more to talk about with him that it both enlightens me and I think educates bootstrappers as a whole.
As someone who has, I think he's bootstrapped 3 companies and raised buckets of money for the 4th for WP Engine, he really just has a very grounded sense about him and about how he thinks about growing companies.
As a reminder, his book is Hidden Multipliers.
You can get it at hiddenmultipliers.com and he will be speaking in just a couple months at Micro Comp US in Portland.
Micro comp.com/US if you want to buy a ticket and hang out with Jason and I for a couple days in mid-april.
Thanks again for joining me this week and every week.
This is Rob Walling signing off from episode 817.
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