Speaker 1welcome to another moments episode in this
Speaker 2clip daniel x shares some invaluable business wisdom and reminds us that you have to find out what the real problem is before you try to innovate your way out of it when spotify took on apple they didn't just copy what was already out there they interrogated what was actually broken in the user experience and built a fundamentally better way our sponsors t-mobile are fixing business internet in a similar way internet outages are so common annoyingly and many businesses like mine have to rely on a patchwork of internet providers backup partners and coverage workarounds t-mobile saw an opportunity and built super broadband it pairs 5g with starlink satellites to give you virtually unbreakable internet across every us zip code here's daniel and what it takes to innovate like this when i heard the spotify story i i really wanted to meet you because i consider myself to be ambivalent ambitious but there are some challenges that i would just view as impossible and at the time when you consider how the music industry was that it's ran by these big record labels predominantly and they own the music to be a young kid from sweden and believe that you could change that for me is a special type of delusion like it's like it's just an impossible task it's what i just would have thought okay some things are the way they are they're immovable objects that is one of them yeah why didn't you think
Speaker 1that was a impossible task um well i i think for several reasons but i think that is the beautiful naivety of an entrepreneur as well right uh we move mountains i'm sure elon was you know even more insurmountable thing electric cars and there hadn't been a successful car companies for uh i think a century or something um or at least a century or something um and i think that's the beautiful naivety of an entrepreneur you know many many decades in the u.s and he managed to do that so i think it's um it's part illusion uh delusion sorry um but but the other part i think um also is that what i realized is before even committing to this idea as the the why not part i probably spent 500 hours learning about this problem and the scarcest resource we have in the world today by far as time and when you have high quality people that spend thousands of hours on a problem you find new solutions and so the biggest um thing for humanity i believe is simply that um i believe we're capable of doing practically anything but there aren't that many people that um can see these multi-dimensional things with that right experience that they're that right time they're spending thousands of hours of trying to needle in a haystack see that opportunity through that very very tiny prism and and um um even even today when i think about some of my other businesses it kind of worked the same way so i started a health care business about five years ago but i was spending um i think the first interview when i mentioned it that was in um and i started the company five years ago uh 2018 so i i probably spent a decade thinking about this problem um and i couldn't figure out a solution 2008 yeah yeah you you started the company in 2008 but no no i started the company the health care company in 2018 18 but i started thinking about it 2008 oh okay so um so i have a notebook with all my crazy ideas most of them amount to nothing uh quite often someone else comes along and does them and i'm happy and it's amazing um but every now and then um nothing happens for a great period of time and i kind of feel that itch to maybe make a difference myself and i and i say that because like the realization there was um i had spent up until that point thousands of hours understanding the health care system why it is for the way it is the incentive schemes and the what the nhs is doing and what someone else is doing and the public health care system insurance business direct to consumer things the the longevity curves of human beings the disease growth the costs curves like all of those aspects um about it similar to how you're describing looking at rockets um but you know imagine you spending a thousand hours a rocket not just kind of cashly researching it i am sure you will find novel ways of how to attack the problem it may not be because you know if you're not a physicist you may not come up with the next rocket engine um but you may find another twist uh to on how to attack this problem and i don't really think it comes down to that and so uh in the space of music i don't know anything about the music industry going into it um but i would argue a few years into it i was probably one of the most foremost experts on copyright in the world around like the dmca and um what the u.s copyright regime looked like and what what um other regimes look like and how um you know performance rights societies label rights and what kind of rights mechanical rights performing rights uh all of those different aspects all the different code ice rc numbers isbn numbers and how they related and so on and so forth and and um um you know i find like people either get too modeled in on the details and don't see the bigger picture or they stay too top level picture to really see the new ones and the question is how do you dive deep enough where you see it and figure out which problems to solve in what order um and and i was at that point um by probably 2007 having spent a year on spotify but the team was super small so it really wasn't a big commit at that time and i wasn't sure at that time but then i realized that hey this is actually possible uh because we built the product that showcased the technology um of what we're doing and it felt like if you had all the world's music on your hard drive so then the real problem ended up being can we get the music industry to accept this and to that i had no idea but i felt like this is so obviously if this came out in the marketplace what consumers would ask for now the only question is is the music industry going to allow this and that took me another year and a half 18 months to learn the answer and it was completely binary we almost died probably four times um in that process and ran out of money and uh record companies saying no this is never going to happen until eventually one day the stars aligned and we were able to launch uh but that was not a given but it felt like the right bet to make because you know it was a binary outcome either we'd fail the price wasn't all too bad if we would succeed it was clearly so that at least this would resonate very well with consumers was
Speaker 2there any moments where you thought that it wasn't going to happen i.e conversations you had with record labels where someone very high up says absolutely no way i've met many
Speaker 1times uh i would say um probably once every month or two over a two-year period i thought that this probably won't pan out uh and it was incredibly demoralizing i i usually joke but like in the beginning of that process i had hair and then in the end of it i lost all of the hair i probably gained 30 pounds in weight uh during that period of time um it was awful um but throughout my co-founder martin uh probably a factor of just who he is as an individual but also probably because he didn't participate in these meetings uh kept being really upbeat kept being um you know an amazing support and said don't worry about it you're gonna figure it out and he just kept believing in me and then he also said a few times you know when that wasn't enough he said don't worry about it we'll figure out something else if this doesn't work out it felt to me like i always had a safety net and it was just the amount the push that i needed to do this um and again talking about not giving advice but the advice that i do give to other people is to share the burden of success and to share the burden of success with someone uh it is so important um and i know i get most of the credits for spotify but it is really a team effort uh from the gustavs and alex and all those people but then also in the early days from uh martin in believing in me uh and and knowing uh this kind of supernatural ability that i'm going to pull it off somehow i must
Speaker 2have told you a story which i guess has stayed with you about perseverance and the power of perseverance the double-edged sword to that is sometimes it's right to quit as well yeah and knowing when to persevere and knowing when you're just wasting your time which is as you said the most important currency of
Speaker 1all yeah you know that's where you know art meets science um there is no scientific answer because it depends it's an art to know uh when something is futile and when something is worth doing but i call it that sort of binary outcome but with uneven distribution right so if you think about it as a curve even if it's 50 50 whether you succeed but on the upside you can win a lot more than you can lose and all you can really lose is one time and the upside may be 100 it's probably worth persuading obviously it's that's the science part the art thing is okay well is it really 100 times is it 10 times and and have i already lost but i'm just not aware of it um that's the art and
Speaker 2also in that i hear an optimism bias from two co-founders the constant oh we'll figure it out we'll figure it out we'll figure it out how important do you think that is especially you know you hire a lot of people is that something you're like looking for in the people that you work with that bias towards we'll figure it out
Speaker 1um i think again it depends on the role you're hiring for you need a team uh i think it's really important that you just don't surround yourself with just yes people or optimists uh you need the naysayer in the room as well you need the people who balance it out and be the one who says i'm not sure this is going to work out um and and so often i think that's the that's the important part we keep talking about the cfo or sales people but again you can have a deal-making cfo and a salesperson that's happy-go-lucky um it may not be a great uh combo you may want the the cfo to be skeptical about the sales pipeline and a happy-go-lucky uh salesperson or the inverse maybe a like really diligent that and the cfo that may be sort of like don't worry about it we will sort it out um but i but i think so much about that is the subtleties we we don't have a perfect model of the world um and uh the more experience i have is it's a cheesy thing to say but the lesser realized that i actually know and so much of these are actually down in the nuances and most people are above the nuances don't really understand the issues well enough or too bogged down in the details to understand the bigger picture and and going that sort of up and down that's sort of super detail oriented but also being able to go up and see the big pictures that is um and simplifying very complex concepts i think some of the most amazing entrepreneurs in the world are experts at and that is a superpower and that is certainly one that i'm trying to hone and work on but when you see it like steve jobs when you think very complex things and people say he didn't understand engineering and technical problems it's not true yes he may not understand engineering he may not have known how to write code but he certainly can empathize with what um made an amazing engineer tick uh empathize with different technical solutions will have different inputs and outputs um and he understood it and um he was brilliant in taking very complex ideas and understanding how to make that resonate for the everyday person
Speaker 2these tales i hear of you sort of being outside record labels and waiting for the ceo to come out so that you could catch them and you could get them to come out and you could get them to come out or trying to accost i don't know the assistant outside and asking when the ceo was coming outside so that you could get a meeting with them yeah
Speaker 1are these tales true um as with many they're probably exaggerated a little bit um where is the truth uh well the the truth is that certainly happened but it wasn't you know i've heard uh people recounted us that i slept outside of the the record labels kind of in a sleeping bag that that didn't happen uh that happened another time in my career but it wasn't um it it didn't happen there but but it certainly happened that i'd book a week fly to new york with no meeting booked uh with basically an open calendar and about 20 phone calls a day just trying to figure out a time to get on the schedule of a senior vp or a ceo etc that certainly happened and that taught me another thing too which is that these assistants like you better befriend them because they are the keys to the kingdom um and most people don't care about them at all uh but they're very influential they're very powerful um and uh and and you know uh that was hard in the beginning but then i realized that um they got to see me as an individual i saw them as an individual and eventually you know this this is not uh we tend to believe the world is more logical than what it is but a lot of it is based on relationships so eventually some of them started taking a liking to me and so when there was the opportunity and they could prioritize 10 other things for that ceo to do but i was there i was friendly uh and easy to work with show up at no moment's notice even if it was 20 minutes before finding out about it i would show up um and so i was i was easy to deal with so take away all that complexity in order to achieve the outcome that i wanted to do and sometimes that is as simple as it is just be consistent be the easiest person to deal with and you'd be surprised how many problems it solves
Speaker 2did you invest your personal capital into starting spotify because i i read again that you'd spent pretty much all of your personal wealth to start the
Speaker 1company uh yeah i did uh so i invested not all of it but quite substantial amounts of it uh and my co-founder invested even more but he obviously had a much larger sum of money um from the beginning um yeah so all in all i think we invested about 10 million dollars uh into this um by ourselves which was also crazy because you know back then today 10 million into a startup just was it isn't a big number many startups that have done that before but doing that on a seed stage uh back in 2007 that just was unheard of it was usually 500k seed check sums etc what if it hadn't worked out
Speaker 2what would have been the personal implications for you financially
Speaker 1uh the personal implications that i went from not having to have a job to then probably having to go back to having a job um so i basically took that security uh that i'd built up uh that 22 i'm set for life and i gave that up um in a moment's notice um and um yeah i mean um i i don't know what to say i think from a purely logical point of view it was probably a terrible decision uh but betting on myself and betting on yourself would probably be again uh i say i shouldn't give advice but it is probably the the best advice i could give many people is is you know because especially those that want to invest in various startups etc and i all but they may not have a lot of money and then i always say well why don't you just bet on yourself instead why don't you just try to like work for one of these startups like you said and and maybe take a little bit more equity and a little bit less pay and take out the likelihood hopefully if you know you're good of the company being a success and it just feels like the more prudent thing to do and so i had a sneaky feeling that that was the right thing to do uh but investing as much probably wasn't the
Speaker 2smartest thing to do spotify goes on to the i mean success is probably an understatement i know the journey to that success had multiple um near-death experiences to get there one of the key things key moments i reflect on as a spotify um is when apple launched their competing product apple music in 2015 i believe it was and there was lots of articles saying that this would be the death of spotify yeah i think i was even concerned as a very loyal spotify user i thought you know they have all the phones yeah they have they're kind of like the mafia yeah they could just squash you yeah most companies when apple comes into their territory shaking their boots yeah what was it like in your office that day when apple music launched a competing product you know when
Speaker 1you live in the thick of the fire you're not concerned about the things that everyone else is concerned about um i usually say public perception lacks about six to twelve months what's actually going on and and so in our case we'd known that apple was going to launch something for probably the better part of a year because they had the beats acquisition beforehand and we were hearing all sorts of rumors etc about what it was so absolutely you have to be worried when one of the greatest companies on earth decides to compete with you so we were concerned about it um uh and we were kind of doubling down on what our positioning was going to be so you kind of like double and triple check whether or not um you know you were deluding yourself into believing things to be true um and and so for instance in our case one of the big things um we had a some strategic pillars that we were focusing on one of them we call ubiquity um because we always knew this would eventually be the case we we thought that consumers would value the ability to sell their products and they would value the ability to sell their products across all devices and all ecosystem and our bet would be that um any competitor we might have had would actually focus on reinforcing their own ecosystem and not care about all the other stuff so the primary reason they were into a music service would be to make their own devices better not to make the world's best music service and um and so you know that's why we made such an effort integrating into cars integrating into all sorts of uh weird devices smart fridges whatever you might think um and so so it was kind of like reiterating that but i felt pretty good about that position um and going back and then there's always the sort of like what if they figured out something that we just wouldn't have thought about uh and i remember we were constantly talking to the product teams about this uh and like what what if they come up with this and we were trying this every game theorizing every possible angle um on it um um but i think at the kind of went through the thousand scenarios kind of thing we knew we'd prepared as well as we could we anticipated a certain type of product there was this kind of one percent or ten percent chance whatever you want to quantify it as where we'll just be wrong and they've come up with something that widely superseded any of our expectations but that very day remember we'd been preparing for that day for so long so the first reaction was kind of them announcing it which we expected them to do uh and then seeing the walkthrough of the product and realizing that okay well we prepared for this we thought about this etc and so weirdly enough as the rest of the world kind of like gasped for air um we were thinking about it okay well this was what we expected um and back to that point distribution was the amazing thing they hadn't come up with something the products side that we just didn't anticipate um but it was really just about distribution and there was nothing we could do to guard ourselves against it um but we felt like we had a superior experience um on the personalization side the fact that you know if you have a windows machine and an iphone um spotify would work um but apple music um wouldn't at that time um so many of those things that we um i thought had a better position than they had i've long
Speaker 2thought that i've tried both i mean i tried it when it came out and i couldn't stick to it um and i think me and my friends who were in my music group we all concluded that the personalization how spotify understands me yeah is really the thing it's hard to know why you do what you do as a consumer yeah but from analyzing it a bit more deeply um it just felt like i'd built there was a lot of investment i'd done to my playlists and all those things but spotify just knew me better it seems to have much more data than um data on me and understands me and is more of a bespoke solution to me than apple was and also the the user experience is not great and i just can't get past that i just so i tried it and i bounced i i just stuck with spotify um apple are i used the word matthew earlier on a lot of people don't know this but they take 30 revenues on pretty much every new app in the store yeah they've rejected your audiobook app multiple times um there's a rumor going around that they even delay how quickly you can release updates of your app and delay how that reaches phones what's your opinion on apple and what they do and how they conduct themselves
Speaker 1well um it's um as a consumer uh let's start off with apple is a fantastic company and they make amazing products uh i really do believe that um i've been a mac user since i can't even remember probably late 90s when i could first afford one uh all the way to now and obviously you use the iphone and apple and you can't even remember all that stuff so let's start with that and i think that's hard to square then that there's this other company that's fiercely um focused on just um itself and constantly trying to do things by itself and not working well with others um and um those are perhaps two different sides of the same coin um but um you know the the way that manifests itself um i think that it's a company in many cases that still sees itself as an underdog but don't realize that they become goliath and so many of the tactics that made it the rebel kind of thing are now stifling innovation and it's really hurting consumers to great extent with the 30 you talked about with the fact that you know a spotify can't um or any developer if you don't pay the 30 you can't even speak to your consumers it's kind of absurd um so you know there there's a ruthlessness um on the business side of apple and and perhaps it's always been so i don't know i never got the opportunity to meet steve jobs but um um where just from an ethos point of view it's just not me um and um um i have a hard time squaring that with me as the consumer and me as the business leader um and and needless to say i i do believe that apple can and should play fair and i think it would be way better for the world if they did um and i think um that it would actually help them in many regards to switch their tactics and realize that they are the goliath at this point and not david um and so yeah one of the things i
Speaker 2want to close on um is your philosophy so i guess it's the same answer because spotify's philosophy towards what's made it successful will probably be in many respects a reflection of your philosophies towards business and and um more broadly towards life but when i sit here and i think a lot of people will sit here and say um there's clearly something unique about you about the way you approach problem solving problems life business all of those things that has been that has defined you and set you apart are you aware of what that is what those principles are
Speaker 1um no i don't think so but i think you're right in that um you know the the way i would describe spotify um to people you're right that it is scary sometimes watching spotify uh trying to watch it from a distance and not just be in it because sometimes it's doing things where i'm like how did how did people know that we were supposed to do it this way um and it would be how i would approach solving a problem and it's kind of how um you know we've internalized certain things but the best way is it's 17 years old now and it is a teenager that's liberating itself so it's not 100 b uh in fact it is this much broader uh different being uh there are aspects of it that um hasn't taken after me um at all in um product development you know gustav is a formidable product leader as an example and alex is a formidable business leader and the two of them are now leading the business and they're both doing a lot of work and they're more of the day-to-day and they're certainly instilling their personal uh values and their personal uh perspective of the of the company too which i think they're totally entitled to doing having been with the company for 12 plus years both of them um but it is interesting seeing it because we're approaching things now in a way i wouldn't always do it's not inconsistent with important principles of mine but but uh it's certainly not directed and the other part is i started this as a 23 year old and the 23 year old i started this as a 23 year old and the 23 year old daniel while many parts are the same uh the 40 year old daniel with um two kids um having seen that have changed perspectives as well um i have a different feeling about uh work and and the importance of that in my life still very important but may not be the sole most important thing that i do just to mention one and so it has similarities uh but there's differences to me as an individual as well um and so i think that's the thing that i'm trying to do is i'm trying to do is i'm trying to figure out who the 40 year old daniel really is because it's a different one than the 30 year old one um maybe it's subtleties but um i think in quite a big way also and just thinking about something like culture the 23 year old daniel um culture was having a ping-pong table uh 30 year old daniel uh would have said yeah culture is important but didn't really understand why and the 40 year old daniel uh would be um you know the 30 year old daniel would be more strategy than culture actually and the 40 year old daniel is all about culture almost to the point where strategy is um secondary if not even tertiary to that um 40 year old daniel is all about culture yeah uh way more so what is the culture well and that's the amazing thing because it is the most scalable thing done right of a company um and it's the hardest thing right because it is everything and nothing it is every positive action that's happening in the companies every negative action or company every person that's joining every person that's leaving is impacting culture and so um in its essence i believe culture is about rewarding positive behavior who want to see in the company and obviously dissuade the negative what are the positive
Speaker 2behaviors you want to
Speaker 1see well one of them is taking risks um failing and how do you do that when you have eight or nine thousand people inside of a company responsibly how do you uh when the common status quo is you don't like failure um you don't get promoted based on failure you get promoted based on being successful um annie duke has this thinking bets she talks about i love that is thinking about poker ships on the table and and she said one time when when we spoke she said to me is like a company is like um everyone has ships at the table we just don't know how many we have and so the people that have been successful have way more so they have leniency and allowancy in the culture of any organizations to do more than someone who just started um and perhaps have a less lesser ones and if you failed enough times what's naturally going to happen is that you won't have the same agency in a large organization. impact things too so then the the counterpoint to that would be well how do you then create an environment where people are allowed to take risks and then balance that with say a spotify at this point where we have a huge amount of responsibility too we have tens of millions of creators that have their livelihood of the platform so we can't just experiment with how we're paying out and so on and so forth right and 550 million consumers we have to be responsible with their data we can't you know put new things in front of them without testing them and so on and so forth and so there's this constant tension between being innovative taking risks and you know at the same time obviously being responsible and and that's hard but that's all about culture
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