Why ChatGPT will be the next big growth channel (and how to capitalize on it) | Brian Balfour

Everyone's always complaining SEO is dead. It can't grow. Word of mouth is so hard.

All of the ingredients for new distribution platform are essentially happening. My prediction: the new distribution platform will be chat GPT. There's a bunch of signals that they're about to launch that. This is a huge opportunity for companies to get on it.

It ends up being a prisoner's dilemma. Don't trick yourself into thinking that you can't play the game. The cycles seem to be getting shorter and shorter. So, you actually have a smaller amount of time. If you don't do it, your competitors are going to go to the new platform and your customer expectations change. There is no opting out of the game. This is the opportunity to disrupt an incumbent.

If you're a late-stage company, you place multiple bets. For startups, it's a totally different ballgame. You have to choose one and go all in. Think about companies like Zynga that grew on Facebook and then became massive companies. Building a great product is one of those things that's necessary but not sufficient. And actually, the separation is between those that build really great distribution.

What would be the backup if not JBT? My hypothesis of who's best positioned would actually be today. My guest is Brian Balffor. Brian is the founder and CEO of Reforge, a company that I've been a longtime fan and advocate of. Historically, Reforge has focused primarily on teaching courses on product and growth. But more recently, they've transitioned to building their own products, including a product called Reforge Insights and a bunch more really cool stuff coming very soon.

Prior to Reforge, Brian led growth at HubSpot. And over the course of his career, he has seen the rise and fall of every major distribution channel, including Facebook's ad platform, Google Ads and SEO, and the Apple App Store. Based on what he's seeing, he is predicting the emergence of a brand new and powerful distribution channel that will likely arise in the next 6 months centered most likely around Chat GBT.

It is really rare for a new growth channel to open up. It's been a long time since the last one appeared. And the people who recognize this and hop on it early are the ones that reap the most rewards. So, this is a huge deal. In this conversation, Brian shares what he's predicting, what he's seeing, why this is a big deal, and what you should be doing about it right now. I highly recommend you listen to this full conversation and discuss the ramifications with your team.

If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. Also, if you become an annual subscriber of my newsletter, you get a bunch of incredible products for free for 1 year, including Lovable, Replet, Bolt, Naden, Linear, Superhum, Dcript, Whisper Flow, Gamma, Perplexity, Warp, Granola, Magic Patterns, Raycast, ChapiRD, and Mobin. Check it out at lennisnewsletter.com and click product pass. With that, I bring you Brian Balffor.

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Brian, thank you so much for being here and welcome back to the podcast.

Yeah, thanks for having me. Excited for this one.

I'm really excited to have you back. Uh we're just going to dive right in. Essentially, you've uncovered a a really important trend uh or insight about how products are going to grow differently in the future, how growth is changing. And this is something that I think a lot of people need to hear. So I asked you to come on to share what you're seeing. Uh I also think this is just very timely. I uh I think you said like in you're going to say in the next like six months things might significantly change. So I'm really excited to do this. We're going to spend this whole conversation on this on this insight to set us up. What is just the big idea? What's the high level idea here?

Just like you, I've spent my whole career just like really passionate about startups, you know, figuring out how to build products that win, that emerge in new markets. And uh one of the things that I have, you know, learned over time or one of the things you hear a lot is from a lot of folks is uh to win you have to like really build a great product. A lot of the advice kind of boils down to that. And one of the things that I feel like I've banged my head against the wall in a lot of ways of my career is actually telling people that building a great product is one of those things that's necessary um but not sufficient and actually the separation is between those that build really great distribution.

And so uh this general partner his name is Alex Rample he's at Andre and Horowitz actually wrote this blog post 10 years ago um back in like I think two like 2015. In the essence of the blog post, he basically says uh one thing which is that startups is a game of trying to get distribution before the incumbent can copy right so it's this kind of concept of escape velocity and and so you know on that note right which I think is like a very good summary of like what you're trying to do in a startup and distribution is that we're right now living in this environment where that game of startups kind of getting distribution faster than the incumbent has gotten way harder in a lot of ways and in some small cases has gotten a little bit easier. But if we think about this, the way that it's gotten harder and some of the things that probably a lot of founders or or folks working on the growth side probably feel is that one is that incumbents can copy faster these days, right? So that window that you have to get that escape velocity has actually shrunk. It's it's decreased. The second thing is that the a lot of the organic distribution that we've had especially over the past few years has really shrunk as well. So, everybody's talking about the decline of SEO and, you know, clicks declining, but you also see it in some other cases, right? A lot of these social platforms don't really let you send as much traffic to sites. You know, LinkedIn just changed their algorithm, which has really dropped organic distribution. Obviously, the the Twitter tox transition that happened, right? Like Tik Tok's almost always been like that. And then the third way that it's gotten harder is that AI is really good at writing software, right? And code generation. And so everybody's kind of feeling this infinite increase of competition, especially at the startup level. And you know, YC is pumping out six of the same thing every single cohort, right? Like that's what that's what it literally feels like. So it's gotten way harder. This game, this escape velocity game has gotten a lot harder. It's gotten easier in some very exceptional cases like a cursor or something where AI has kind of been like this spark, you know? I know you wrote uh the blog post about the race car engine and I think you said like there's like the spark plug in the engine, right? and and so AI kind of really created that uh a new type of spark, a new type of interest of early adopters to to to fuel some some new players in a short period of time, right? And so it's amazing to see something like Cursor overtake market share of something like GitHub Copilot in nine months or less, right? Like that that's how fast it happened. It's kind of crazy.

But the main thing that people need to understand is okay well if that's the game I'm playing, right? How to get escape velocity before the incumbent. Like what are all the ways to do that? and um and to really figure that out. And there's multiple ways that this can happen, but one of the major ways, one of the major major ways that we always see is that uh this can happen when new distribution platforms emerge. Um and because when new distribution platforms emerge, startups are usually the fastest to take advantage of them. It's slower for the incumbents to move. It gives startups this opportunity essentially to play this game.

So Casey Wyers wrote this blog post about two years ago um maybe like 18 months ago about uh the AI technology shift and his key point was the AI technology shift has been a technology shift that has not come with the distribution shift yet. So if you look historically we've had a bunch of technology shifts from you know uh the internet to the cloud to mobile to social like all these different types of things and some of them come with distribution new distribution platforms new ways to distribute products and some of them don't but the most powerful ones the most impactful ones are the ones that um do come with these new distribution platforms and so his second key point was that these two things don't actually happen at once usually you get the technology shift then you get the distribution shift shift a little bit later. So now we're a couple years from that post. We are a couple years into AI technology shift and one of the things that I am seeing is all of the conditions, all of the ingredients for a new distribution platform to emerge are essentially happening. And so I think we're at an inflection point where we're going to see this emerge really fast. And the key thing for everybody to know is that as new distribution platforms emerge, they follow the same four-step cycle. And it's kind of a game that you're playing that everybody's playing. And so, just like any game, you kind of need to know the rules of the game. You need to know the steps of the game in order to have any sort of opportunity to win. And that's kind of like the the the thing that the that I've lived through once again, both painfully and um also in good ways. and is something that I'm keeping my eye on and something that I've been talking about.

So, before we go into that, you know, four-step cycle, I figure I I'll pause there to see if you you have any follow-up questions on that.

Okay, this is amazing. So, essentially what you're saying is we have all these ways to grow. There's SEO, there's paid growth, there's sales. All these uh channels have been around for a long time. They're extremely saturated. Everyone's always complaining SEO is dead. It can't grow with SEO anymore. It can't grow. Word of mouth is so hard. There's so many amazing things now. That's hard. Uh paid is so hard. It's just like all this money >> tax are rising. Yeah. All these things. Yeah. So all these saturated channels and what you're saying is there's an emerging new channel that has not yet been saturated and this is a huge opportunity for companies to get on it. Uh and you'll talk about timing because it's a little tricky to even know exactly when to go big on this. >> That's right. >> Um but that's a huge deal. This has been a long time since there's a new way to grow that you can actually use as a lever for growth and not just hope for the best. >> Okay. >> Uh before you get into the the cycles, do you want to tease what the answer is just to give people a little hint or do you want to keep it secret?

>> Well, to be clear, right, like okay, so um my prediction will we don't we don't have a clear winner yet. Um my prediction of the new distribution platform will be chat GPT. um in some ways that people probably already think it's happening in some ways that it won't uh but the thing that is less important or like that is more important than whether I have predicted the exact winner correctly the thing that's more important is to understand the cycle and and evaluate like how to determine where you want to place your bets and how to place those bets which I know which I know we'll talk about because I I'm I could be wrong about the chat GPT prediction and what's going to happen there. Um there's I think there's going to be two parts of it. There's going to be what they do with like a chat GPT search experience, but I think the bigger thing will be whatever they do with launching a third party platform on top of chat chat GPT. There's a bunch of signals that um they're about to uh that they're about to launch that. I'm pretty sure it's going to be chat GPT. The thing I'm way more sure about is that some new distribution platform will emerge and it will follow the same four-step cycle. That that that's kind of that's kind of the key. So could be wrong on the first piece. I am very confident on the second piece.

>> Okay, excellent foreshadowing. Uh I completely agree. If it's anything, it would be chat GPT at this point. Let's get into it. What are the what are the cycles that uh platforms generally follow?

Yeah. And I'll give some examples of this, but let me explain the four uh the first four step uh the four steps of the cycle first and then we'll go through a bunch of examples of all those individual steps. So the the four steps are essentially one is like I call a step zero. It's it's the the conditions of the market have been met. Um, step one is about a moat, step two is about a platform opening and step three is about uh the platform closing for control and monetization. So, let me kind of briefly explain each one. Um, step zero is about the competitive market being uh met, the conditions being met. And there's a few part piece of this. One is that typically what happens is that a uh there is consensus that there is going to be this new huge category right think social think mobile like all those types of things and in this case right uh these AI like chat platforms like a chat GPT or a clock so there's consensus about that but there's no clear winner yet and you typically have somewhere between five to seven you know major players really battling it out right so And they're all kind of looking for what is the edge? What is the thing that is going to that is going to to help me win because all of these dynamics you in in all the history they either end up in monopolies or duopolies, right? And so this the stakes are really large and so the competition is fierce. So that's kind of step zero. And I I think we could all agree that we are in that mode, you know, right now. We've got we've got open AI battling with claude battling with Gemini uh in Google with whatever Meta comes out with new their new team you know so on and so forth like and there's huge amounts of capital there's consensus like all the type they are in a fierce composition so that's step zero step one is then um these players somebody essentially identifies whatever the moat is the thing that is going to help build them defensibility and help them hit escape velocity and become that monopoly or duopoly in that uh single category. And once they figure out what that mode is, then they need to press the advantage, right? They need to figure out how to gather that moat as fast as humanly possible. And it tends to be that you can't do that by yourself. And so you kind of need the help of an ecosystem in order to gather more of that mo. And that typically comes down to thirdparty content creators or app developers and other businesses. And so they all establish like a third-party platform, right, that has some incentives built in. And usually the value exchange is, hey, you develop on top of my platform, right? You add more use cases, you know, more engagement, like all all of these things to my platform. And in exchange, I'm going to give you something in return. And usually that thing that's in exchange is I'm going to give you some new form of distribution for your application and for your business. But what essentially happens as we go over time is that we go into step three, which is the closing period, which is at some point all of these companies end up um starting to lock down the platform. And this tends to happen for reasons of like monetization and growth, right? uh they either competitively don't want you know somebody to use their own you know platform to disrupt themselves like we saw that in the early Twitter days with things like Vine and Periscope right like shutting those things down unceremoniously right or they need to find ways to monetize at a deeper and deeper level because all these companies like they have to grow and you know Google's the classic example here of just more and more real estate has either been taken up by either ads or their own, you know, first-party applications. And so that's the key is like they close it down by doing one of two by one of a few things. They either shut it down entirely, two, they develop their own firstparty applications to absorb the the highest use cases, or three, they artificially depress the organic distribution that they gave you in the step prior to push you towards paid mechanisms in order to monetize. And so I think we should go through like multiple examples here, but that's kind of like the core essence of of the four steps. And so I'll I'll pause there.

Awesome. So, it's essentially figure out what's going to make create defensibility long term. What's remote? Bring everyone in. Hey everyone, welcome to to Facebook. Uh everyone joins Facebook and then okay and or developers build on Facebook to bring in more people on Facebook and then they're like okay now you got to pay. There's a toll and but you love this so much and you're so hooked. All your friends are here. you may as well stick.

>> That's right. That's right. >> Uh, amazing.

>> Okay. So, yeah, a few examples would be great.

>> Yeah. So, you you just hit on the first one. The f this is the first one that I always think about because this is where I learned about this cycle very early in my career. Like my one of my first companies uh was during the whole uh uh the Facebook platform boom, you know, social gaming, all of those applications. And I lived the full cycle in a very short period. I lived the the glory days and the just the absolute horror days and and it was very painful. But this is exactly what happened. So let's go through the four steps. So step zero, Facebook was in a brutal battle with uh MySpace, Friendster um and a few others. People forget this. People forget that there was actually like a bunch of competitors at that time. And in fact, those competitors were bigger than Facebook at the time. They had more users back in 2007 when Facebook launched um their third party platform. Uh but one of the key things is that Facebook was very early to the insight about uh the direct network effects and that um there's going to create real lock in that the the more friends the more of the global network that was on there the more that it was just going to feed and hit this escape velocity. And so at the time they launched their platform I think they were maybe like 1/4if uh the size of you know something like mspace or even fster orchid like these are some of the names at that time but they opened up their third party platform and what was the value exchange they went to third party developers and they said okay we've created this canvas and they used to call it the canvas and they were like you could put anything in the canvas that you want an app a game whatever you can monetize in any way you want. We just want this sidebar real estate on on the ads. That's that's what we're really interested in. And so there is this mad mad gold rush uh on that Facebook. Oh, sorry. The other part of that was not only will you put it there, we're going to give you access to all of these notification channels and feed to get distribution for your application. That was that was the other piece of it. And so you had this mad rush of developers um coming in and you had this huge uh like social application, social gaming boom. uh the people just grew incredibly virally uh very fast. But eventually essentially what happened over time is they kept peeling back that value exchange. They first were like ah actually you know that those dollars that you're you're making inside that canvas area. Well, we want a percentage of that, right? And so they changed that and then they figured out their like their ad systems and then they started peeling back you know they started suppressing access to all of the organic channels that they had. Eventually they went all the way towards absorbing the highest uh you know use case into their own firstparty platform things like uh firstparty applications things like events, photos, all those types of things and basically shut down the platform um for dead. And these companies that have basically built on top of this platform, you know, uh the other thing is by the time they started closing all those things down, all those competitors that we talked about, they were so far ahead at that point because they had built off the back of all these developers coming, adding use cases, bringing more users onto the platform, like all like identifying that mode. They were so far ahead, it didn't matter. It didn't matter what the other what the other folks uh did at that point. And and that's what kind of really gives you uh confidence to start closing down. But there's so many other examples of this, right? If if we go through it, right?

So >> just before you get other examples, just something I'll highlight here. One is the mode they identified in theory was the friend graph. I imagine just like once we have all your friends, you're not going to want to go anywhere.

>> I imagine it's also uh important to note. You may not This is kind of like a natural thing that would happen if you build the thing and it grows and you're like, "Oh, maybe we should change strategy." I imagine not everyone even knows this is what will happen and they kind of organically evolve their strategy or do you think everyone's just like this is our going to be our plan step 1 2 3 4

I think a different version of that question is I think some people could sit here and interpret this as all these folks are evil right and and that's not what I'm saying right like that's actually not what I'm saying I want to be very I want to be very clear on that uh because I think you know a lot of the a lot this cycle happens because of competitive and capitalistic like dynamics and pressures. It's it's the same environment that enables like creating amazing new companies right here in the US. So, and and there's there's like two sides of the coin. And so, you go through this cycle because it's a competitive environment. You're trying to figure out how to beat competitors and this is one of the strategies to beat competitors, but at some point like you just have to continue growing. You still have you have to grow those dollars. Like the the market does not reward flat companies if anybody's noticed. you have to keep growing and so they have to keep finding ways to grow as well as prevent their own disruption, right? They they can get so big and they can give access so much access of distribution to new developers. They don't want to enable uh their own disruption as well as like they need to keep growing. And so my guess is anybody who is kind of sitting in their shoes, you know, owning their platform is going to follow the exact same playbook and and the exact same reasoning. And you know, look, sometimes it happens also because it actually is the best thing for the user. Facebook's channels did get super spammy and like all of those things. And that was part of the reason, you know, they they play this. But let's be honest, it wasn't the only reason, right? Like a lot of it was a lot of it for was for these other reasons. And so I don't think it's evil. It's just you need to know how to play the you just need to know how to play the game. That that's competition. That's business. They're playing you. So you need to play them. like that like that that might be a little a little sadistic or something but but that is that is business that's you're you're in a game of competition.

>> Yeah. Essentially the incentives are pointing you in this direction. Capitalism this how capitalism works.

>> Um and so it'll pull everyone in this direction even if they they don't they want to avoid it.

>> Let's do a couple more examples.

>> Yeah, we'll go through them quick. You know, I I think everybody's probably Google's an interesting one because it played out over a much longer period of time. You know, Facebook happened over the course of about in fiveish years, something like that. Google kind of did it like very slowly over years but uh same thing right massive early massive competition against Yahoo I don't know Altivist I like you name them all right uh that was even before my that that was even before my time right they were first to really identify these data modes and incentivizing um essentially web developers content folks to optimize you know for their search algorithms it create this great great distribution mechanism everybody's kind of building content and everything you for them. But o over time, slowly but surely, right, they did uh two things. One is more and more of that real estate uh became ads that they were monetizing. So, they're suppressing organic distribution in order to push people towards the ads as well as absorbing a bunch of of the highest value first party use cases, things like travel, you know, as an example or um even like, you know, like restaurant search and like all those types of things. you know the Yelp former Yelp CEO and founder has has been you know been out there saying a lot a lot of things about about these practices. So same same exact cycle. Mobile went through the exact same cycle, right? iOS created a new distribution mechanism. They were in massive competi. They they had a ton of competition among different phones when they first started on. They found the defensibility was more about the apps. They got in all the developers, created the the app store, like all these types of things. But over time, we've seen more and more restrictions there on that front. And then most recently, right, like we've seen this happen in smaller places, too. LinkedIn as an example first went through this wave with company pages right they were like ah companies you know come on promote your company page bring in more users like all that type of stuff and then get get all these followers and then of course they you get almost no distribution now through your company page uh because they're pushing you towards ads and then they recently just did this with personal profiles too which is they really boosted um distribution for individuals to create content for that platform. They then introduced the thought leader ad format, a way to monetize those those individual posts. And now you've seen them really pull back on that organic distribution. So this happens in big forms and it happens um even in in smaller use cases as well. But once again, the steps of the cycle are exactly the same. And the key part about this too is it the broad trend is that the cycles seem to be getting shorter and shorter and shorter and shorter. So you actually have a smaller amount of time to play the game.

Okay. And the big aha here is yes, this will end maybe not great for you, but there's this magical period when they're open to customers and users where you can grow like crazy because they want everyone to come and they give you distribution. And what you're saying essentially is chat GPT potentially some other platform maybe uh is about to enter this mode.

>> Yeah. Well, let me first before we get to chat GBT, I think the natural reaction when when you first realize this is screw them. I'm not playing that game, right? Like that that's what I feel like most people uh like how how they react, right? Because um because the unfortunate truth is is that a lot of companies don't predict that last stage and end up in a really hard hard position, right? So many companies got completely killed during uh you know the crash of the the Facebook social platform. Apple's 30% tax, you know, basically destroyed a bunch of types of um types of applications and business models uh because it just you couldn't you like it was just wasn't like margin effective like all so many companies built on, you know, SEO loops, right, that are in serious serious uh trouble right now if that's their only channel. So so all these things, right? And so I think the natural reaction is yeah like like why would I play this game if I'm a startup or or a company right and you can even see this with like chat GPT as an example right uh they just launched these like deep research connectors um one of them was my former company HubSpot and you know if you sat inside HubSpot and you were just thinking in isolation you would be like well why would I want to make all of my data accessible through chat GPT and have like all of the usage you start to acrew through there, right? Like that doesn't really make sense in isolation, but we don't we don't operate in isolation. Once again, we operate in a competitive environment. And what's going to happen is that if you don't do it, your competitors are going to certainly go to the new platform and your customer expectations change and you have to rise to those customers expectations. Like they're going to start expecting you to be in these new experiences and all these things. And so it it ends up being a prisoner's dilemma, right? which is like you there is no opting out of the game. You have to play the game and and so it's better to be early than than to be super late uh to this game especially especially if you are a startup, right? Uh that that kind of like the the key uh that that's kind of like the key opportunity. And so we'll talk a little bit more about how to play the game more, but it's it's it's better to be early as well as then than then the key the harder part about it is is anticipating that last stage of the cycle and figuring out how to sequence away from something before that last cycle comes. So I think that's the key part. Um but let me pause there and then I'll talk a little bit about chat GBT and and some of my reasoning behind that.

Cool. So what you're saying is not only is there going to be this big opportunity to grow.

>> If you don't take advantage of it, somebody in your space will.

>> So it's not only there's an opportunity, but this is something you need to do because you might miss the boat. And I think about companies like Zinga that grew on Facebook and then became massive companies. And you know, if they didn't do that, they would have missed the boat. Someone else would have uh eaten that lunch. Uh I don't know. I'm thinking about the Technology Bros podcast on Twitter right now, TBPN, where they basically figure it out on Twitter. You can create this like live stream and you see it all day in your Twitter feed just like, "Hey, they're broadcasting and it's a really cool distribution channel." So, so I think there's like a big call to arms here almost of just uh the opportunities emerging and you basically need to pay attention. You can't opt out.

>> That's right.

>> Okay. Exactly. Let's chat. Yeah. So, let's talk chat GPT.

>> So, look like like let's go through this cycle. We right now we're in that competitive environment like we said like all those players we talked about chatbt Claude Gemini all these folks they're they are battling it out right uh and we've seen this with you know the talent wards especially over the past you know month or so and and so there's no clear winner yet but there's consensus around uh the category the second thing is then okay what's the moat has the moat been identified and who seems to have identified it the first or is furthest alone I think there's uh You know, my hypothesis and I think there's a lot more consensus around this now than there might have even been three months ago is that the mode is really about is about context and memory. you know, these models, uh, you know, by themselves, if you compare them side by side, uh, you know, they they kind of generate the same result. And so that the actual difference maker is which one has more of your context and and and and because it's the context plus the model that produces the best output and then and then that kind of starts to acrue to this loop around memory. The more you use it, the more it's able to store memory around you, which kind of feeds more personalized context, which produces better outputs, right? that ends up being, you know, another one of those flywheels, another one of those another one of those loops. And so if you look at who's farthest on this, it definitely is um chat GPT, right? Like they were kind of the first ones to memory. They've been investing a lot in these different types of uh data connectors, essentially context connectors, you know, you know, gathering uh all of this context and uh and and so you can really start to see it in the usage. But the second thing is is and one of the push backs I've gotten on my prediction has been well what about like Google and Gemini like they have so much distribution through Chrome and like all of this other stuff right but uh it was uh DD doss who's a a VC at Menllo Ventures um actually uh published some good data on retention of all of these different ones and I think the second reason I predict chat GPT is like if you look at history once again it was never the person who had the biggest distribution at the moment of time. It was the one that had the best retention and engagement. Google had the best retention engagement over the others. Facebook had was smaller but had way better retention and engagement over the others, right? So on and so forth. And so um the the data that Dee published uh clearly showed that both the retention curves uh which I know you and I have both written about at you know at exhaustion um level off at significant portions higher than all the other platforms as well as those retention curves have been shifting up dramatically over time. you can start to see the effects of of memory and and they have the very elusive smile curve, right? The ones that you just like and the only other times I've seen, you know, all of those dynamics very few times in my career and they tend to be the folks like Slack and and like all of the big winners. It's there it's just like so elusive.

>> And the smile curve, just to just people haven't done that, is essentially retention goes up over time. it goes down a little bit and then you come back to it and you use it more.

>> Yeah, that's right. And it's usually the result of um some type of network effect or something else and uh and and it's it's a early indicator that these folk that that platform is on a trajectory to to hit escape velocity. Um the third piece is that and they haven't really hidden these but there's all sorts of signals that they're about to launch a third party platform. um they've uh they've been hiring for a bunch of roles. I've seen multiple postings on like product manager, engineering roles, all that kind of stuff for you know quote unquote agent platform and all those pieces. And so um it feels pretty inevitable that they will one of these players will need to launch a third-party platform in order to you know serve all the possible use cases on you know on these tools. there's going to be some value exchange which is like hey for your agent to be effective you probably need access to context and memory and distribution right so there'll be some value so integrate to us and we'll give you those three things right which is going to drive more users and more usage and and we're going to go through the steps of we're going to go through the steps of the cycle and you can already see this right like uh you know they're starting to form preferred partnerships right with uh some of the bigger players which paves the way for um smaller thirdparty players. It kind of gives lends credibility to the platform. It's like, well, if HubSpot and XYZ are doing it, then I should probably do it, too. It's it's like that type of that type of mentality. But that's why I think out of all of these platforms, Chat GBT has uh that the best shot right now. And and then a bunch of folks are always like, well, what about cloud? I really like cloud. I use cloud. Well, um, the problem with that is like I think Chetchip at this point has like at least a 10x difference on MAU. So, if you're a developer, right, and you're comparing those two platforms and you're saying and you're looking at, you're like, well, chat GPT has 10x the number of users and better retention engagement. It's like, what's the what's the logical choice of which one you're going to prioritize your scarce resources on, right? Um and so so those are just some of the reasons that my prediction is on chat GPT. And um in in the blog post that I wrote about this, I actually then played my own devil's advocate and said, "Okay, here are some reasons why it might not be a chat chat GPT, but uh but I think we're in that part of the cycle." That's my prediction. I might be wrong on the prediction of chat BT chat GPT, but I really think I feel very confident we're going to see this cycle play out again.

>> Two followup questions here. one is what's your what would be the backup if it's not JBT it sounds like it might be Gemini Google my hypothesis of who's best positioned but is not executing on it right now would actually be Apple because

>> through the the devices they basically can see everything so they have the ultimate view into your context right they're they're sitting at that they're sitting at that level but I don't know what they're like from an execution standpoint, maybe they're going to surprise us with something crazy magical. Uh but I haven't we haven't seen any external signals around this. So So that's probably just based on on what real estate and where people live in the stack would own. And then I think right behind that I would probably put I would probably put Google uh because of owning the context of things like email and the the distribution points of search and Chrome and Android and and those types of pieces. But um and a lot of people point to them, but my experience with all of their products is uh like going back to the retention engagement thing is um is that if we could take a look inside their metrics, I think what we would see is a bunch of flyby users in their mouths like they're kind of sprinkling the Gemini bucket everywhere and I'm I've I've like literally clicked on it accidentally multiple times and so my guess is a huge portion of their mouse is is exactly that of like what what's happening right now. And so, you know, look, they just um uh they just acquired a very talented team from uh from Windsor.

>> Just the team. Just the team. Part of the team.

>> Yeah. We'll see. And and things are things are changing dramatically, you on a on a week-toeek basis. So, we'll see if they're able to press those advantages in a very clear way, but I think the window is very small for them if if if Chhat GPT plays their cards right because they clearly have the escape velocity right now. And uh if they just keep pressing that advantage and in the right way, I think it's going to be very hard for Google to um counter in in the amount of time that's left. On the clot piece, I'll just throw this nugget out. I had uh Mike Creger on the podcast, head of product CPO at Anthropic, and asked him just you're you're losing to Jad GPT. What do you how do you approach uh the future of anthrop of Claude? He very specifically said, "Yes, they've caught lightning in a bottle. This is just going to win based on what I've seen at Instagram."

>> And so we are specifically focusing on what is Enthropic and Colad incredibly good at which is developer tools, coding, backend stuff. So they're actually leaning more and more into that. And if you've seen their revenue recently, they're making I don't know like approaching 10 billion a year or some crazy amount of money. So they're actually doing super well just in a different use case.

Yeah, I'm glad you mentioned this because this brings up something that uh we skipped which is uh there are smaller platforms that have existed and will also emerge in this environment as well. And and that's kind of like what you're alluding to is this tends to happen is like things end up um you know uh you know growing into more niches like even if you look at social right uh like LinkedIn emerged as a subset of of the social world but I'll I'll but even on these smaller platforms these new distribution channels they they go through the same cycle. I I'll give something you know really a a very opposite example of the ones that I gave like look at the platform Udemy right they they are a platform for course creators right I don't know if most people know this but when they started their rev share to creators was something like 80% to creators they started very high and that would that brought on all the course creators got their whole marketplace going like so on and so forth I believe it was about a year ago they announced that they're essentially pushing that rev share down to something like somewhere between 15 and 20%. They're somewhere at like 25 and 30%, right? So another example, right, of like they close down organic distribution in order to monetize like all that kind of stuff. And the same thing will happen in this AI world. I believe you know cursor it's very clear like cursor is on a path to also probably create some type of agent platform, right, for developers. So that'll be like a smaller ecosystem to play in for um some some products. Um there's all sorts of it feels like everybody has the same strategy at this point as everybody wants to launch an agent platform. I imagine some of these other horizontal productivity tools will do the same thing. Maybe like a notion or an air table or like a monday.com or or something like that. So there there are there will be smaller platforms that will emerge and they will follow the exact same cycle that I am uh that I'm also discussing. Um but yeah, in terms of like the biggest kind of consumer one, that that's where I think chat GPT has probably the the most escape velocity and uh and yeah, others will focus on different areas. And and just to be clear, I love Claude. I actually use both Claude and ChatgBT all for different things. I have lots of love to go around for all these tools. I'm not my prediction has no bearing on which

Which product I I like the most right now. Also love cloud. So I think what so the key point here you're making is that there's almost a number of distribution channels emerging, many of them will be niche. So I think of LinkedIn, if I want to like LinkedIn for me is a very targeted audience for folks that listen to this podcast. So yeah, even though it's not, I don't know, Google or or Facebook or whatever, uh, it's still incredibly valuable for the specific thing that I do. So I think this is even more interesting that there's going to be a number of distribution channels that emerge out of this whole AI wave.

The other thing I'll note real quick, you mentioned this idea of everyone's building agents. I just had Brett Taylor on the podcast who's building Sierra and we actually he made me realize why everyone's building agents partly. One is because the uh the outcome-based pricing that you can uh charge with agents is incredible because one, you can actually attribute their impact on your business's ROI. You can actually see this is saving an agent $15 because it solved the case and it's um it's attributable and it's autonomous. It's just doing it on its own. So with that, you can charge per outcome. You can say we'll charge you a dollar every time it solves an an issue. So the monetization opportunity is huge. The margins go up like crazy.

Do you can I just ask a question about that? Do you think that has longevity um in the sense that uh that makes sense in the current environment that we're sitting in right now because people are kind of comparing these outcomes relative to what it costs them today with pure humans. But once again, competition comes in at some point. And so that feels like that creates a pretty ripe opportunity to, you know, undercut and come into and then you have like whole all like the disruption theory kind of playing out as well. And so um obviously depends on like the infrastructure cost and compute costs to to to run these things. But I just wonder how much of that is uh temporary versus uh versus something that'll be long term. So you're saying that dollar will come down to like 50 cents, 25 cents, or you're saying someone's going to come with a whole new business model and disrupt that whole approach?

More the first? Yeah. Like it's just competition erodes that away essentially, right?

Yeah. Yeah, that's a good point. So margins will be higher for a while and then they'll come down.

Unless there's uh something else that um creates a like durable pricing power, right?

I wonder if that Yes. I wonder if that's probably the second piece of this. Yeah. Yeah. That's probably the second piece of that hypothesis I feel like. Yeah.

Yeah, I think I guess the opportunity there, the moat would be the data, like similar to how Cursor is collecting more feedback on what is people want in their code suggestions, maybe in theory, CR has more and more data over time and there's kind of this network effect. So let me revise that. Yeah, it's like uh I believe in that as long as it's paired with some moat, this second piece, otherwise it gets competed away. Yeah.

Good tangent. Okay. Uh, one more question. What's the what is your prediction on timeline for when things when the opportunity appears and what do you predict as of the day we're recording? What do you predict will be the next couple things that open that ChatGPT and let's just focus on that releases to start to open up this platform to get everyone in there?

Yeah. Well, look, I I'll first uh uh give the disclaimer that I feel like any thoughts on timing in the AI market are very have been very hard to predict. It's always shorter. That's where we should bias. It's always shorter than you think uh of like when something's going to happen. But that's what it's felt like from the seat that I've been sitting in. Um, and uh but my guess is this. We're going to see the the next major steps of this play out over the next six months. And so I think we just saw one of the pieces drop around this uh which was uh their re which was ChatGPT's recently launched agent mode. And so it's kind of a general purpose agent, you know, and I think that starts to introduce all of the users to uh to to using agents and they're kind of figuring out and placing it in the different tiers and business models, all of those pieces. But um but it's likely that no general purpose agent is going to fulfill all of the infinite use cases um successfully and there's two reasons for this, right? Users struggle with horizontal tools they can do everything and that's exactly why they struggle to adopt and so they typically need more specific entry points, but also the more specific use case you get, sometimes you need specific UI, specific data, like other specific ingredients, you know, to properly fulfill uh that use case for, you know, for a given audience. And so I think their agent mode was a step in this direction. What I would expect to see play out next is that they will they will either launch, they will announce the platform or what they're going to announce with preferred partners or what they're going to announce first is is basically a set of preferred partners, the guinea pigs, you know, an initial 10 to 20 folks that are like bringing agents uh to their platform and uh and what that does is it essentially once again, it's a credibility card, right? You you do special deals with uh some like right brand names to give uh the platform credibility and it kind of creates this desire from everybody else to come on, you know, to the to the platform. And then the step after that is starting to open up the platform and this is where the real uh, you know, where we'll really start to figure out what this game is going to look like because they basically have to define what the value exchange is. What are they giving you access to, right? Uh and like what are the what are they incentivizing you with to to come on to the platform. So that's one version of it. Um, the other version of it is just like the replacement to search. Um, there will probably be uh, you can also see them starting to make more moves here which is like deeper attribution in some of the results, like those types of pieces. They're bringing in shopping, right? Like that's one of their recent announcements as well, kind of native into the UI. Essentially, they will form new monetization mechanisms around that stuff as well and that's actually going to be very important because uh for them to going back to the moat around memory and context is that uh, you know, they they will want to incentivize as many people to their free uh tier as possible, but given the cost of AI, they have to cover it somehow, so they're going to need some monetization mechanism. So the more that they can cover that free usage with things that aren't subscriptions, I think that probably also kind of feeds them out. I think it those are some of the next steps on two different vectors, more of like a third-party developer platform and more of the, you know, kind of content, whatever you want to call it, AEO, GEO, I don't know what acronym is that everyone we've all decided on yet, let me know if we have. And uh and I think those will be I think those will be the next the next steps that we'll see.

Now that's what I think for ChatGPT. I think the thing that we should talk about is like um essentially what I would advise folks, especially startups, is you're placing bets. You at this part of the cycle, you're placing bets. We don't the winner is 100% guaranteed as I mentioned. And so you essentially at some point will need to make some decisions about uh, you know, where to where to place your bets. In the Facebook days, uh, all those other all those other social networks, they also came out, you know, with their own platforms, right? And uh iOS had Android and some failed initiatives from Windows. I don't even remember what that platform was called, right? Like, and you can look back and whoever placed their, you know, the iPhone was actually a very and iOS is a good one, which is if you had only aligned your bets to Android, you probably lost. If you somehow found a way to play on both ecosystems, you could be a winner. But if you only aligned to iOS, you could also be a winner, right? So like that's just right like you you had to have iOS as part of your betting strategy in order to win. So everybody right now like you're probably at the cycle and trying to figure out well you all need to everybody will need to figure out where are they going to place their chips. How how are they going to bet and depending on how you bet really depends on um what your current position is in the marketplace. You know, if you're a late-stage startup, let's start with that. Um, or like a late-stage company, you can afford the luxury to place multiple bets and kind of spread your chips and and kind of wait it out a little bit to see who the winner is and then really throw your muscle, you know, be behind that winner. You you have that luxury a little bit. And of course, but the risk of that the the risk of that is that the sometimes the incumbents wait too long to to make that decision. And and that's like kind of the key key question they will need to answer. The key question for startups is totally different. You don't have the luxury to spread your chips. Like you have to go all in. You have to choose one and go all in. Um, you you have scarce resources, scarce attention um from the market. And so it's a totally different ballgame. Higher risk, higher reward for sure. Uh, and uh, and and that's part of the betting strategy for startups. And so that's kind of what that's kind of what you have to do is you kind of have to figure out your betting strategy and then you know, we we can talk a little bit about how you might evaluate and pick the right course for you. But uh, but that's where we're all at right now is where we're kind of we just entered the casino. Uh, we just cashed put some cash in for some chips and now we now we've got to figure out, you know, what tables and and where to to place those chips.

I love this analogy. Okay. So just to be crystal clear about what listeners should do, what founders should do, product teams should do. The advice here essentially is integrate with and ChatGPT, maybe Gemini, maybe if Apple has something like actually integrate with with what they launch. So it could be a login thing, could be a search thing, could be a connect and suck up your memory and context. The advice here is is you need to do this because this is potentially the way that most companies will start to grow and your competitors may overtake you.

Yeah. Yeah. If we had to like really simplify it, it's essentially play the game. Don't opt out of the game. Don't don't trick yourself into thinking that you can't play the game. That's number one. And then number two, no matter who you bet on, just make it a focus bet. uh because the the all like if you look back, all the failures are the ones that tried to, you know, play multiple games at at once with scarce resources and that just tends to never work if you're you're an early-stage startup. So those two things, play the game, put a focus bet.

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So you were head of growth at at HubSpot for a long time. So and you gave that as an example, HubSpot. Why would they integrate? Why would they give away all their data so that ChatGPT can suck it up and you never have to go to HubSpot? You're just working through their agent. You're Would you at HubSpot be like, "Yes, we got to do this. This is the game we got to play."

Yeah, 100%. And that's exactly what I think you see them doing. And look, to be very clear, I have not talked to anybody at HubSpot about this. I have not talked to Dharmesh about this, but um Dharmesh I think has also like published publicly po published about this, but that the right thing to do is essentially even though you don't you you understand how the cycle plays out and you don't necessarily understand what your exit strategy is uh once you get out, it's better to be early, know that you need to figure out an exit strategy and figure out that exit strategy along the way versus waiting and then being super late and and then and then know what the exit strategy is. And I think that's essentially um what that's exa that's exactly what you see them see them doing. They're trying to be as early to this stuff as as possible. And I think it's a I think it's a pretty smart play even though we might not necessarily see like what what the exit strategy is out of this cycle for them.

So going back to that amazing quote that you shared at the beginning of the conversation by I think it was Alex Rampell.

Yeah. Of that startups win by finding a distribution channel before the incumbent copies them. And what you're saying here is this is the opportunity for startups to disrupt an incumbent. This is the opportunity for someone to disrupt Salesforce, I don't know, Service Now, all these guys that have been around for a long time.

Yeah, it's going to be one of the major ones. Now look, you've already see players that have been able to hit this escape velocity, uh, you know, the Cursors and stuff of the world. Um, and and so, uh, there once again, there's multiple ways to hit that escape velocity, but this is going to be one of this is one of the major ways to do it is to basically hitch yourself to a new platform. Look, you did it yourself actually. You hitched yourself to Substack super early. You took a focus.

Uh, yeah. Yeah. I was like, I don't know why that just hit me, but you took a focused bet and you've benefited from it in a disproportionate way than those that kind of came later. Uh, and I think that's actually a great meta example here as I sit here and think about this.

Yeah, that's actually the way I thought about when I was moving to Substack. Just like I feel like there's this wave rising and I want to ride this wave even if it maybe it's not the best place or maybe, you know, they take a cut, all that stuff. Uh, but it worked out really well.

That's right. Uh, and

I think it worked out very well.

It worked out really well. Uh, and to be honest, it felt like it was too late. The when I started when you entered, it felt too late.

Yes. It always feels too late, I think, to people that join like Silicon Valley or sorry, Mark Andreessen has this famous quote. He's like, I came to Silicon Valley in the 80s. I thought it was over. It was too late. I missed all the opportunities.

That's fair. Yeah. So, yeah, there was just a lot of newsletters. They were doing really well. Million subscribers. I'm like, no. And what do you say to people now who want to join Substack?

That's learn from this example. A lot of times when people think that it's too late, it's it's definitely not too late and it's always only just getting started. Especially if you're like on Twitter all day listening to podcasts like this where we're surrounded with this bubble of everyone talking about something when in reality, like 1% of people know anything about what you're hearing about every day.

Yeah. Uh, yeah, that's so interesting. Okay. So coming back to the advice, say someone is sitting there and talking to their manager like Brian just shared all this mind-blowing advice. We got to pick our battles, we got to pick our platform. What would your advice be for them to decide where to where to place their bets?

Yeah. So I think this is a great question because once again, you know, put my personal prediction aside for a second and I would encourage everybody to think about it from first principles from their like who their audience is, what their product is, what stage of company they're at, like all the all those their current strengths and weaknesses. You got to take all this into account. If I had to boil it down to a few criteria, the main things I would think about is when you're looking at new distribution channels and new platforms um to choose on, one kind of going back to what we said before is the better signal is retention and depth of engagement of the users on this platform than it is like pure kind of user level like MA or some some other like number of signups, you know, one of one of those vanity metrics. So look at that. Number one. Number two is there's some element of like user quality and monetize and ability to monetize the users on this platform. I think the starkest example here would be, you know, iOS and Android. It's like even though even today it's something like Android has 70 70-something percent of devices but only 30% of the market share by dollars and it's the exact flip uh for iOS. So, it kind of goes back to what we were talking about earlier, which was if you bet on Android only, you probably lost, but if you bet on iOS only, even though smaller user base, you could you you were still able to parlay that into a win um later. Um, the third thing to look at is as these platforms emerge, just analyze what the value exchange is, right? So what are they giving you to incentivize you to develop on their platform and uh and like all these platforms are a bit of a it's a bit of a game of whoever understands the rules and how to arbitrage the rules the best right tend to be the ones with the edge with the edge uh and figure that out. And then and then finally fourth on my criteria would be pure scale, right? Obviously, even if you have those other three, but there's, you know, a 200x difference in in scale in momentum, then like obviously you probably opt to choose um the the bigger platform. Um, but last but not least is as you go through these criteria, this is these are how you think through entering the game, you know, and once you enter the game, then you immediately need to move to starting to think about how do you exit the game knowing once again that that last step is going to come at some point in the future, that there's going to be some closure uh for monetization. Then that's where you have to start thinking through your strategy to to exit. And that comes down to things like, okay, well, how are you going to own an important part of the user experience or workflow, or, you know, how are you going to accumulate specialized data in context that the major platforms don't have, um, or how do you create, you know, different types of like micro network effects, like all all of these types of things. So just once again though, there's the entrance criteria, but once you figure that out and you feel like you're in the game, you immediately need to move towards, okay, you know, what what what's my exit plan here knowing this is all coming.

It's interesting that another way to think about this model you've described is building the strategy of building on top of LLMs and becoming a GPT wrapper because essentially this tech allows you to say create a Cursor that is incredible and then you could argue, oh, you're just going to be this wrapper and why wouldn't anyone like they're getting all the money here, everyone can copy you, like how what's your defensibility long term and the answer is what is the moat you will build over I'm sitting on top of this thing that will make you more and more valuable long term and not have to rely on this thing. So it feels like you could use the same framework for building a GPT wrapper business.

Yeah. To use that euphemism.

Yeah.

Um, so say someone is sitting there today. Is there anything they can do to start making a bet? Is it simply creating an API that allows LLMs to suck in your data? Is that the one thing you could do today? Is there anything else that's available today to start uh using these platforms or is it just a little too early and they haven't released the good stuff yet?

It might be just like a tad too early. Like we're like right on that edge. But um, you know, some of the questions I'm asking myself is I like I'm kind of going through all of these these players and where our customers and target audience live and I'm asking myself, you know, the question, okay, if this player launched, you know, some type of platform, like how would we evaluate it, you know, so on and so forth. It's hard to you can also try to cozy up uh to these folks. I would place a large portion of my net worth right now that if we could sit in the OpenAI offices like at that front desk, that they are having, you know, meetings with potential preferred developers, like talking about this, we could probably sit there and and and log it. So, I I do think some people are going to be in a place to develop uh preferred relationships and and make a and if you're you're in that spot, then you you should definitely play that card. Um, a lot of early-stage starts won't be in that card place. Um, other than that, I would say we we still need to like once they launch these platforms, it's like we you can't do much else until you really kind of know what the the value exchanges and what they're going to expose uh for you. But also just be prepared to turn your strategy on a dime and go all in. I think that's probably one of the hardest parts of this is that uh these things emerge and you have to capitalize extremely quickly and a lot of times it's just it's hard for leaders to do that because they don't want to create a feeling of whiplash into the unknown. We've got all these projects in play, like all you, you know, all the things. So, I think that's uh I think that's probably the the last part of what what we can be doing right now versus just, you know, kind of staying on top of everything as as it emerges.

As you were talking, this reminded me I recently noticed that ChatGPT is driving me to my newsletter more traffic than Twitter. And I feel like that recently shifted. Uh, I didn't even know this was a thing until I just started looking through my referrals. I'm like, ChatGPT, what the hell is going on here? And I think it's like a different version of what you're talking about, but essentially it's like in theory, I could block ChatGPT from, I don't know, I don't even know if I can from being

You can you can in Substack now. Yeah, I just saw that setting in there. Yeah.

Okay. Oh, interesting. But that's the a similar kind of decision is like, is it better for me for it to be recommending my stuff and telling people, hey, go check this thing out, or is it better to block it off? And I think uh per your point, I and this is how way I felt like take it all, just like it's good. It'll it's in that it's better that it's like the from Lenny's newsletter than something else. So someone else will come in and eat that market share.

Yeah, that's right. Like if if you don't do it, uh, you know, somebody else is um, and I think and I think that's also kind of what all the major media publishers are really contending with right now.

I guess I need a licensing deal in New York Times stuff. Anyway, okay. I I want to go on a totally different tangent. We weren't planning to talk about this. I know that uh I said this, we're going to be fully focused on this one topic, but there's something you mentioned to me before we started recording that I think will be really interesting to a lot of people. So you guys at Reforge are now building actual SaaS products that people can buy. It's not just courses. I don't know if people know that, but let's make sure people understand this. There's actually products for product teams. So maybe just explain that briefly. But the thing that I think is really interesting here is you work with a lot of companies now selling them AI tools and you have noticed a very big difference between the companies that are really good at adopting AI tools and seeing gains from them from those that don't. Talk about just what you see there and because this is in theory going to be really helpful to companies that are struggling with adopting AI tools and seeing gains.

Yeah, just to quickly explain that transition so it it uh it makes sense for people, which is, you know, I started Reforge just with the interest that there was all these incredible leaders out there growing, you know, on the front lines of some of the fastest growing companies and they have all this amazing knowledge and I wanted to encode it in useful and practical practical ways for others, right? And that took the form of courses uh and content product, all that kind of stuff. At the And along the way, everybody kept asking us to essentially build the tools to implement what we taught. Um, because, you know, with anything is like you can learn as much as you want. You can listen to my podcast, your podcast, Lenny, like whatever as much as you want, but if you don't actually put it into action and implement it, then it's not really going to create value, right? And so people kept asking us to to really close that gap and we said no for the longest time. And then about a couple years ago when AI really started to inflect, it really created this moment that oh wow, now we there's this opportunity not just to encode this knowledge into content, but also into the products, the software, the tools that we use ourselves and so we started to take a really big bet on that and uh and started to develop this this new um platform for AI-native product teams. The first product we launched was called is called Reforge Insights, which acts like your AI product researcher, kind of aggregates all the feedback from all the sources, uses AI to analyze it, helps you explore it, um, but also uh will start to identify like what are the gaps, the things that you don't have in your feedback today and autogenerate the research to go gather all those new insights to complete the full cycle. We're going to launch two other major products as part of this platform before the end of the year, but uh, we'll we'll save that for some some future episode. So that's kind of been our our journey. And so we've seen inside companies that are going through this transformation from two perspectives. One is obviously selling in that tools, but the other perspective is for 10 years, companies have been coming uh to us to help them drive some sort of transformation with our learning product. Uh, you know, most people, most companies are not coming to us to uh just like throw a bunch of courses in front of them, they're they're trying to solve some big business problem, some transformation. Now, that used to be things like, we've got to figure out this growth thing, right? Or I'm going from sales-led to product-led, or um, you know, I'm turning, uh, I have more project managers and I need to transition to product managers, right? Like something like that, like, or there's some business problem, they're going through some transformation and they they saw us as part of that transformation and we got to partake in quite a few of those types of transformation. Now, of course, the transformation that everybody's going through is, okay, how do I become more AI-native? How how do I adopt this stuff? And and so we've seen a pretty wide spectrum and from both perspectives of how companies are approaching this and I'm sure everybody's seen the like AI I call we've been calling them like the AI manifesto memos from CEOs out there that proclaim we are now AI-native, you know, it's some grandiose, you know, way, right? Uh, and uh, but there's behind the scenes, there's actually some incredibly stark differences in the actual teeth of what backs up those memos and backs up those executive decrees that, you know, we should all be uh, you know, AI, and and so just to kind of point out um, a few of them, which is um, one is that uh, there I think the most impactful thing um, that you can do is form really hard constraints. So what what you there there's other parts is like, okay, you want to communicate this, you want to establish an owner of who's going to drive this, you want to build in incentives and rewards, and you see this all playing out in things like um, you know, building it into your uh, you know, your career ladders, or some people are starting to introduce this as questions into uh, their performance reviews, like, you know, all those types of pieces, but the thing that is actually moving the needle are the companies, companies that are defining incredibly hard constraints. So one company that we worked with developed this constraint that they benchmarked against other companies of their revenue size and the team sizes uh for those stages, and they set a benchmark that we will be 15, each of our functions will be one size, and and what that did is it created a constraint that you couldn't hire above that level, and it forced people to essentially find ways to adopt AI and do things to to play set. So that was one. Um, you've seen these other ones. I can't remember from what company this might have been Shopify or another who was like, you are not allowed new headcount until you prove to us that you're not able to accomplish this uh with AI. That's like another hard constraint, and but you also see these other constraints on a smaller level, which is, you know, executives saying, I will not do a product review uh, or review a PRD unless it comes with three prototypes, you know, some something like that. And so that's that's the hardest one, those are the biggest constraints, but I think the biggest change that I'm seeing is and the things that separates out the top few percent making this change and and everybody else is uh is essentially making the hardest decisions. And that hardest decision is going to come down to exiting people. So in every transformation, what we see is essentially three groups of folks. You see your uh, we call them the catalysts, the people kind of leading the charge, the people who are experimenting, you know, doing this on their own, um, time, like all that kind of stuff. You then have uh your what we call your converts. Um, these are folks that will make the transformation. They will adapt, but they need structure. They need permission. They need an outline. They need a clear plan, right? And I don't say this in a negative way. It's just that, you know, that's how some people operate, right? And and so you um, and so that's where things like uh, all the things that we were talking about before, which was like the decree, the permission, the clear budget, the rewards, like all of those types of things. Um, but then inevitably, you have a certain percentage that are anchors, right? And they're dragging their feet. They're kind of uh, you know, silently creating friction in the background uh, and like all those pieces, and there's a big difference in how I think companies are treating uh, and and thinking about their strategy for those folks. One group is kind of like, ah, we're going to work with them very passively. Others others have set a hard deadline. They're like, either make the they're going to either make the transformation by X date, or we're going to exit folks. And a lot of people look at this as being really harsh. I think a lot of people would think that, especially individuals, but let me kind of explain it from a as more of like a CEO perspective. Um, a lot of these companies are seeing this AI transformation that the ones that are taking it more seriously as this isn't adopting new tools. This isn't a light change. This is a fundamental culture change of how we operate as a company, right? And you can't have 20, 30%, whatever meaningful number of it is, of your company trying to operate in a completely different way in a in a completely different culture. Cultures thrive on density, right? And that's why they're sometimes the best ones feel like cults, you know? Um, and and so as a result from that perspective, it's like, hey, like we for us to be successful, for this to be the best thing for all employees, we all need to be operating around the same cultural principles and stuff, and if that's not you anymore, then we're defining a plan to exit it. But I would say that less than 10% of companies we see are taking this hard stance, but I would say they are probably the ones that are farthest along getting the most adoption and are seeing the most results of the ones that are taking those hard stances. So, there's a bunch of other stuff I could talk about, but that's kind of the high level of kind of what we've what we've seen across a bunch of different companies.

That is incredibly interesting. I'm glad we went there. There's a I have a newsletter post coming out soon, probably before this episode that touches on some a lot of advice along these lines. Um, I I'm excited for you guys to keep seeing these uh insights into companies and sharing more of this because this is I think what a lot of people are looking for, just like things aren't quite clicking at our company. We keep hearing everyone is getting so much more productive. All these companies are uh running more efficiently and it's not working here. And so I think that's the kind of advice a lot of people are looking for.

So thank you for sharing all that. Brian, is there anything else that you wanted to touch on? Anything else you wanted to leave listeners with before we get to our very exciting lightning round?

Well, actually, just a couple more points on this topic. We should we should go is like um uh is there's probably two more things I would say about this. One is that um so if you're a CEO listening to this, >> I would say that most CEOs or most executives are incredibly disconnected from the actual AI adoption taking place in in inside their companies. I think a lot a lot of executives who have done these decrees and all that kind of stuff think it's kind of happening naturally. But we talked to both groups. We talked to tons of end users and we talked to tons of executives. The story we hear from the end users, the PMs, the engineers, all that kind of stuff that we talked to kind of using all this stuff. One of the main questions we ask them is uh, you know, if somebody if we're talking to somebody who's picked up a prototyping tool, say well, um, how many other people on the product and design team or have you are using this? Almost 90% of the time it's like, ah, it's like me and this one other person and everybody else hasn't uh like taken it up, right? And so the there's a huge disconnect and we heard one story and I won't I can't say the name, but the it's a company we all know, it's a major tech company, tech-forward company, CEO's been out there talking about being AI-native. We talked to one of their um like uh principal PMs, person was early to the prototyping tools. This person shared prototype type of the designer, the manager, the designer and manager escalated it to the VPs. It caused this whole conversation, month later kind of the it was like kind of still stalling out. This PM happened to then, you know, attend a happy hour where the the CEO was at and approached the CEO and told uh the the CEO about the experiment that they were running with prototyping and stuff, and the CEO was like, this is fantastic, like why, you know, like where is it at right now? was like, "Oh, well X, you know, XYZ happened." And the CEO had no idea, and and then the CEO is like, "Okay, let me take care of it." And then the next day, it happened. So there one is that you have to go to the ground floor on this stuff. Um, some of the best companies like Shopify and others are measuring actual uh adoption and usage. They've gone to the extreme like kind of on that on that front to get a bunch of signals and close to the ground. But it's just that it just goes to show that this is, you know, I don't think we want to talk about quote-unquote founder mode, but um, the reality is is it's not just about getting into the weeds of your product, but with something this sizable, you got to get into the weeds of the transformation to like really understand um what's going on and adopt it. So that that's point number one. The second point I would say is for Reed uh on um we do this podcast called Unsolicited Feedback. You know, Fared Masavat had this great quote on it. He was like, look, the slowest your output is uh constrained by the slowest part of your system. And and I thought that was that stuck in my head because it's absolutely true. And so if you think about AI adoption as a system, there's all parts of the system that could be slowing adoption. It might be that people don't feel permission, or they don't have the budget, or they don't have the knowledge, or like destruct, like all these types of things, right? Um, but in a lot of these cases, it's things like IT, legal, procurement are the slowest part of the the friction and are kind of setting the pace of all of this output. And you can also see this in um in just product teams, which is, you know, a lot of there's been all this talk about, you know, product managers are becoming the new bottleneck because engineers are speeding up. Well, that's because people are speeding up one part of the product system and not the other parts, which makes sense, like they adopted all of this tooling for engineers because they're the biggest headcount and the most expensive and like all that type of stuff. But product is an output of design, PMs, and engineering. The system is there not to produce code. It's to ship product, right? And and shipping product is the function of those three things. So if you just accelerate one part of the system, you're just going to move the bottleneck to another part. And your actual product output, the output of the system doesn't accelerate either. So I think you like really got to people have to really understand those two things is like what is actually happening on the ground floor and what what is the slowest part, what is the thing that is causing, you know, the slowest part of the adoption, just like attack them ruthlessly if if you're really serious about making this transition.

What a wild time we're living through. It's just like all these ways that we're all so used to, okay, this is how we do it.

Yeah. Yeah. It's exciting and exhausting at the same time, man. That's how that's how I think about it.

That's such a simple way of describing the road.

Yeah.

Oh my god. Okay, Brian, is there anything else before we get to a very exciting?

That's it. Let's do lightning rounds.

Yeah.

Ding, ding, ding. All right, Brian, I've got five questions for you. Are you ready?

Let's do it.

Let's do it. Okay. What are two or three books that you find yourself recommending most to other people?

My my god honest answer is that I have not had time to finish an entire book since I had my second child. Um, so from a complete book standpoint, I have not, um, I have not been able to, um, things that I've been, you know, that I actively read on a regular basis, just like other content out there, um, that I'll throw out there is, uh, uh, gosh, Jamon Ball from Altimeter Capital writes this great newsletter called Clouded Judgment, which is kind of a mixture of market thoughts as well as, um, like market stats, uh, that like that's really useful to help me a pulse on the market. Um, you know, I was just reading through some like stuff from NFX that was uh that that's been pretty good lately on all this. I know James Currier and I share we lived a lot of the same uh cycles through social and stuff. So, I tend to identify with that. So, I don't know. Those are two things that um um that I love reading. And sorry, I'll give one more shout out to a different podcast which is from uh uh from two guys at Spark Capital. Nibil Hyatt, which I know from my early Boston days, and uh Frasier, I'm sorry, I'm blanking on the last name right now, who was head of product at OpenAI, and they've got a great format where it's just those two riffing on some ideas and stuff. And uh I uh yeah, highly suggest that one. I I like that one a lot.

Here's my reading tip that has changed my uh reading habits. Uh, Brian Johnson, the uh longevity guy, he has this advice for better sleep, which includes before you go to sleep, read for 10 minutes in bed.

It does put you to sleep.

I don't feel like I retain anything that I read that close to bed, though. Do you feel like you retain it?

I do. I do. I'm reading fiction. Like, it's non-fiction. You want Sorry. You want to read something calm, not like I'm learning. So, I'm reading I'm reading fiction and it's really nice. And knowing that this is going to help me sleep better makes me motivated.

There's an incentive. There's a reward there. Yeah, they're talking about rewards and creating behavior change.

Yeah.

Exactly. And the reason to do it is his whole thing is you want to get to low resting heart rate, and that helps lower your resting heart.

So,

I've got some other sleep tips on that front if you want to go down that path, but we'll save that for

That'll be for the third podcast. Okay. Uh, next question. Do you have a favorite recent movie or TV show that you really recently enjoyed?

It's not new, but I just uh rewatched Silicon Valley that I hadn't watched a number of times. And it's um it's painful because like the first few seasons, I went through almost every one of those moments in my first startup. Uh, like hiring the gray-haired CEO, the funding falling through at the last second, like all the crazy stuff. Uh, but kind of going back and watching that, I like there's just some extra nuances and stuff that I feel like they wrote really well that uh that you know

that I thought was uh that I thought was really good. So, I've I've really been um watching that.

The other thing is that I've watched is just more of like a just pure entertainment kind of calming thing kind of turn the brain off is uh is um Owen Wilson's new show on Apple TV Stick um which is about him as a former professional golfer uh and and all that you know I I won't ruin the show and stuff but it's a nice it's a very nice um calming a little bit fun type type of show.

>> I've been seeing that on my Apple TV. Maybe I should check it out. Good tip. Do you have a favorite product you've recently discovered that you really love? It could be a gadget. It could be a app on your phone. It could be something on your computer. It could be nothing at all.

Um, you can't see it, but I do have um I just changed my whole setup. So now I have a um Ultra Gear super wide curved uh screen >> with a very nice standing desk from I believe it's called Erggonafis. >> Yes, it's a Yeah, I think it's Erggonafis. E R G uh O N O F I S. And it's very nice, sleek um >> standing desk. Uh very stable, very quiet. Um very much enjoy.

Excellent tip. And the and the current monitor. Very cool. Okay, two more questions. Do you have a life motto that you often come back to and find useful in work or in life? Something you share with folks, something that you think about when times are hard or just generally.

>> Look, it's a little cliche at this point, but I used to um somewhere around here I used to have the quote uh printed out about um you know, the man in the arena, right? It's just like uh just lots of lots of you know especially in times like this where so many things are changing and uh there's so much competition but so much opportunity for create I just I really both respect and enjoy uh you know the game and spending time with folks that are kind of in the arena figuring this stuff out tinkering with things and uh and just yeah that's that's kind what I come keep coming back to especially you know been at Reforge for 10 years that's a That's a good portion of my life and we've gone through some great periods and some tough periods and uh so I I tend to come back to that and >> that's what's always separated Reforge from so much other content advice is it's people in the arena sharing their wisdom not just bunch of influencers.

Um, and it's sad that Jamath made that quote so cringey. >> I know. I know. That's why I know that's that's why that's why I said it's a little cliche cringe right now. >> Screwed it up for everyone.

>> Final question. Brian, you don't know this, but your parenting advice on Adam Fisherman's podcast really impacted my parenting philosophy, specifically this line you had about independence.

>> Oh, >> and I'd love for you to just share that insight about how you think about raising kids.

>> Yeah. And I wish I could remember where I grabbed this from so I could attribute it properly. So, but basically, uh, the philosophy is like your job as, if you think about going from when they're born until they're essentially 18 and, you know, leave the home, your job as a parent is to essentially make them more and more independent. Uh, and so what that involves is continuously looking for opportunities for them to make even bigger and riskier decisions uh for themselves as they grow up. And you're there as a support to those decisions, but letting them make those decisions on their own so that by the time they're 18, they are a fully independent person able to think through those decisions themselves.

not look like my sons are young, right? They're five and three. So, it's not like I'm having them make, you know, life and death decisions or where we might buy our next house or or stuff like that. But it's even small things at this age of, you know, my my oldest, like five and a half, is really starting to learn and get curious about uh like money and how you spend money and where new things come from and how you you earn money and and uh and so rather than just like buying things for him, you know, we've he got like money from his grandparents and stuff saved up and we're trying we can be like, "Okay, like you can buy that thing, but you're going to spend this and try to like teach him the consequences and like all that kind of stuff and then when he breaks something, right? Like so it's just small things like that, but thinking about the time from zero to 18 as this spectrum of independence and being um a supporting role and what you're essentially doing is you're trying to move as many decisions you as many the percentage of decisions you make for them down to zero by the time that they're 18. like uh and that's that's kind of something that um I've kind of I've kept in the back of my head since since really seeing that.

>> Thank you for sharing that. I know I didn't tell you that I was going to ask you about this. So that was a beautiful way. Yeah, I didn't know where I I couldn't remember that whole podcast, so I had no idea what I said, but uh you you can always say it. But but that's a good one. Yeah,

>> Brian, uh two final questions. Where can folks find you if they want to reach out? What where can they find the products you guys offer? whatever you want to plug and also how can listeners be useful to you.

>> Check out reforge.com check out our new products uh like Reforge Insights. Uh they're on the website. You can find me personally um my writing including a bunch of the stuff that we talked about today. Uh now on Substack uh so just recently moved. Um so you can either go to my website brianbellfor.com where I have some info or just uh blog.brianbalffor.com where uh all of my new writing is taking place. But uh those are the two major pieces.

Last but not least is that um as I mentioned Ped Mosavat uh who I used to work with, he used to Slack, we just have we have this fun podcast. The two of us get on there and riff like we were having dinner every couple weeks about um different like product and strategy uh types of things. And so it's a it's a fun format for us. So if that's something you enjoy, it's called unsolicited feedback where we give feedback and advice to nobody that ever asked for it.

So, >> yeah, >> perfect title. Uh, Ryan, thank you so much for being here.

>> Yeah, thanks for having me again. This is great. >> Bye, everyone.

>> Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lennispodcast.com. See you in the next episode.