Introduction

Patrick: [00:00:49] My guest this week, Eugene Wei, has one of the most interesting backgrounds of anyone I've had on the podcast. He worked at Amazon early in its life, was the head of product at Hulu and Flipboard and head of video at Oculus. Our conversation is about the intersection of technology, media, and culture. We discuss Eugene's concept of invisible asymptotes, why growth slows down for both companies and people and how some can burst through. I'd list more of the topics but we covered so much that you should just listen.

Finally, I'll say that after spending a day with Eugene, including a wildly interesting dinner with Eugene, past podcast guest, Sam Hinkie, and future podcast guests, Kevin Kwok, that he is the type of uniquely interesting and kind person I'm always searching for, and one that I wish I could bet on somehow. If you know more people like this, reach out and suggest them for this podcast, now enjoy our conversation. We're going to jump all over the place because, again, of your smorgasbord of interests, and this notion of travel is a good excuse to talk about your idea of Cuisine and Empire, walk us through that concept.

Eugene: [00:01:48] It was inspired by a podcast I had heard about this book, Cuisine and Empire. I had just realized that when I was younger, music really felt like it was the heart of culture in America. Music was where young kids turn to express their sense of rebellion, to protest things like the Vietnam War. Music was like punk rock and all of that, was just the way that people would choose bands and music to express their point of view on the world. And I realized that, now, food has become that for a variety of reasons. One is, certainly the advent of the internet and television channels like the Food Network, started to make celebrity chefs into celebrities. We used to only know the names of restaurants growing up but, nowadays, you can talk to many people who are into food. There'll be able to name who the chef is behind a particular restaurant and all of that.

And my notion there was just that, we are constantly in this cultural battle to find sources of scarcity, and music experiences used to be more scarce. I remember an age when I would try to collect rare LPs or things like that. And it'd be a huge find, if you went to some weird record store in some weird small city and found one of these mythical LPs, that you couldn't find easily. Music, concerts and things like that, were these coveted tickets that you would go to and all of that. And at that age, music just wasn't reproduced the way it is now. But now we live in an age of Spotify and there were the CDs before that, which was just printed in mass, and so it no longer became hard to track down any piece of music. Whereas food experiences, especially at the high-end, are really scarce. The French Laundry or if you take any 3-star Michelin restaurant, they usually only have two seatings at night, only a certain number of people can roll through that. And so for you to be able to say, "Hey- "

Patrick: [00:03:53] I did this.

Eugene: [00:03:53] "... I went and had that meal," is a badge of honor that you can hold out, it's a scarce accomplishment. And so I think that we will always continue to fight that battle, because humans are status-seeking by nature, and so we're always trying to find that thing that gives us the edge over another person, when it comes to status. And food has really become that for many people.

Patrick: [00:04:15] It reminds me of another interesting thread that you were pulling on, which is your impressions from watching the documentary, The Defiant Ones, about Jimmy Iovine and Beats and Dr. Dre. Would love the key takeaways there because one of the things I want to spend a lot of time on, is this notion of scarcity, marketing, identity, signaling, et cetera. What were your primary takeaways from, The Defiant Ones?

Eugene: [00:04:37] Well, one metapoint was just that, I think more things that might only be books, in another lifetime, should be turned into small videos or documentaries, especially if they involve very charismatic and famous people. A couple of things about The Defiant Ones, one was just around the marketing of Beats headphones, the whole conception of it. Prior to Beats, people who were headphone nerds might debate the frequency roll off of high-end headphones and all of that. And so I was really struck by the scene where, Dr. Dre and Jimmy were trying to figure out, "Hey, what's the state-of-the-art in headphones right now?" And they assembled a whole table full of all the leading headphones, and they were trying them on and to paraphrase, they were basically like, "These things look terrible, I would not want to wear one of these because I don't know why anyone would buy one of these." And if you look at the high-end headphone market before then, it really was a relatively small market, not a lot of differentiation in market share, no clear leaders.

And so I think Jimmy, with his marketing expertise, his great insight was, "Well, hey, we have to make these things culturally significant status signifiers." And if you look at them, they really should be that. Apple recognized this, even before Beats, with their marketing for the original iPods. How did they do it? They marketed these silhouette images and these posters with these white headphones, because that was the most distinctive thing. If you look at the things that are the best status signifiers, for humans, it tends to be those things that are most visible, that we have on us at all times.

For women, it can be purses, right? Because you're always carrying it on you and so it's always visible. Headphones are very visible, especially the white, Apple ones, which stand out in sharp relief against clothing and everything like that. Jimmy is like, "Hey, we've got to make our headphones look hot, they've got to look different than all these other headphones." And today, if I go on a plane and I see someone walk on with a pair of Beats headphones around their neck, I always recognize them from a distance, that's important. The second piece, "Let's borrow from the cultural scarcity of all these famous musicians and stars that I know, I need to get these headphones into pictures- "

Patrick: [00:06:54] On as many famous faces as possible.

Eugene: [00:06:55] Yeah, onto as many famous people as possible. And he did that and so in the documentary, all these musicians are complaining about, "Oh my gosh, Jimmy, with his headphones," I'd go to a meeting with him and he'd be like, "Wait, wait, before you leave, put these headphones on, I'm going to take a picture of you and post this to Instagram and share this out publicly." And it was brilliant and, in fact, Beats headphones got banned by some of the sports leagues.

Patrick: [00:07:17] The best thing ever.

Eugene: [00:07:18] Best thing ever, right? In our view. The whole idea that bad publicity, there's no such thing as bad publicity, usually holds and that's one great example of it, I think that was one of the metapoints there. Another one that I thought was interesting, from that documentary, was just what separates some experts and people, what's a way to identify talent? And I was always just struck by how Dre was listening to these demo tapes and found Eminem. He heard the tape and he was just like, "Wait, stop, who is that? Let's fly this person out." And you hear that and obviously there's selection bias in these stories, in hindsight. But I've seen it enough in business and other venues where I do think there's something to that. There are certain people with that gift for spotting talent in a crowd, or spotting something distinctive that stands out. And in the arts world, where you might argue that it's just a lottery style distribution of outcomes, if you had that little bit of edge, it would be a huge advantage.

Invisible Asymptopes

Patrick: [00:08:26] Can you tell that story about being convinced to buy a sport coat in your travels, and why that is an interesting experience and that will be a good segue into the idea of invisible asymptotes.

Eugene: [00:08:37] I was in Milan for the first time, a couple years back, and I was traveling through Italy for five weeks. And everyone had told me, Milan is the fashion capital. I had wanted to go there really just to go see an opera at La Scala, but I decided to also walk around to all the luxury stores and just check them out, since that was such a huge part and, I mean, they're all over there, they line the streets there.

The thing about these high-end luxury boutiques is, when you walk in, there's very little clothing on display. I mean, stores are very minimalist and I walked in and I was convinced that I wasn't going to buy anything, I didn't really see anything that looked like anything I would wear. And this salesperson walked up to me and she was like, "Oh what are you looking for?" And I was like, "Well, I don't really know, I was just walking around and checking out the town." And she started chatting with me, just looking me up and down and she was like, "I have a thing that I think you might like." And so she went back to some storeroom-

Patrick: [00:09:35] Secret lair.

Eugene: [00:09:36] ... and brought out this sport coat, which I looked at it and I was like, "Well, that pattern's a little bold, I don't know if that's quite me." But she had me try it on in front of a mirror and then she started talking about why it fits so well, how it spoke to a certain part of my personality that she had sensed and just chatting with me. I know that I was being sold on something and yet it was just so polished a presentation and so convincing, that after her whole spiel, I was like, "I really do want to own this sport coat," and so I ended up buying it.

And when I was at Hulu, I would go on sales calls sometimes with our ad reps. And when you go on a sales call with the best sales rep on your team, it's absolutely a great lesson in what sales is all about. This whole idea, like they say in poker, "Play the player, not the cards," the salespeople will tell you, "You're selling to that person, not your pitch." Best salespeople go in and they don't just go into some spiel, they're actually trying to understand the client and what their needs are first, and they're adapting the story to that, just the same way that salesperson in Milan did to me.

And I think, in tech, we have this obsession these days, with big data. If you just get enough data and you just crunch enough of it, you will just figure out what people want. And I just think that we often lose sight of the idea that, there are other paths to making the sale or satisfying a customer need that take a different approach, that aren't deterministic from big data.

Patrick: [00:11:10] It's a great excuse to get into this big, hairy concept of invisible asymptotes, what that concept means for businesses, for people, maybe how to identify them. I'd love to spend a few minutes here so start by outlining what that concept is, and maybe how you first came up with it.

Eugene: [00:11:25] The concept of invisible asymptotes, it's just that, in business, we traditionally speak of successful businesses as going through what's called the classic S curve. In the beginning, you're not growing really and then you figure out some product-market fit and your business starts growing sharply, and so that's the bottom starts to go up in that classic hockey stick style. And then, eventually, businesses growth slow and we have a lot of talk, and a lot of cases, and a lot of people obsessing over how to get that initial product-market fit, because that's something that almost all startup entrepreneurs struggle with and it's very hard, most new businesses fail.

I had been at companies which had grown up and gone past product-market fit, and then had hit the top shoulder of the S-curve where their growth flattens. And I just didn't feel like enough people spent time thinking about, why does that happen? And how does that happen? I wanted to write about it and my piece really, what brought it up to me was very early on at Amazon, when we had done surveys of customers. And we surveyed two sets of customers, one, customers that did buy from us, we actually wanted to know why they didn't buy more from us. The other set of customers were those who had never bought from Amazon at all, and obviously to figure out what your total addressable market is, you have to understand why people don't buy from you.

Most companies in the Valley, nowadays, do a lot of market research panels, surveys, focus groups, and there is a tendency to focus on, "Well, look at these people who do use our product, let's listen to what they're saying." And I'm actually always fascinated by the people who don't use your product. I think there's just much more to learn from the people who don't use your product and to figure out, in your mind, how to segment the market into people who will use your product and won't.

But the concept of the invisible asymptote is just that, there is something that causes you to hit that top shoulder, in the S curve. And it's often invisible to you but is an asymptote on the growth of your business. And without figuring out what that is, you won't ever break through that barrier. And so I talked about a number of different companies that I thought were hitting different invisible asymptotes. And one reason I think the concept is important is, if you identify the wrong cause of that flattening of your growth, you will chase a bunch of solutions that will have no effect on your business.

And I think one of the most powerful things that any business can do, is to clearly figure out why their growth flattened, why certain people don't use your product. And it's often very different than what you think, and the reason is that when we hear from customers that do use our product and why they love our product, it's just so flattering to hear that type of thing. And it often resonates with our own belief of our own product's value, because we are also usually customers for the products we build.

And the thing is, that can deceive you because those very reasons might be exactly the reasons why other people don't like your product. You and I had chatted about Twitter earlier, that was one of the companies I used as an example. Actually, I think the interface of Twitter, the style of its presentation of its content, is hugely massively appealing to a certain type of person but on the flip side, it's also very, very unappealing to another set of people. And so there are a number of other examples that I go through but I think that's just the most important thing, is that it can be very hard to segment our brains this way, to understand that, "Wow, the way we filter our product is so appealing and perfectly tuned for product-market fit, for the segment that we selected to. But it's exactly built incorrectly for all the other people who don't use it."

Patrick: [00:15:14] You gave some examples like Amazon, it's an interesting one, where maybe those were identified and not necessarily removed but just avoided, that through other means, new S-curves were begun, new businesses started. What do you think is shared in common by businesses that are able to, maybe, identify or blow through these things?

Eugene: [00:15:32] Well, one thing that's interesting about Amazon and also a lot of Chinese tech companies, for example, is that they're in many lines of business. We don't tend to see that much in the American tech scene, most American tech companies, even the largest ones, focus on a couple of sweet spots. Amazon is the closest to some of these Chinese tech companies like Tencent and Alibaba and whatnot, which seem to be in a gazillion lines of business. When I was over in China, I met with some folks from a company over there called Meituan, which started as a Groupon clone type of business and now has over 200 lines of business. They'd have drones that were food delivery robots, they have a Yelp-like side, there's just movie tickets, all sorts of just disparate businesses like an old school conglomerate.

And if you look at Amazon, they're like that also and I think there's just this very pragmatic focus on, what is the customer need and how do we solve that? And in a lot of the lines of business that they're in, there is usually a very practical answer to that question, in each line of business that they're in. And Amazon has always had, as its mission, to be the world's most customer-centric company. There is this deep, attuned focus to what the customer needs and wants, which is a little different, I think, from the approach of genius inventor in a room, thinking of something that the customer doesn't even realize they want, and coming up with something from scratch. Which I also think is a beautiful story and we love those stories of individual geniuses, like the Steve Jobs of the world, that just figure out, "This is what customers need," before they even need it. But the other type of business is often seen, I think it's less sexy. We're just like, "Hey, here's a bunch of customer needs, they're very obvious."

Patrick: [00:17:22] Let's solve them.

Eugene: [00:17:23] "Let's just go solve them." And so I think there's that in common and it wasn't surprising to me, when I was in China, that Jeff Bezos is the patron saint for the tech companies there. I saw posters of him, quotes from him, hanging in most of the major tech companies' hallways and elevators, because I think they are very Amazonian.

Patrick: [00:17:43] Many of the companies that you profiled in that excellent, long article which people should definitely read were media, social media type companies so Snapchat, Instagram, Facebook, Twitter, et cetera. And in the second post you wrote, about this concept of the role that the selfie is playing in our society. And of those networks, I think that I see the Instagram effect on society the most often, because maybe it's my age and I just missed it, in terms of the importance and the signalling and everything. But Instagram seems like a really neat one to spend a few minutes on, to get your ideas behind how these things, the medium is the message idea. How these things shape our behavior, consumer behavior and how we act.

Eugene: [00:18:27] Well, I think a quarter all of that is first understanding and believing in, and I think most people believe this. Is that humans are a social creature and that we are status-seeking by nature. A lot of signalling theory derives just from that very simple observation, and I have more thoughts on this, which will probably be the subject of my next post. But if you consider the history of humanity and how we sought out status, in different social structures, through our job and our family, at school and all those different things. We had one set of contained surface areas, in which we would pursue higher status.

What the internet and social media has done, essentially, is they've increased the surface area of status seeking to a digital realm, a virtual realm, and vastly expanded that surface area. When you look at young people on Instagram or Facebook before that, or Snapchat or any of these things, you realize that almost every post could be described as a form of signalling in one way, shape or form. Instagram, by being photos-only, I think speaks to the most efficient way for young people to seek out status in the world.

Snapchat is another thing that's interesting, which we should talk about afterwards. But I think that we have a younger generation, which grew up with smartphones that have a camera in it, by default, so they have a camera with them at all times. I think the behavior shift is monumental and it's something that's just not discussed often enough. Which is that, young people realize that communicating quickly is most efficiently done by a photograph or video, and not by writing texts. I actually think if you go back to caveman days and you'd given cavemen these smartphones with cameras built in them, nothing else except the camera, I think visual language would be the first language for most people in the world, rather than texts.

That's not to say texts doesn't have its advantages, in many ways, it's just that photos are... They say a photo is worth a thousand words, there's some truth to that. You can express a lot in a photo, with your face, the expression, and so if you look at a young person and how they message their friends and you count up the percentage of them that are photos or videos, snaps versus text messages, and then you do that same thing for an older generation like my generation, you'll see that's almost exactly the opposite. Young people mostly use photos and everything to communicate, old people tend to tap out a text message on a virtual keyboard.

And so I think Instagram just came along at the right time, where they jumped to that transition. Facebook had started with text status updates and had added photos later, but it's always been a mixed medium social network. Instagram was like, "Oh, this is a photo-only social network." Not only is that more accessible to more people, it's more appealing to young people, I think.

And so, essentially, what I said in my invisible asymptotes piece was that, Instagram is a photo entirely composed of advertisements. Not just the official ads but all the photos that we take and post, of our lives. "This is the meal I just state, look at this beautiful place I just went on vacation, look at what my husband or wife just got me for my birthday, look at what my kids made me, breakfast and bread," for father's day or mother's day. All these things are little advertisements of our life and so the things that people say that are both good and bad, about social media, all stem from this. Is that we have these massive, massive networks where people have realized it's more efficient to actually compete for status in these virtual worlds, than it is in real life.

And that's especially true for young people. Young people, before they have a job in the world, before they've gone to college and maybe not, they don't have a car, they don't have a job title, they don't own a home yet, but what they can do and what they are very good at is getting status virtually. This is why, when I'm on Snapchat or Instagram, and then I compare my posts to those of really young people, it's just ridiculous, right? They'll post a random selfie and get 500 likes, some astonishing number. I will carefully compose a beautiful photo from my vacation and get maybe a couple dozen likes. And it's just, they grew up in this game, this status game, and all their friends are playing it also, it's just a different world.

Patrick: [00:22:57] Yeah, it's amazing. I mean, I think the best episode or one of my favorite episodes of that show, Black Mirror, was the one that it's taken this to an extreme, where it literally becomes its own currency. And back to your idea of scarcity, the goal becomes the accumulation of social currency through ratings of each other and feedback mechanisms. I mean, it's crazy, the extent to which this could go, you mentioned you were writing about it or thinking about writing about it, maybe preview some of those ideas a little bit for us.

Eugene: [00:23:26] I'm not a big crypto zealots or expert by any means, but I actually think this is where crypto makes for a beautiful metaphor. If you looked at the original Satoshi Nakamoto white paper, and you look at ICOs, what's interesting is, they have this proof of work hurdle, something you have to do to mine for this currency. And when you describe it to the normal person, they're like, "This is so absolutely bizarre and weird, why is this?" And there's a number of reasons but I actually think, the parallels to starting a new social network are there. In that, if you start a new social network, what are you doing? You're setting up some structure where you have some proof of work hurdle and, by having your users do this proof of work, they can mine, essentially, what's a social capital currency.

Let's take Instagram, for example, let's call it Instagram coin. When Instagram was created and they created this network, what was their proof of work hurdle? It was this, you have to take a beautiful, interesting, square photo, if you do so, you will mine Instagram coin. And how do you redeem that coin? It comes in the form of likes, it comes in the form of followers and comments and just engagement with your work. And so, you had all these people, essentially, mining Instagram coin by doing this. Facebook, any social network, has some wired proof of work thing. If you look at, Musical.ly, in the beginning, Musical.ly was like, "Hey, how do you demonstrate proof of work here? Well, you have to create a lip-sync little dance sketch to these music tracks that we've licensed, and post it to our feed." And just like any cryptocurrency, it's much easier to mine this in the beginning when the network is young and hasn't built out. If you are one of the people who was on Twitter's recommended follower list, way back in the day, the difference in the number of followers you have versus the next person, it's exponential. I know a few of those people who are on that list, they have a million followers or something, right? Here, people like you and me are working hard-

Patrick: [00:25:37] Grinding.

Eugene: [00:25:37] ... to try to get followers these days. Grinding, writing these beautiful tweets, but that's never going to happen again. And that's because, as networks expand over time and just as cryptocurrency gets mined more and more and there are more people, it gets harder, right? Because there are more people competing for it, there's just less of it to give out. And so I think it's really important, why do some social networks succeed and others don't? I think it's hard to come up with a proof of work that's unique, that can actually distinguish among a user base. I think you can't create a network if you don't have some proof of work, that separates users out from another. If every person who posted on Twitter got exactly the same number of likes, it doesn't matter what you wrote, you'll get a million likes, it wouldn't be a fun game to play.

And I think back to... This goes way back, if you go back to early Twitter, pre-its growth, and I was an early user of Twitter, everyone was just posting what were conventional status updates, the stuff that people always joke about like, "I just had a bologna sandwich for lunch," and stuff. There are very few likes, my first tweet was way back in 2006 or 2007, "Doing my taxes." And then I didn't tweet again for a year and my next tweet was a year later and it was also, "Doing my taxes." No engagement, I was just like, "What is this network?" And people often remember that as a friendly, fun time on Twitter but, actually, that wasn't even a business. There was nothing there, there was no potential energy.

The proof of work is the structure that creates the potential energy in a network. And for me, what caused that for Twitter was the creation of these two sites. There was one called, Favstar, and I think the other was called Favored. And what they did at the time, they were global leaderboards for tweets. They said, "These are the most liked tweets across all of Twitter," and when I saw that, for the first time I was looking at what a really good tweet looked like. And a lot of it was comedy, back in the day, the style of single punchline comedy that's very common on Twitter. Now, There's no setup, it's all contextual, it's just the punchline.

And what that did was, it created a status leaderboard and it turned Twitter into a game. And it's the game that we play today, right? Which is, get the most likes. And how do you do that? Well, there's a whole bunch of ways to do it but, back in that day, it was to write a funny one-liner. And then later it became post a really interesting fortune cookie-like thought or a quip. And there's another form, which is post a link to an interesting article. Now we have the quote tweet, a clap back, you can dunk on Donald Trump or somebody like that. There's all these forms, right? But what mattered was that there was a sense of status and competition embedded into the network, that created all the potential energy. When celebrities like Justin Bieber and those folks came onto Twitter, they brought all their inherited real-world social capital, into the network, and created this sense of separation, right? I remember when there was the race to a million followers, was it? I can remember, Ashton Kutcher?

Patrick: [00:28:44] Katy Perry and Ashton Kutcher or someone like that.

Eugene: [00:28:46] Yeah, right? That energized it. The funny thing is that, Facebook had that from the very beginning because Facebook started off as only for people with Harvard email addresses. It was already, Harvard, the most canonically elite institution in the United States and you could only get into this social network if you had one of the email addresses. That meant, from the beginning, there was a status game in Facebook and the way it's spread through the Ivy Leagues and all of that, right? And so, Musical.ly was interesting. Musical.ly came along and I thought it was an interesting case because their proof of work was different enough, that there was a whole class, a whole generation of young women who were like, "This is a network where I am uniquely qualified to actually win status, versus some famous VC on Twitter," right? "I'm disadvantaged on Twitter but, on Musical.ly, I can kill them in this game and I can accumulate a ton of followers," and so they migrated over to Musical.ly, in mass. And so I think all social networks have this proof of work and, to tie it back to my asymptotes theory, the proof of work not only distinguish who are the winners on your platform, but it also governs the ultimate size that your network can grow to. The problem for... And Musical.ly will always be... Well, there are only so many teen girls in the US who are willing to dance around in their bedroom and do one of these lip-sync sketches. I don't know you that well but I don't think that's something that-

Patrick: [00:30:11] Not my thing.

Eugene: [00:30:11] ... you would spend your time doing, it's not something I would spend my time doing. There are some people who won't do that just like there are some people who won't enjoy writing little 280-character quips, on Twitter. And so every network, almost by definition, chooses-

Patrick: [00:30:24] Creates its own asymptotes.

Eugene: [00:30:24] ... its ultimate size. If you look at the largest network in the world, Facebooks, the WeChats, they almost always have to generalize out their proof of work function over time, to attract more users. Facebook, if they had stayed at, "Hey, you can only post text status updates," how large do we think they would be, if they had never added photos or videos or all these other things that they do? WeChat, if they hadn't expanded from messaging into doing payments and all the gazillion lines of business they're into, wouldn't be as large as they are today.

You'll almost always see the largest social networks broaden out, over time. The problem, of course, is that, again, status and the scarcity of status is the potential energy that governance the heat. I like to think of it just like, you just know some networks are hot, they're growing quickly, everybody's on them, competing. As you broaden out over time, as you make everything easier to do and accomplish on your network, in a way, that status-seeking game loses some of its heat. Which can be fine, I think, if the network becomes massively useful. I think, for example, on WeChat, it may not be as fun or as hot now on WeChat, to compete for status. On the other hand, you can't live without it in China, you use it to pay for things, pay your bills, pay everything. And so if a social network can go really far out in the utility access, that's almost always the path that large, large social networks have to take.

I think Instagram, Snapchat, all the networks, eventually they're going to be like, "Well, the status game has gotten a little old, how do we remain relevant in the customer's eye? We have to graduate to becoming super useful in their lives," because, as you know, status games are fragile by nature. I think there's something here to the idea of, and this was the idea that Sam Hickey and I had discussed. That to refresh the status games on social networks, you almost need some mechanism to clear out old money or the equivalent of old money. If you have these people on Twitter who accumulated millions of followers back in the day, but no longer Tweet.

Patrick: [00:32:32] You got to reset it.

Eugene: [00:32:33] You got to reset the game, in some ways. Someone new has to come along and feel like, "Hey, this game isn't rigged, I actually can become famous on this network also," which is a hard thing to do the way that status accumulates, typically, on social networks. But I think you'll start to see social networks think about that more and more, over time.

Winner-Take-All Dynamics

Patrick: [00:32:51] One of the questions I was looking forward to asking you is about, this tendency for inequalities to be magnified in digital networks. If you look at history, if you go read Will Durant's Lessons of History, a very short book, one of the big sign waves through history is this equality-inequality pendulum. And everything that you've described just now, really highlights how easy it is to magnify stuff when it gets digital. And you've described, effectively, inequalities, in this case, for social capital. Obviously, there's been a lot written about financial capital inequality and things of this nature, power inequality. What are your thoughts there about, and maybe it's the resets that solve this and it's a self-correcting mechanism, but what are your thoughts about digital and its tendency to magnify these things?

Eugene: [00:33:34] Well, we clearly have this winner-take-all dynamic, Pat, it's a result of a number of things that came about when the internet came about. It's funny, when people used to talk about network effects, back in the day, they wanted to teach what network effects were. They would always use companies like Cisco, when they would talk about the telephone network. But what we're living through now, is the largest network effects businesses in the history of the world.

I laugh because when I was at Amazon, one of my research projects was, "Hey, let's research to see if Amazon could be the fastest growing company in history." But it was like, turned out to be this really hard problem, back then, for me to actually research, I didn't even ultimately conclude what was the largest growing company. But what I do know is that since Amazon, which probably was at the time, the fastest growing company in history. There've been many, many other companies that have far exceeded that hurdle, you had Groupon, you had Uber, there's companies now that-

Patrick: [00:34:28] Scooter companies, now.

Eugene: [00:34:29] Oh yeah, that hit a billion dollars in revenue in just no time whatsoever. Why is that? Well, we all have these smart phones that are connected to the internet at all times, we have these massively connected social networks like Facebook and Twitter, that allow information and ideas to travel more quickly than ever. And so we've taken network effects, which are this concept that worked in small segments of business, and just amplify it to a degree we've never seen in history. And that creates these runaway, winner-take-all effects, which we're still grappling with. For example, there's this whole debate about antitrust, how do you deal with tech companies-

Patrick: [00:35:07] It's the equivalent here.

Eugene: [00:35:08] Yeah. How do you deal with it when the consumer welfare criteria for defining a monopoly, actually doesn't apply to these huge network effect companies. And what do we do? Do we want there to be companies that have such strong network effects, they've effectively shut out all competition? And you have that same effect on social networks, you have the runaway celebrities who gain so many followers that it becomes a self-fulfilling prophecy. I think just as social networks have to grapple with that, antitrust law has to grapple with the idea of, "Well, what are the downstream, harmful effects of companies with massive network effects?"

And I think the strongest argument probably you can make is that, there's some element of first-mover advantage combined with network effects, that is partially a function of luck. And if we believe that, then we may be cutting off a lot of future competition, which I think is always healthy for markets, just because some company will always get lucky, will always be the first-mover in some massive network effect business, and will always run away with that.

Now, there are probably a number of different ways to deal with that problem, depending on line of business. Always, I think, the preference is to let markets sort things out, to let some competitor come along and disrupt that. But I do think there has to be some thinking done around this idea of, "Wow, okay, luck plus first-mover equals massive network effect, runaway winner, is that healthy? Do we want that? And how do we control that to encourage more entrepreneurs, more people to come along and innovate, and do different things on top of, to push progress forward, to push the markets forward?"

Media and Content

Patrick: [00:36:48] I'd love to move to the topic of... Three topics on one, and you can choose which direction to go. You mentioned, before we started recording, your interest in media, generally speaking. You've mentioned a few times, your time spent at Hulu and you've written quite a lot about your interest and, I think, love of movies. Tell me how those three things intersect, maybe what you did and learned at Hulu and how you think about what to do next, given those interests.

Eugene: [00:37:11] Sure. We spoke earlier about my interest in different media types and my sense of the power of photos and videos versus texts, as a communication medium. We're already seeing that, right? We're seeing a young generation grow up, that are much more visually literate and comfortable with that. And I think that's important because in traditional American schooling, video as a form of language isn't really taught, we're taught writing and grammar and all of this and we have this very powerful cultural association with text and literacy, with knowledge and being one of the liberal elite, for example. And I think we have an anti-intellectual bias against video as an art form, but actually video is just like any communication medium, neutral in its base conception, it's just about how you use it. And I actually think we have plenty of evidence that indicates that video is actually way more appealing than text. If you look at the number of books that are sold each year, the number of books that are read, the truth, Pat, and not a lot of people like to admit, is that most people don't read, most people don't read very much. If you look at the New York Times bestseller list and you asked, "How many copies of that book that's number one- "

Patrick: [00:38:27] Shockingly low.

Eugene: [00:38:27] "... do you think were sold? And then how many of those books that were sold do you think were actually read?" It's a shockingly low number, it's shockingly low, we just like to-

Patrick: [00:38:35] It can be a few thousand.

Eugene: [00:38:36] Yeah. Yeah. It can be like a lot of those book deals, if you agree to a book deal, you often have to buy the first couple of thousand copies yourself, just to get yourself on that list. But then if you look at video, if you look at something like, The Defiant Ones, if that had been a book versus that series on HBO, and look at how many people watch that. If you look at how many people watch movies, TV, how many hours a day people watch TV, video is a medium that appeals to us as a visual sensory feast, in a way.

And so I've always thought that, that was a place where I could arbitrage, in that, I don't think a lot of people actually understand how to make video in tech and why would they? They're never taught this. And I still think video has a lot of room to penetrate a lot of markets, that we currently still rely heavily on text for. Especially now that smartphones all have really nice video cameras in them, and you have this generation of young people who are super visually literate, about video grammar, the people who were making vines and all these things, growing up.

As for Hulu, my time there, I was really interested in... I had gone to film school before going to Hulu. I've always had sympathy, also as an English major, as an undergrad, for artists and creatives and what a tough life that is. I saw there was this just huge adversarial relationship between customers and filmmakers a lot, because studios were sitting in the middle of that relationship. People would be like, "Screw it, I'm going to pirate this movie because screw," whatever, "Columbia, Warner Bros," or whoever, "I don't care." But if you ask the most fans of any artist, they actually really are fans of the creators themselves.

And so I thought, with Hulu, trying to reform that industry from within to create a more customer-friendly approach from the studios, in terms of how to distribute that work to the end customer, was valuable. You had seen, with Napster and things, the adversarial approach which is just like, "Hey, let's just reform the industry from outside, just blow it up," and that also didn't work out that well. And I do think artists should be compensated more fairly for their work, because I enjoy seeing the work and I want to see it continue to be made so, that's a big part of the reason for me going to Hulu and trying to reform that industry from the inside.

And we're starting to see what I now see as the first phase of Silicon Valley disrupting Hollywood, and if you look at the history of Hollywood, you'll see how this happened. Way back in the day, movie studios were vertically integrated, they owned the talent, if you were Tom cruise, you would actually work for an MGM, you were an employee. They owned the movie theaters, they owned everything, they made the scripts, they shot the films and they put them into movie theaters.

And so these companies had a lot of know-how and unique process knowledge, inside their four walls. Well, there was a Supreme Court case where they were like, "You know what? You can't own your movie theaters anymore because that's anti competitive, because you can just shove your movies down on the viewer's throat." And then the talent was like, "Hey, you know what? We don't want to work for you anymore, we're going independent," now you have the Actors Guild, all these unions, right? They're all free agents.

And studios then became public companies, they got bought by large companies. And what you had was, a formerly vertically integrated institution become, now, just a thin horizontal slice. And what is that slice? It's largely financing and marketing, that's what they do for films. And you had tech companies who came along and initially their thought was, "Hollywood doesn't know what they're doing and let's try to shake up the business," and they started trying to do all these things to innovate on how films were made and everything.

But, over time, as they were basically getting robbed by licensing, these old TV shows for huge amounts of money, they immediately got data back, right? And they're like, "How many people are watching this stuff?" And once you get data, you know the ground truth and what all the tech companies realized was that, "Oh, look at all these Hollywood studios, look at how much cash they have, they are barely profitable. Meanwhile, we are these massive companies that are just churning out cash, why don't we just cut these studios of the process?" And just for Netflix, it's just like, "Why don't I just write a check to David Fincher? Why would I wait for him to make something for new line and then license it years later, for too much money, when no one's watching anymore? Why don't I just go to David Fincher and say, I'll give you a hundred million bucks if you make House of Cards for me."

And so this is essentially wave one, of Silicon Valley disrupting Hollywood. It's to say, "We have more money than you and we can actually just go straight to the talent." I always say that Hollywood is such a well-tuned structure that, essentially, you could treat it like an API. And this is the API, put money in, get a TV show or movie out of it. It's very abstracted like that and that's a lot of what the tech companies do now, right? Apple, Amazon, Netflix, they're like, "Oh, this is great, I write a check for a hundred million dollars, next week I get back 10 episodes of premium video and no questions asked? It's perfect. And I plug it into my awesome business model, where I can make a whole bunch of money from it."

And by the way, my business has other revenue sources that Hollywood studios don't, so I actually make more profit off this per unit. Well, that is why, now, we're essentially down to two studios left in Hollywood. There's Warner, which is trying to launch its own streaming service to stay relevant in the world, and you have Disney, which will probably do fine because they have a bunch of incredible IP, and all the other studios are being absorbed or will just die off.

That's wave one, when I think of what I want to do next, it's really, I think, to think about wave two of that level of disruption which isn't just replacing the studios, but doing exactly the same thing as the studios. Is to think about, how does that business change when we incorporate tech in a deeper way, into the artistic process? And what does that look like? And I don't know what that is yet, I'm still thinking about it, but I certainly don't think we're at the end of how Silicon Valley will change that entirely world.

Patrick: [00:44:48] You said earlier that, there's still probably a number of categories where video could replace text, effectively. Any examples that you could share with us?

Eugene: [00:44:56] Yeah. Well, just from a simple arbitrage perspective, I certainly think there's a lot of great ideas locked away in books today, that are very forbidding and not appealing to the masses. Which could be turned into educational content using video, and that would reach many more people. I think what it takes is, we have these MOOCs now, which essentially every new medium recreates the old way, the first TV shows were just radio, right? You see that pattern repeated. We kind of saw that with the first wave of MOOCs, which wasn't that exciting to me where, "Well, let's just film the lecturer," but the lecturer is doing exactly the same thing, they're reading off some slides or they're just talking to the camera, it's super boring.

When you look at what video is strong at, communicating visually, it's not that. And so I think we will see the next generation of educational content be much more appealing, visually, it'll have cinematic language and production values and we'll open up education to the masses, in a way that we've never seen before, from texts. I just think, if your best ideas in the history of the world are locked away in some dense textbook, by its very nature, it's not going to reach a lot of the audience that wants it. Just the fact that you and I are doing this podcast, right? The advent of audiobooks was nothing more than arbitraging one medium into another. It was like, "Hey, why are audio books so appealing to some people?" Well, you can drive and listen to these books, you can be jogging outside, you can listen to these books. By the way, the human voice is super expressive so the book may be more interesting, when read by an actor who can give different voices of the different characters. And most importantly too, these mediums like film and podcasts and audio books, if you don't do anything, they keep going. A book won't read itself, if you're just like, "I don't want to read this book right now," the book is not going to enter your brain, right? But if you're jogging five miles and you're like, "This audio book, it has my attention or not," the thing is-

Patrick: [00:47:04] It keeps going.

Eugene: [00:47:04] ... it keeps going, right? This is always the crazy thing, when you read an audio book, you're like, "Wow," because when you look at a book it could be hundreds of pages, it looks like this forbidding thing. And then you listen to the audio book and you're like, "Oh, nine hours, that's one commute over a week and then I'm done with a book," it's like, "Amazing." And then yet, a book will sit on your nightstand for months, you're like, "I can't get through it." And so there are all sorts of these weird arbitrage opportunities between mediums, which I just think haven't been explored.

Patrick: [00:47:30] There's such an interesting trend, I see it even in the financial world, where it's become table stakes to have some content aspect of your business. There's just, with very few exceptions, and this is the ultimate scarce examples where it's really small investment partnerships or really niche type stuff. Maybe it doesn't need this sort of exposure and its marketing is the fact that it's mysterious and scarce and quiet. But for any business that's reasonably open and the products are reasonably accessible, it seems as though, in the financial community and in others, you need some content strategy.

And then what becomes interesting is the relative cost of these different things. And so we can write the best white paper ever, and we've written a few this year, and the really fantastic ones might get 50,000 people reading them. And that's esoteric, weird quant stuff, right? That's a big number for a very specific topic, that is the absolute floor for any conversation I have, very casually with someone interesting.

There's this multiplier effect and, by the way, that white paper is arduous and costly, in terms of mental capacity and time and editing, it's a nightmare. It's multiples as hard as this podcast, and the podcast is multiples as effective at reaching an interesting audience. And so I'm fascinated by where the sweet spot is in all of this, because I think video ultimately, like take The Defiant Ones again, that was one of the most effective pieces, four hours, stitched together, that I've ever seen. To learn about something, to be entertained, to really take lessons away. I mean, it was a masterpiece in content creation but arduous, I couldn't do something like that. I'm just interested by, there's these companies popping up that do support and basically are tool kits for content creators. And that's why your interest in media overlaps my own, I just think it's such an interesting need for almost every company, to have this arm of itself and finding the sweet spot for each, and some do it better than others, to grow their own businesses.

Eugene: [00:49:31] Yeah. Well, I'd be curious to hear your opinions on this but Neil Postman wrote, Amusing Ourselves to Death, which is this amazing book and one of the most-

Patrick: [00:49:37] The opening pages of that book are some of the most memorable of any book.

Eugene: [00:49:42] I so wish he were alive to write about this current internet age but, essentially, one of the core ideas from his book, which is so important and even more relevant than ever, today. Is that everything has become entertainment because of the mediums through which it's transmitted. And the idea I'd add on top of that, which is really important now, is that we now live in what I like to call the big bang of content. This is the age where content went to infinity, effectively, it's not infinite but effectively. That is such a difference from the age of scarcity that we used to live through.

And what it means is that, formerly, you could stay in your lanes, you could be a research facility and just write white papers and just like, "Look, I mean, what else are people in my space going to do? They have to read my white paper because that's essential, that's the only type of content in my business. But what changes in our age today, with a smartphone, is that at any point in time, you are competing with what's on a person's smartphone. And that means that, formerly, different lines of business and different industries now compete head-to-head.

You may not feel it entirely but, Fortnite, is just as important a competitor to the film industry as the next studio over. And because of the way the mediums are structured, everything is becoming entertainment. Politics became entertainment long ago, you don't have to look at our current president to say, "Oh, okay, politics is a form of entertainment, this former reality star." If you look at, for example, what Ocasio-Cortez is doing right now, amazing, right? Because she understands, "Wow, in this different age with different distribution channels, the game has changed." And she just happens to be young and she understands these mediums natively, whereas most senators and congressmen are these really old, White men who probably don't understand how to use Instagram or what it's all about, and all of that.

And so the fact that you now are doing podcasts is just a reflection of the fact that part of your business has to be entertaining, it didn't use to be, now it has to be. And so I think everyone now has to figure out, with their content, how to compete with every other form of entertainment. That's a invisible asymptote or an invisible competitor that many businesses just can't see. If you were a video company, you're not looking at what's going on, probably, in e-games or what's going on Instagram or something like that.

But every person now has a choice, at any moment in time, for how to entertain themselves. And they are going to go to the best option because it's one tap away, on their phone. And that means the bar has been lifted, the game has been lifted. There's a entertainment hurdle which is ever rising, which is some analog to Baumol's cost disease. I just think there's some entertainment hurdle now, which everyone has to surpass, and it's amusing, right?

Our young kids, my niece, I look at her and I'm guilty of this, I take a lot of photos of her on the phone and she's always like, "Let me see," as soon as I take it, right? I'm training her to be an entertainer from a very early age, right? When she grows up, she's going to be way ahead of me in understanding that the reason I don't send snaps or things like that, to message my friends, is I didn't grow up with that behavior. But the world has changed.

Feedback Loops

Patrick: [00:53:03] It's amazing and it affects all of us, because our businesses are relying on these things. I wonder what your thoughts are on the personal side of the invisible asymptotes. In exactly the same way as you described for companies, that you're doing one thing and if you don't evolve, everyone hits the top of that S curve. How do you think about that from a personal standpoint and in any way you want to describe it? It could be your business skills, it could be how you treat people, whatever, how do you think about that?

Eugene: [00:53:32] Well, look, it's human nature to not be good at taking feedback. Some of the most interesting arbitrage opportunities in the world, you always hear this, it's such simple advice and yet it's shocking that it's not standard behavior. But if you're a CEO or an executive, almost everyone tells you to get a coach, "Get an executive coach." Atul Gawande wrote this great piece years ago, in The New Yorker, about, he's a world-class surgeon and yet he asks a peer of his to observe one of his surgeries and give him feedback. And he was like, "Oh my gosh, I got all these notes on things that I missed."

And I think it's, we're just terrible at looking at ourselves. We will always be the most biased observer of ourselves and so it's human nature, if you become successful over time, to just feel like you know it all, right? You don't need any coaching, you don't need any feedback. And I have this core thought that almost everything in the world could be fixed by tightening feedback loops, in general. Why is it so hard to exercise and eat well? Well, the problem is the feedback loop is too slow. If I could go out for a jog for three miles-

Patrick: [00:54:38] And lose five pounds.

Eugene: [00:54:38] ... and lose five pounds, you bet I would be jogging every day. But the thing is you have to jog over and over for weeks on end, before you start to feel your pants loosen up. And you know that'll happen, it's just... And it's the same thing with eating, right? I eat these 10 French fries today, I don't pay an immediate penalty and they taste really great because the feedback loop on taste, is much faster than the feedback loop on your nutritional loops. And so that's the thing with invisible asymptotes, a lot of them are just caused by very slow feedback loops. And so a simple thing that most people can do is just, increase the number of feedback loops. For me, myself, it's having those friends or peers or things that will give me honest feedback on where I need to develop. One of the problems is, the average tenure of employees at companies in tech now is short, it's two years or something, at startups. And there's a whole bunch of reasons why that happened, the economic models of stock options, the way that companies are... For a number of reasons, that is the case.

One of the promises that, if you, as a company, look at an employee that's only going to stay for two years, how much are you going to invest in training? It's just not worth it, they're going to take that training and go to some other company, maybe one of your competitors. And so the problem is that, if you look at the business world, you've got all these employees enter companies just like, "Hey, well, you just start doing this job." And then they're responsible for their own learning, there's not really great education or anything like that, companies don't optimize for educating. I think it would have been different in the age where people worked at one job for life, then it really behooves you, economically, to train that person to be the best employee possible but we're not in that age anymore. I just got back from Japan where the Japanese are famous for, you'd have these craftspeople who become the best at what they do.

Patrick: [00:56:25] Yeah, seven years making rice and sushi or whatever.

Eugene: [00:56:27] Yeah. Jiro Dreams of Sushi, right? It's the canonical one that people are familiar with here. And a lot of that was based on an apprenticeship model, where you would go serve a master and study them and learn your craft. And in a way, in our modern world where everything's short tenure, that doesn't happen. And so besides tightening your feedback loops, I think we have to get used to this idea that everybody has to take responsibility for their own learning, in a way. We've actually never had more resources available to everybody, for learning, YouTube and all these free resources online, but the discipline to take advantage of that is still super rare. I think I still have much to learn on many, many dimensions and I've tried to adopt those things, tighten my feedback loops and then taking responsibility for my own continued develop.

Patrick: [00:57:19] The feedback loop implies, there's something you're trying to achieve. And so if the five pounds or the inch off your waist is the goal, at some point in the future, and if it's a slow feedback mechanism, the odds just suck. Whereas if you reframe it as like, all success is just habitual, it's just habit formation where you actually fall in love with the habits themselves, and not the goal that's distant, that you just short circuit the system, you then live for the process versus the product. Now that's hard, it's really hard and I think it requires a philosophical buy-in, in my case, it took me years. It took me years to convince myself that this idea was true and whether or not it is true or not, I could be fooling myself, it doesn't really matter because the outcome is that I focus on habit creation and very small bite-size habit creation, high-frequency habit, daily stuff, weekly stuff. This podcast is a good example where you don't know maybe what the content of it is going to be. I don't know who my guests is going to be next, who the next person I'm going to talk to is, but I'm going to talk to somebody for an hour and put it out there in the world. It's an interesting problem and it gets a lot of attention but not a lot of action.

Eugene: [00:58:28] Yeah. In writing school, famously, they teach you that the idea of the muse is inverted. It's this idea, "I write when the muse visits me," and it's like, "How does the muse visit you?" The muse visits you when you write and so this idea of just showing up continually. I'm fascinated, if you look at interviews of successful people, you're always like, "Hey, what's the secret to someone's success?" And you hope that there's some magical thing that you can adopt.

Patrick: [00:58:53] What exercise and survivorship bias?

Eugene: [00:58:54] Right. Exactly. But one thing that I find is very common among all successful people, is they have lots of goals, they set goals. To me, goals are just a hack and it works, actually. The time that I set a goal to run a marathon, I ran a lot that summer and a goal is just gamifying your own life. It's like you said, it's making the habit drive towards something, like for example, this month I have a goal of doing 2,000 pushups. And I just randomly set that and started it but as soon as I started that little Google spreadsheet, every day, before I go to bed, I remember, "Oh my God, I got to do my," whatever, "100 or 50," or however many it is, and I keep up with it. And so that's such a simple hack that I always tell people to just set even arbitrary goals all the time, just have a whole bunch of goals and you will just automatically align. Because a goal really is just the way to structure your time and align your incentives, into a very rigid path. And the same way with you, with habits, right? We're bad in the absence of weird artificial constraints like that, in knowing what to do, a goal just aligns all your loops and everything.

Patrick: [01:00:06] Yeah. Maybe it would sum up the whole conversation with just, these are all versions of scarcity. Like controlling scarcity, controlling your own patterns, is an incredibly powerful way and then you can obviously scale it up to the business level, to do really interesting things.

Eugene: [01:00:19] Absolutely. I think the number one scarcity we all have is that, we're all going to die someday. That's maybe the master scarcity that should govern everything, about how we spend our time and everything.

Patrick: [01:00:29] Because of I think your thirst for experience, I would just love to get a few recommendations from you, in a few categories, before we wrap up. The first would be on travel, which is where we began, what are just a couple of really special places? And this, you wrote about alleys in Taipei, and I love that post and this could be as specific or abstract as you want it to be. But when it comes to travel, what pops to mind?

Eugene: [01:00:52] The mode of travel that I find, and this is general, this is not applying to any specific place now. When I was younger, I think, and I was visiting so many places for the first time, I would go off of guidebooks and things, which usually have a list of sites, iconic sites that you have to go see. And in an age of Instagram and everything, it becomes this checklist, scavenger hunt. You're running around, you're like, "I have to go see the Sagrada Familia in Barcelona, I have to go see the bridge in Prague," or whatever.

And it's a little bit exhausting and this idea of understanding of the path dependence of culture and everything, means that now what I mostly like to do is, it's fine if you want to hit some of those big sites on your first day there but, mostly, I want to embed myself with some people who've grown up in that place and spend enough time with them, eat a couple meals, take them out, have them walk around and ask them questions about their everyday lives, that help you to understand, actually, their worldview. Ask them what they find bewildering about American culture and what they find appealing about it. Ask them, in their daily lives, what media they consume.

And all these things, I find, have made travel just much more interesting for me. And there's so much hidden knowledge that's not in guide books, that's in the minds of the people who live there. The whole Taipei alley investigation really just came from me asking a local there, I'm like, "What's the deal with all of that?" And when I was just in Japan, I also noticed the same thing that triggered my conversation in Taipei, which was like, "Hey, there are no public trash cans."

I was walking around with this empty plastic cup and I was like, "I have nowhere to throw this out," so I carried it with me for the whole day. I was like, "Why are there no public trash cans in Japan?" And someone had told me that it came from the sarin gas attacks in Japan, many years ago, where they were like, "Hey, we don't want these trash cans in public, where someone could hide something like that." Whereas in Taipei, it was a totally different situation that explained that. That's my meta travel recommendation.

Patrick: [01:02:56] I love it. By the way, that's a recommendation in not just physical places but intellectual curiosities too. If you want to learn about whatever it is, venture capital investing, go talk to six or seven venture capitalists and have them be your guides, versus reading a hundred books. You're going to leave way better informed and with a much better understanding of nuance. I think that's the beauty, is the beauty of travel and exploration of any kind is the nuance of it all, that's what makes it beautiful so I love that advice. How about movies?

Eugene: [01:03:25] I like all types of movies so I'm generally not prescriptive on... I think you should find the types of movies that you enjoy. But I think that one way to heighten your appreciation of anything, like film, is to just better understand how it works on you. Why does a good film work in a certain way? And why does a bad film work in another way? And just like with sports, if you played a sport growing up, you will have a much deeper appreciation, when you watch it, of what's happening moment to moment. I don't have as deep an appreciation for soccer because I didn't play it as a youth but, recently, I'm watching soccer with some people who did play it growing up, they were able to give me a lot of pointers on, "Hey, what's happening here and there? Why is this little exchange very extraordinary?" With film, and one thing you can do with a lot of DVDs is to listen with the commentary on. Find a movie that you love, that has a director's commentary, turn it on and rewatch the movie with commentary, and listened to a little bit about that. Or there are a bunch of books that are all about film, visual grammar, and some of them are pretty light. Having one book like that and just flipping through it and understanding a little bit about, why a shot works a certain way on you, is great. For example, there's a famous shot in Jaws, it's called a Zolly shot. And it was first used in vertigo but what it is, it's called a Zolly because it's a combination, zoom and dolly shot. You zoom one way in the shot, you zoom in but you dolly the camera away so it changes the perspective, right?

In jaws, it's when he first spots the shark and they do the very famous Zolly shot on his face. And what does a Zolly indicates is that, someone's worldview has changed significantly, in that moment, right? When he sees the shark, he realizes what his adversary is, that it's real and that it's a big problem. In Vertigo, they do a Zolly shot of the falling down in the tower, which famously just creates... That was creating the sense of disorientation that he felt because he had vertigo, and he was scared of heights. In Goodfellas, one of my favorite films, there's a very famous Zolly shot where Ray Liotta goes to meet with Robert De Niro in a diner near the end. And he's trying to decide, Ray Liotta is trying to decide if he's going to flip and become an informant, in exchange for a lighter sentence from the government.

And he goes to meet De Niro and De Niro is like, "Hey, I've got this job for you, I need you to go to this place and take care of this one thing." And in that moment, there's a subtle Zolly shot on that because that's the moment that Ray Liotta realizes, and he says this in the voiceover, "I knew I would never come back from this job." That's the moment he realizes De Niro wants to get him killed, and that's the moment he decides to turn state's informant. And so just a subtle thing like that, these are the types of things you may hear in a commentary.

There's another famous move in film, there's a rule in film, it's called the 180 rule. It's if I were to film this conversation between you and I, I draw a line between the two of us and that splits the world in half, and all the camera shots should be on the same side of that line in order to not disorient the viewer. And you'll see this in every movie you go to, you'll just see it. If there's a two-way conversation, they'll shoot over my right shoulder and they'll shoot over your left shoulder. They'll never do, my right shoulder and your right shoulder, because then the world flips and it's confusing to the viewer.

But if you know a rule like that, then you know when it's violated by a filmmaker, that something is happening. There's a shot in, The Insider, by Michael Mann, where in the beginning, Al Pacino has been kidnapped and they have a bag over his head because they don't want him to see where he's going, he's going to interview somebody. And when the bag is taken off over his head, he's having this conversation with the person, the camera suddenly goes from behind his right shoulder to his left shoulder. It's because it was a pivotal point in the movie where something changed, and the filmmaker wants you to know this.

And Michael Mann does this quite a bit, there's also a famous move like that, where he crosses the 180 line when Robert De Niro was talking to Amy Brenneman for the first time, in Heat, and it's when he warms up to her for a moment. At that point, when the camera crosses that 180 line and it's such a powerful, visible move, you're like, "Why does the camera move like that?" It is foreshadowing the fact that Robert De Niro has now violated the rule that he tells everybody in that film, is, "Never get attached to anything that you can't drop in 30 seconds, flat, if you feel the heat coming around the corner." And you see that later in the film, he violates his rules and that leads to his downfall at the end of the film. There are all sorts of things like this which, I think, once you learn them, every time you're watching a film, you will start to understand how it works on you. And I think understanding how something works doesn't have to remove the magic of it.

Patrick: [01:08:14] It can amplify it, right?

Eugene: [01:08:15] Yeah, absolutely.

Products and Magical Experiences

Patrick: [01:08:16] Two more categories and then the closing question. The first is, I'll call it just products. I know you get asked often, to evaluate a product, given your experience. And I'm always intrigued because, as I thought about it, actually in preparation for our conversation today, I was on my iPhone and I was trying to type the things... Products, I guess, is loosely the right term, it could even be companies, Apple might be one option. Where a reverse order of their indispensable nature to me, what would I want to lose last? If I had to slowly prune products from my life, which would I want to lose last?

And, for example, one that was on the list was my local butcher, right? I just like really, really like the experience of that and I would be super bummed out, I'd rather lose Instagram than my local butcher and cheese shop. And so I'm always just really fascinated by what makes a product experience great, magical, delightful? And because you see a lot, I'd be curious to know of either at the metal-level, what you think drives those magical experiences. Or at the more tangible level, some examples of products that you've seen or used more recently, that you think are wonderful.

Eugene: [01:09:22] Well, I think, at a meta-level, over the years, I guess, my product thinking is always evolving a little bit. I've worked on lots of products, some have succeeded the way I wanted them to, some haven't. You're always learning a little bit and the way I've come to think of it, especially when building software products, is that it is a form of indirect communication. The software interface is a form of language, just like film is a form of language. Film, you're making the film on set, doing all these things with the actors and your cameras, and your lighting, and the script, and all of that. But you know, at some later date, you are not going to be there to guide the viewer through that experience. The work has to speak for itself, products that have software interfaces are like that. Once I've built the product and someone's using it somewhere in the world, on their phone, on a browser, I'm not going to be there to explain it.

And so there's just always a level of communication and legibility in the product, that has to be built in. And so a lot of, I think, product development is trying to decide how much legibility has to be built into the product, while retaining some elegance. And I like the idea of elegance, which is, I've heard this definition once. I think it's in Steve Grant's creation where, "Elegance is the maximum amount of information communicated in the minimum way."

And I think that's my general guiding product philosophy, is it's a language where you're trying to achieve that balance of elegance. If you are too minimalist or anything and no one has to use your product, then there's information being lost which is terrible because, ultimately, you're trying to serve a need for the customer. If you're overly legible, you probably are too noisy, you've communicated a lot of information to the user but you've created all this noise that's distracting, and it's unpleasant to use. And there is something into it, and maybe it's because I just got back from Japan, this idea of the Zen simplicity.

Patrick: [01:11:30] Clean, minimalist.

Eugene: [01:11:30] Clean. But I think people confuse, sometimes, minimalism for elegance. Minimalism is a one approach to achieve that elegance but remember, it's maximum information communication.

Patrick: [01:11:41] It's the ratio, not the....

Eugene: [01:11:42] It's the ratio that really matters. In terms of products, it's always hard for me to... I actually should just come up with a list of things, so I can think of them off the top of my head. But I will say that, during my travels, I thought a lot about Google Maps because I used it a lot. I just think, and I had written about this briefly, that I think Google Maps is the most interesting Google products. Because there is so much underlying information, that forms a structure that could be reoriented for many different uses. When Google looks at its portfolio, I'm sure it's very concerned about making headway in some areas where it's not as strong; commerce, social, you name it. And I actually think Google Maps is potentially the most useful approach for them to take, to attacking a lot of these markets. But again, you're trying to balance information and how much is in the interface. And the interface of Google Maps today, on a phone, is optimized for helping you go somewhere and get directions.

But if you took that underlying data and all that and said, "All right, many people want to do a search to buy something or they're trying to find their friends to interact with them around different things," location can be an important component in all of that and Google has a ton of amazing data in there. What interface into Google Maps would optimize for that type of thing? And I think as VR gets big, the ability to 3D map the world in a way, will become this hugely important base of information, off of which virtual worlds are built and the way we navigate the world. I'm intrigued right now, by Google Maps, I think it has a lot of hidden potential and value.

Patrick: [01:13:24] The last category that I'd love any thoughts on is conversation itself, the art of conversation itself as a medium, it's the one we haven't talked about. You talked a lot about video and text and voice, and sometimes video is a way of capturing conversation but maybe the art of engaged conversation, any thoughts there?

Eugene: [01:13:43] I have, over the past year, spent a lot of time just pinging random people from Twitter that I found interesting, and saying, "Hey, let's meet up in real-life." And one of the advantages of conversation over, let's say, a linear medium like texts or reading someone's texts, is just the ability to adjust midcourse, the give and take of it. Obviously, body language and voice are very expressive in their own ways. But I think the biggest thing for me is the ability to just double-click on anything, quickly, and jump into this or that. Which you get with conversation with someone interesting, which you won't get if you're just trying to read a body of their work.

Not everybody's a great conversationalist, I'm not sure even that I am and I'm not sure what necessarily goes into being a great conversationalist, that's something that I'm continuing to just study and examine. You can go talk with some people who are great conversationalists, but probably a simple place to start is just by listening well and reading. In a conversation, the other person is your audience in a way so the ability to read that other person, and draw on something that you think is interesting about them.

I went so far as to actually, there's this great book called, The Most Human Human, which was about a person who entered the Turing contest. The Turing contest is computers trying to impersonate people in a typed exchange, conversational exchange. The Most Human Human is an award given, so there's five computers and then there are five human judges that you interact with. And at the end, the contestants rate all the people that they chatted with, from most computer-like to most human. And the human that is ranked the most human wins this, Most Human Human award. And so what that book got me thinking about is, "Well, what is it that makes a human, a human, in conversation and interesting?" This is exacerbated by the Google auto-complete sentences in the new Gmail, where you're like, "Oh my gosh, this robot can tell exactly what I'm going to write."

Patrick: [01:15:46] You find yourself intentionally writing something new?

Eugene: [01:15:47] I do. I do. There's a mathematical measure, it's called conversational entropy, which is how predictable is the next word that you're going to type, or the next letter, right? If it's highly predictable, your conversational entropy is low and if it's very unpredictable, then it's high. And so what Google is exposing to all of us is that, most of us have low email conversational entropy. And what I find is that high conversational entropy is correlated with interestingness, as a human being.

And this book is all about this person's goal to win the most Human Human award, and he studies all these people. There's this set of cards, I think they're called hypotheticals or something like that, they're cue cards of questions that you should ask people in the next conversation. And it's a gimmick, they're sold, it's a box, but I bought this because I was like, "Hey, am I like a boring conversationalist?" And then I realized, going back to all these exchanges I would have with people at parties, and you go up to people and you're like, "Oh, what do you do? How's the weather?" You're like, "Oh my gosh, a computer could do all of this."

Patrick: [01:16:48] I'm on autopilot all the time.

Eugene: [01:16:49] "I'm super boring." And so these hypotheticals were crazy questions that were like, I don't know that they are necessarily the answer to this problem, but they would be like a wizard walks up to you in the street. The wizard says, "I have the power to increase your beauty in some correlation, based on the amount of money you're going to give me right now," how much money would you give this wizard? There questions like that, there's another one, I remember just like, "Your friend is going to die, unless you just walk up to your friend and... " It's either I kick him while he's sleeping or just punch him in the face, but you can never tell your friend why you did it, would you do it? It was also weird questions like that. And I think they're fun, party conversation starters but it's more of the idea that-

Patrick: [01:17:32] Get out of the rut.

Eugene: [01:17:34] Yeah. Genuinely ask something that isn't something that a computer would just auto-complete for you, in a conversation.

Patrick: [01:17:41] I'm sensitive to share this here because it's so nice to have it, people not expect that it's coming, because I do this a lot now. My friend Lloyd Vardy taught me this, when I was in Africa and we had to introduce as a group of six guys, to each other, other than one, we had never met each other. And the method is extremely simple, which is give a short introduction of yourself, here are the things you're not allowed to mention; where you're from, whether or not you have a spouse, what you do for work, whether or not you have kids, where you were born, basically there's seven or eight of... It's the equivalent of, "Oh, how about this weather?" It seems like the art of conversation, and many times, is stripping away the norms and getting the other person to say things that they haven't said before or thought about before, but not just having it be one-sided. But that goes both ways, you've got a magical conversation.

Eugene: [01:18:29] Yeah, Absolutely.

Patrick: [01:18:30] My closing question for everybody is, for the kindest thing that anyone's ever done for you.

Eugene: [01:18:35] I'll mention one thing which actually I always think of as having changed my life, and this was when I wanted to go work in the internet space. I was out of undergrad, I had deferred law school because I just was like, "I don't know if I really want to go to law school." I was working a consulting job just to pay off my loans, and this was like '96-ish and I was like, "Wow, this internet thing, I just love the internet, I just want to be in that space." But I had very little work experience, very little qualifications and I really wanted to go work at Amazon because I loved books and I was buying all these books from Amazon, I was like, "Oh, this is perfect."

And I looked on their website and all the job listings were like, "Requires 10 years of computer science," or, "10 years of experience," or, "A master's." And I ultimately applied for VP of business development, which is laughable. I'm an undergrad at college, it is like 10 years of experience required, I obviously didn't qualify. But I wrote a three-page cover letter outlining my passion for the company, why I wanted to work there. And a random recruiter at Amazon got my cover letter and she read it and she was like, "Well, this guy's clearly not qualified for this position, however, I really like his cover letter, I'm going to pin it over my desk. And at some point, if something comes along, I'm going to call this person." I got one of those, "Thanks, we'll put you on file postcards."

And I didn't hear for six months and I was like, "Okay, move on." And she actually then found a position that she thought I qualified for, she called me six months later, I was in London on a case. And she was like, "Hey, I'd like to have you come in," and I was like, "Oh, okay." And when I went, it's just one of those weird things where she didn't have to really do that, she was getting tons of letters. And she really just showed me that she had it pinned over her desk, and if I hadn't gone to Amazon, I really don't know. I mean, think of how different my life would be, that was my business school, that was my education and that was my entree into tech and all of that. That's something that comes to mind.

Patrick: [01:20:39] Fantastic. Well, this has been so much fun, let's keep it going at dinner, thanks for doing this.

Eugene: [01:20:43] Awesome. Thank you.

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