Business strategy with Hamilton Helmer (author of 7 Powers) - द्विभाषीय उपशीर्षक
Warren Buffett famously said in business, I look for economic castles protected by unbreachable mode.
Power requires a benefit and a barrier.
So he's taking care of the benefit bar by saying a castle.
You have to have a pretty good understanding of why it's a castle and not a shack.
So in a lot of decks, it's like, oh, we have the most amazing team.
We move it the fastest.
You mentioned how rarely is that.
You're on a treadmill, and if you stop running that treadmill, you get cream, but it's not power.
The things that drive operational excellence can be mimicked.
What's actually talked about achieving these powers?
There's a thing called power progression.
There are times when certain types of power are available.
The path to power is where the rubber meets the rope.
Today, my guest is Hamilton Halmer.
Hamilton a legend in the world of strategy.
He's the author of Seven Powers, which outlines a framework for identifying and developing sustainable competitive advantage.
It is widely considered to be the best book on strategy.
And people like Patrick Holson,
Peter Thiel, Reed Hastings, Daniel Eck, and so many more leaders credit the book and Hamilton's teachings for helping them build durable lasting companies.
In our conversation,
Hamilton shares what sources of power startups can start developing early, which types of power companies often think they have, but they don't.
Thanks watching.
relates to strategy and modes,
went to start thinking about power as a startup,
and also what individual product managers and non-leaders can do about these insights about power,
also how Hamilton sees AI impacting various entry and the sources of power.
He gives a preview of his new book that he is working on currently, and so much more.
With that,
I bring you Hamilton Helmer after a short word from our sponsors,
and if you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube.
It's the best way to avoid missing future episodes, and it helps the podcast tremendously.
app.
At some point your customers will start asking for enterprise features, like SAML authentication and SKIM provisioning.
That's where WorkOS comes in, making a fast and painless to add enterprise features to your app.
Their APIs are easy to understand so that you can ship quickly and get back to building other features.
Today, hundreds of companies are already powered by WorkOS, including ones you probably know, like Vercel, Webflow, and Loom.
WorkOS also recently acquired Warned, the fine grain authorization service.
Warned product is based on a groundbreaking authorization system called Zanzibar, which was originally designed for Google.
to power Google Docs and YouTube.
This fast authorization checks at enormous scale, while maintaining a flexible model that can be adapted to even the most complex use cases.
If you're currently looking to build role-based access control,
or other enterprise features like single sign-on, scam or user management, you should consider work OS.
It's a drop-in replacement for Auth0 and supports up to 1 million monthly active users for free.
Check it out at WorkOS.com to learn more.
That's WorkOS.com.
This episode is brought to you by Vanta.
When it comes to ensuring your company has top-notch security practices, Things get complicated fast.
Now, you can assess risk, secure the trust of your customers, and automate compliance for
SOC 2, ISO 27001, HIPAA, and with a single platform, Vanta.
Vanta's market-leading trust management platform helps you continuously monitor compliance.
alongside reporting and tracking risks.
Plus, you can save hours by completing security questionnaires with Vanta AI.
Join thousands of global companies that use Vanta to automate evidence collection, unify risk management, and streamline security reviews.
Get,000 off Vanta when you go to vanta.com That's B-A-N-T-A dot com slash Lenny.
Hamilton Helmer, thank you so much for being here.
Welcome to the podcast.
Hi Lenny.
A pleasure to be here.
It's even more my pleasure.
I want to start by talking about when power becomes important.
When do you recommend founders start thinking about power in terms of pre-product market fit, post-product market fit?
Is it worth spending time thinking about power early?
Obviously, it's good to think about it a little bit, but how much and how seriously should
founders be thinking about it before they found something that people actually want.
One of the things that has really surprised me in the last five years has
been that my understanding of the answer to that question has changed.
And before I thought it was you do product market
fit and then and then and then you do strategy and and if you try and put strategy before product market fit,
it doesn't, there's not much you can do about it.
That's wrong.
Actually, one I mentioned before, one of the great pleasures for me in my work is being able to talk to company founders.
And of the things that has surprised me is that conversations with them,
even at an early stage about strategic matters, have a richness and relevance to me that was unexpected, and founders are practical people right.
I it's very hard to do what they're doing, and they have to be extremely focused and choose what's worthwhile spending time on.
And so, in observing their reactions in the dark.
I could see that there was something going on that was meaningful to them,
and this second book we're working on will tease out why that's so more
but the answer to your question is when should you thinking about this, the answer is always.
That's an odd answer.
Even before you have product market fit, it's worth thinking about strategy.
Now, it's not strategy in the sense of this fully articulated, strategic planning, we're going to do this.
These are going to be the competitors.
This is going to how we're going to answer them.
This is how we'll price.
Not like that at all.
At the earlier stage, you imagine wildly more degrees of freedom.
And questions of the business propositions that you're thinking of in trying to get to product market fit,
what are the underlying characteristics that might tilt them towards the availability of power or not?
And actually are meaningful conversations.
And certainly Right, you're tilting probabilities, you're not creating a determinative of things.
And then later on,
once you've already have product market fit,
then you have to understand your source of power to understand what competitive position is, because then you have of of that.
And then later on in a more stable phase when you're in a stability phase of business,
you have to know what your source of power is if you have one,
because you have to know And then also,
it is also the foundational knowledge that you need for if there's another step because another thing that's quite surprising about iconic business.
They often have a second act or a third act or fourth act.
I think of AWS or Intel going into CPUs or Apple going into iPhones.
It's all not the origin of business, right?
And actually common, not unusual.
And that's starting the process all over again.
Awesome.
You mentioned this word strategy.
I want to set a little foundation here.
How does strategy relate to power when people are thinking about these two concepts?
And do you have just like a nice definition of what strategy is?
Everyone's always just like, what the heck do you mean when you're talking about this strategy?
As I said, I'm sort of a concept person, right?
And so when you develop concepts,
you have to be very highly constrained by their useful I'm a great fan of the great mathematician John von Neumann,
and had a view which really irritated a lot of mathematicians,
which is that if mathematics wasn't guided by what was useful, it would become, I think the word he used was aesthetic to aesthetic.
And so any concept developments like that it needs to be guided by usefulness and so in dealing with strategy the question is what domain of things do you want to include in that conversation because
the term is ubiquitous in business.
I mean, do a Google search sometime.
I've done one recently on Google Scholar for the word strategy, and you'll get a million.
I'm not exaggerating a million hits.
And strategy for some people might mean everything that gets to the top of a pile
in terms of what you have to do that year.
everything.
And that's a perfectly legitimate definition,
you But what I have found is that there is a very important narrowing that makes it much more useful.
So that's coming back to what I was saying that time long.
It it much more useful.
So, my view is that you want to focus, it's very useful for a business to focus on the fundamental determinants of business value.
And that's an arbitrary choice,
it could be something else, but I can tell you from decades of business experience that that narrowing is very useful.
And then so once you reach that understanding, it tells you some important things.
if you understand what drives business value, I if do the math of it, right, it's NPV of cashflow, right, expected cashflow.
And what that tells you is that strategy is a long time concept.
You're looking far out in the future.
So think of Pearl Harbor.
Pearl Harbor for the Japanese was this enormous tactical success.
They just destroyed the U.S.
ability, naval ability, and the Pacific Ocean.
And worst possible strategic move, because it completely solved Franklin Delano Roosevelt's problem of how he could get the U.S.
citizens.
on board to attacking Hitler.
The strategy of it was, was US's industrial might would eventually win the war and population.
And the difference there is time constant,
tactical, short strategy law,
And so if you focus on value,
that narrows what you think about and allows you to get rather concise and offer up advice to founders about what they need to pay attention to.
So then how specifically is power informing strategies, like the way you think about it, focus on your power and that will inform your strategy?
Earlier I talked about these economic structures that provide durability in terms of refuge from withering arbitrage of everybody who wants to eat your lunch,
right?
And so that's what power is.
So you have to understand What is an economics?
I you're asking me questions to get pretty deep into theory here.
I you don't.
This is too conceptual,
but you have to say you have to understand how competition takes place and say,
what is it that creates some kind of refuge and what it is?
Is there something in what you do?
that gives you either a cost or price advantage over others, so let's say your lower cost, and that's the benefit.
And the barrier side is that there's that is durable about that,
that makes it over time that you can't, that competitors can't take away from you.
So benefit in the barrier, call it the 2B or not-to-B test, right?
And if you have that,
you can think of that immediately translating into because that will give you good margins out into the foreseeable future, which is what you're after.
And I don't know that we're getting into the weeds here, but that's what it's about.
And power is those structures.
Let me give you a example.
So, one, I in the book.
So, Netflix scale economies, right?
They have more subscribers,
the cost of their content is a very large fixed cost,
about 50%
of their cost structure over a They can take that fixed cost and spread it over more subscribers,
so cost per So,
versus somebody with fewer subscribers,
so if they face same prices as their subscriptions as their competitors,
they will be So that's a scale economy, and that's an example of the type of power, and a common one, I'd say.
But these things are hard to achieve, because they're kind of the holy grail.
Let's actually talk about achieving these powers.
Essentially, the argument here is your power informs everything you do, because this is the thing that will allow you to stay.
durable and competitive in last.
There's seven powers, we're not going to talk about all of them if you want to go.
Understand it.
Go read the book.
That's not the conversation always goes too long.
Yeah, exactly.
So what I'm wondering is, okay, so say you're looking at this list of seven powers and your specific type of startup.
Do you have kind of a heuristic that tells you,
here's most likely the power and set a subset that will most likely be an option?
B2B SaaS companies, is there like a smaller subset, like probably one of these has to be one of your options versus B2C?
That's a great question,
Lenny, because I think the path to power is where the rubber meets the road, and it's very complicated and nuanced, but I'll give you a few thoughts
along.
And frankly, our next book, The Second Invention, that's what it's about, it's not the path to power.
So in a book,
there's a thing called Power Progression,
which says it tells over the cycle of a business, there are times when certain types of power are available.
and the converse of that is times when they're not available.
And so there's some that only are really available when you reach a stability phase, so it's pretty far out there.
And so if you're starting a company, take those off the table.
So those two are branding and process power.
So I often, you know...
I find that there's a confusion about this because brand recognition for a startup may be incredibly important
But you can get brand recognition by buying and add the Super Bowl
That's not power that you paid for it
and so so take sake branding and and Process power and process power is really so sort of operational excellence on steroids kind of,
and usually is imitable, so it's usually not.
So take those off the table.
And a kind of resource type of power,
which is you have something that is of value that if you transferred it to somebody else,
it would be of value to them, but you own the right.
The barrier is law, for example, or lack of knowledge from others.
And there are classes of businesses that are like that so prescription pharmaceuticals, right?
If you have if you're the first person to come up with Viagra
That's worth a lot of money if you took that license and gave it to somebody else and be worth a of money to them
But that's a different class and it's usually not the types of things that That you know,
I'm dealing with and it's and it's and it's and it's kind of obvious to everybody So the key challenge there is can you invent of pharmaceuticals?
that's effective for a large market,
and you can take those three off the table,
and then leaves counter-positioning scale economies,
switching costs and network economies, and the important thing to keep about in mind there is that they're sequenced.
So, almost every startup that you want to deal with starts with counter positioning because remember what product market fit is primarily is a substitution.
it's you are coming up with a way to satisfy a more or less existing need in a novel way that creates more value.
Now there's sometimes you in you tap into entirely new needs but it's not so long.
Amazon was up against brick and mortar storks.
Google was up against Yahoo.
And so on.
And so you're usually substituting.
And that substitution is so your competition at that point is functional.
And if you don't have counter-positioning at that point, you're pretty high-risk from an income.
who already has the capabilities necessary to do that.
They have to extend their product or do this or that.
And what counterpositioning is the refuge from that.
And then you go into the other three types of power scale economies, such as cost and network economies.
And depend on your scale relative.
this is pretty cursory, but that's what I'd say.
I'll focus on those four.
I would recommend that you think pretty hard about whether you think there's UF counterpositioning to start.
Awesome.
I actually want to double down on that thread, but just to summarize, I have the list here.
Basically, you're saying if you're an early-stage startup, the forward to really that are actually potential powers for you, at least early on.
Counter which your point is, you could just start with that.
That's essentially positioning and business model design,
which happens at the beginning,
and then you can start to think about network economy scale economy switching costs as powers right and and i
you've done the right thing by not having me go through and define each of those but
but will but your listeners will will need to sort of go back to my book and see what those things
are to get me over we're going through the shorthand as we should but but uh but all folks that won't be completely obvious.
Yeah, I think a simple Google search I find just gives you a very simple definition.
Yeah, that's right.
There's some people who've some really good summaries of this or or chat GPT even better.
In a lot of cases.
Right.
Chat If get it right, sometimes I find they don't hear it's they hallucinate hallucinate an eighth power.
You mentioned how some companies think they have a certain power or they or it's common to think you have a certain power.
If you look at every start of deck, there's always like, here's our moat, here's the way we're going to have barriers to entry.
I'm guessing in almost every case they're delusional about the power that they actually have and the power they think they'll have.
Do you also find that to be true that often founders are like wrong about how much barrier they've actually created?
And is there a you often find most wrong and mistaken?
Yeah, so I agree with your observation, but I don't want to be unkind.
So mean, there are two things to keep in mind here in terms of making people feel better about that incorrect slide.
In fact, one is that founders have to be optimistic, right?
I think it's an important quality that they maybe understate the risk a little bit,
you but they're so committed to,
I'm going to do this thing that they go through that and that may give them an advantage over a large corporation.
thing.
The other is that despite the name Seven Powers,
which makes it sound like,
oh, you can sort this out, actually understanding whether or not there is a type of power in place is hard.
I mean,
if I did it with my colleagues here at Strategy Capital and we're looking at a well-known company,
it might take us weeks to answer that question for a single company.
And it comes down to the hard part as industry economics is what really are the economic relationships and it's very hard.
So with those caveats that sort of give them some courtesy,
I'll say some of the obvious ones are,
I mentioned before people sometimes think they have brandy power,
but another one that I think I've heard you mention is people often think that they get scale economies through data and I possible,
but it's rare,
and the reason it's rare is not because they're on-scale economies and data,
but rather that the range of scale that the existing competitors have are often large enough to be able to put them in shouting distance of
each other so that the differences in their cost per unit is not that great.
The curve flattens,
in other words,
which is typical of any, because the most common scale economy is you've got a big fixed cost, and then you pro-rate that.
And as you get more and more scale, the percentage cost advantage of a fixed cost advantage like that goes down.
And that often, so that's a pretty frequent one that we see.
We sort of laugh whenever we say we hear somebody say, wheel, which kind of gives you the idea of network economies.
There are often flywheels, ones that really are material, are rare.
The key thing here is materiality, not whether the flywheel exists.
the effect is strong enough to really tilt returns.
I was actually going to ask about that one because in software and social consumer products, network effects is always the pitch.
Once we get big enough, we create this huge barrier.
You mentioned just now, you often find that's not actually true.
It's something that'll be a become a barrier.
Is anything else you find with network?
And I know your power is called network economies,
not network I guess just to be clear, are these kind of the same thing in your mind with different words?
Yeah, kind of.
I mean...
I have called it a type of power,
so for me, it's only those things which clear the significance barrier hurdle rather, that they're a large material, right?
And so there are lots of things that I would say have network effects, but not network economies.
Oh, interesting.
Wait, can you speak to that?
So there's a difference between these terms, network economies.
Yeah, so for me, the difference is the materiality, you is whether the value benefits,
large enough to engender a price delta significant enough to give you materially different margins into the future.
Does that network effect have an actual impact on your business and your ability to price?
Yeah, it's not an impact, it's a material impact, so it could have, if it's a penny
to your bottom line, that's one thing, if it's a billion dollars or something else.
Wow, that's actually really interesting.
Is there an example of a company that comes to mind like they had network effects, but not network economies as a power?
Oh, I turn almost anywhere and get some some modest network effects and you know any any
platform business would probably likely have some modest network effects.
You asked me earlier and you sent me about Uber and Lyft I'd say that you know they probably have network effects involved.
but not network economies.
Wow, that's interesting.
And the reason you're saying they don't have network economies is because they're still so competitive,
they still have to spend so much money to stay ahead.
And the fact is not important.
Yeah, the advantage that they get is not a non-material, right?
Wow, that's interesting.
Kind along those lines, it's so interesting to see Uber and Lyft these days.
In theory, they both had some sort of strong network effect.
I just looking to lift as 5% the market cap of Uber.
Is there a lesson from just what it is that allowed Uber to just win and kind of run away with the market essentially?
I'm not entirely sure.
I'll take a guess, but I'll take it as sort of an uninformed guess.
I really studied it carefully.
I think that over time,
if I had to guess,
I'd say they're probably modest sale economies in the business, and over time, Uber has just very successfully played a war of attrition.
And that's both been in how they run their business.
They made one sort of initial misstep, which is they misdefined their business.
They said it was international transportation and it's not.
That business is extremely geographically specific.
You know, if you have a, you know, a great position in the Bay Area, it doesn't help you in London, right?
And so there are forays into China and everything really didn't make,
but they pulled back in that focus down on understanding their source of power, which was a geographically specific scale economy.
Then they've done interesting things like Uber Eats where they've tried to utilize the
platform that they have to get other opportunities for the one side of their platform,
the So if I had to guess, I'd say it was a well-played war of attrition with modest scale economies.
And is that attrition coming from a source of power or is that just like a proderm or stochastic?
Yeah.
It works because there are modest scale economies.
If there weren't any, then they did all this stuff, they'd still have a cold onesie.
Let me go in a slightly different direction.
We've talked about power.
We about strategy.
There's there's this word moat that comes up a lot.
Everyone's always trying to build a moat in your mind as a moat equivalent to a power.
Is there a difference when people talk about these two power requires a benefit and a barrier right you have to you have to have something that you that gives you a better outcome than your competitors,
lower cost or higher price.
And something that makes it impossible for somebody else to mimic that.
So mode is the second.
So it's it's not it's not synonymous with power because you can have a you could have a motor round over very
undesirable piece of property
And wouldn't get you far so so but And and but I think it is pretty synonymous with barrier I you know,
I think warm Buffett sort of Charlie Munger who I admire enormously.
I think I get crazy popularizing those concepts, and I think the way they think about it is good.
I'd say that seven powers is probably more systematic and comprehensive than saying that.
I think There's this wonderful,
I don't know if read any of the Microsoft,
any trust literature that came out of their lawsuit,
but was a communication between Bill Gates and Warren Buffett,
where Warren Buffett was saying why he couldn't invest in microservices, he just didn't understand it, right?
And so that meant He didn't, you know, the idea of network economies and what the moat was there, he didn't understand.
So I think,
but I think the concept of a is a good one, the idea that you have something that gives you a refuge from a-computing.
In terms of Warren Buffett, I the quote about moats.
Warren Buffett famously said in business, I look free.
Economic is protected by unreachable moats.
Right.
And he's taking care of the benefit bar by saying a castle.
Right.
He's got a cover.
But of the tricks to understanding power is you have to have a pretty good understanding of why it's a castle and not a shack.
I'll give you a Netflix example,
so a company I admire a lot,
and think some of the things that they had to do to develop their business were so important for their business.
that aren't, that don't guarantee a castle.
So, for example, UI development.
It's been an enormous amount of resources on trying to get just the very best UI.
I a zillion AB tests, all kinds of things.
Their engine, everybody kind of knows the story about how that went.
You know,
they're interfaced with the content world and all this so those things those things are important There are things they have to spend a lot of time and resources on
But they can largely be mimicked So when when Netflix and her earlier phase was fighting?
When blockbuster finally threw in the towel and said well we done will better do a mail order DVD business
If you looked at the blockbuster site their UI site, you couldn't tell it different from Netflix.
I just copied it and So all that thoughtfulness about which things you put first and now you structure it and all that to make the suitable was
So that's an understanding of looking at the properties you have and trying to figure out if they're a castle or a shack
I love this episode is brought to you by Paragon, the embedded integration platform for B2B SaaS product development teams.
Are your users constantly requesting new integrations with other SaaS platforms that they use?
Unfortunately, native product integrations take months of engineering to build and the maintenance never ends.
Paragon enables your engineering team to ship integrations seven times faster than building a house by removing the complexities around authentication,
messy third-party APIs and debugging Engineering teams at companies like CopyAI,
Cinch, TLDV and over 100 other SaaS companies are using Paragon so they can focus their efforts on core product features, not integrations.
The result?
They're shipping integrations on demand, which has led to higher product usage, better retention and more customer upsells.
visit useragon.com slash Lenny to see how Paragon can help you go to market
faster with integrations today that's us P-A-R-A-G-O-N dot com slash Lenny So let's take this concept of seven powers.
A lot of people listening to this are just like individual contributor product
managers on teams building new products or iterating on products they already have.
What do you suggest they do with this knowledge of their exists, these ways to build benefits and barriers?
I'm working on saying new product.
What do you recommend they do?
What's like something they could do this week next month to infuse?
These lessons into the products they're building.
I'd say there are a few and it's a little bit different You know,
I I'm not a great fan of strategically driven organization because it that idea of
because it fuzzes over how this knowledge is useful at different stages in the business.
And so for somebody in that position,
say a product manager in an existing successful business,
So, it's important in terms of just understanding their business to know what their source of power is because they, and that can inform them about, you know, what is that they're working for, and also
they may see things, since they're down in the weeds, they may see things.
that are important to that,
that they need to bring to other people's attention because they're the ones that really have the knowledge of what that's going on.
There's another aspect, I mentioned before this idea of transforming, of starting up entirely new things.
And usually,
I wouldn't say usually,
I'd say, it's not uncommon for ideas about that to bubble up from down below, you and so so that's that's another source.
If you're so let's separate a business into three phases, you know, origination, take off and stability.
So the answers I've given are more in the stability phase.
In the takeoff phase, let's say you've launched a product, you've gotten customer traction.
Now you're in a phase where there's just very rapid growth, probably other entrants like you.
What are you facing?
What you're facing is, remember that underneath all of this is changing technology.
That's what made the product market food possible in the first place.
But that doesn't just stop.
If you're in a technology way,
often there are all kinds of offshoots, both for you and the compliments to your business or anything else going on at the same time.
and to win at that stability phase, which is really a market share win.
You you have to be aware of those and understand okay
We have to incorporate this new new feature or maybe now the things have gotten to the point where this new market segment is
Our product is attractive for whereas before it this is meat potato stuff for somebody at that level and and it may
Well be the decisive element in terms of whether you win that market share battle with the other
contenders And so you're you have a very very important role at that point.
And I'd say the first thing to do with your question is to make sure you think about the different phases of this and then ask what those responsibilities are.
What about for people that are just trying to get better at being strategic?
thinking strategically, something every product leader is always encouraged to do, become a better strategic thinker, build his muscle of strategy.
What do you often advise to people just get better at this stuff?
Obviously.
read the book and then have conversations with your colleagues about the topic because it
as you sort of you know internalize what that means and how you know as have conversations
with them about do we really have this kind of power what's going on here what's important what is And,
you know, those conversations tend to allow you to sort of get a better grip on things.
I in the case of Netflix, Reed actually had me come in and train the top hundred people in Netflix and strategy.
We ran classes in the company.
But that's unusual.
say.
And I didn't have the book yet.
And I think the book gets people pretty far down that path already.
And you don't do that anymore, imagine if someone wanted to do that today, not an option.
I sadly don't have time.
I do often do fireside chats at company meetings and that kind of thing, but not a full blown course.
And I'm not teaching Stanford anymore either.
So I don't I enjoyed that immensely wonderful people to work with but but but I'm sadly I don't have the time
You're about to get a lot of requests for fireside chats.
I hope you're ready already.
You mentioned AI at some point in our chat.
I'm curious how you think AI is going to change your seven powers framework.
Do you think defensibility goes down in general with certain forms of power become more important or harder to achieve?
How do you think about AI?
Yeah, it's a great question.
I mean, we're all in this phase of wondering exactly how generative AI is going to play out.
My own view, currently, I don't see any change in seven powers from it in terms of an eighth power or something.
But the issues that it brings up like scale economies,
I mean,
think of scale economies,
you if you have to,
if you have a fixed cost of trying to develop a model of a billion dollars or something,
you know,
or network effects, you know, AI models develop so that they learn in a way that for one user's interaction helps in other users interaction.
That would be a powerful network on me or if it learns if you think of home You know,
if it learns about you and becomes a better psychiatrist or something, then that's a switching cost, right?
So all these things are relevant to which business models will work and I find that useful.
But I think in general,
the way I think about it is it's a it's sort of a standard form of potentially very powerful technology that is being introduced
into the business world and just asking how that plays out.
I, know, I tend to think of that the sort of three, three types of play.
there's the company that's the technology play itself.
So you think of microprocessors, it would be Intel.
If there's the companies that wouldn't exist without the technology, so for semiconductors, it be Microsoft.
And then the companies that utilize the technology but have existed before and after.
So semiconductors of the automobiles, they used a ton of chips, but were still cars before and after.
And I'm kind of of of the view very much uncertain at this point that.
that the AI will, its biggest impact will be that tertiary class.
It will be used in a lot of things that...
existed before and exist after, but are made better by it, like semiconductors and automobiles.
And it reminds me sort of, if you think of really big technology shifts like this, it reminds me sort of electricity.
When electricity came, you could completely reconfigure a factory floor, right?
You longer had to have, you could have the power source essentially at the operating unit of an operator.
But that took a lot of re-design and corporation investment, learning, compliments, all kinds of stuff.
I tend to think this will be more like that.
There will be some fewer cases.
People want to have them write their term paper with JETG.
But if you think of businesses, it's hard for me to think of a single functional area and a business with redesign couldn't benefit.
So accounting, HR, R&D.
You know, all have uses of this, but it requires incorporation, which is always, yeah.
troublesome.
And so that's kind of my view.
But there certainly will be businesses that couldn't exist without it, and there's some that are coming up.
And of those are, in fact, the businesses that empower the tertiary need, they're the ones that bring in.
But if you go back, this will date me.
But if you go back, in.
to a business history that back in, I guess it was the 90s.
There this thing called business process re-engineering.
The idea that you could take a computer sensibility into business processes, redesign them, and these monstrous cost savings.
And was a gigantic consulting opportunity for people, whole developed.
It sort of feels kind of more like that to me, but it's very interesting.
I could be wrong, but it feels different than crypto.
It like there's more of a real ultimate use case.
If it really is true, what they say, that a 50% improvement in programming efficacy is not uncommon.
Just that propositional loan is worth an awful lot of money, if you think how many programmers are in the world.
No question.
You mentioned eighth power.
I want to check.
Is an emerging eighth power you wish you may be would have included or may be added in the future that's like,
oh, maybe this is on the edge or it's like, nope, we got these seven.
You know, it's a great question.
I'm always looking.
Because if you find it, it probably means it's so obscure that it'll also be a great investment opportunity.
We're looking all the time.
But so far, no, so far, I'm pretty satisfied that seven is an exhaustive set.
But never say never, you know, you know, that's an seven, not a theoretical seven.
Yeah, if we start seeing you making incredible returns, you've clearly found any power that happens when you're right.
That's right.
I'm going to close one thread on a power that you mentioned that is often a kind of a pitfall,
which is around process power and basically execution.
A of people think, so in a lot of decks, it's like, oh, we have the most amazing team.
We move the fastest.
We're earliest.
You mentioned how rarely is that actually a power actually being able to execute and create a process that is an actual barrier.
You talk a bit more about that to help people understand okay it's probably not our power.
One of the great thinkers in strategy was this Harvard professor Michael Porter and he.
He, and probably 40 years ago, made the very controversial statement that operational excellence is not strategy.
And he a lot of people of Harvard Business School faculty really mad at him because that's what their careers were about,
and sounds like he was dissing him.
But the point he was making was when you get to kind of this end state, if you already have power.
that things that drive operational excellence can be mimicked because you can hire a consulting firm who has best practices,
knowledges that come in and get you up to snuff,
you can hire people from your competitors who know how to do it better and that's kind of true.
But it's also true in in the this take off phase in a business when that we talked about before when you're trying to attain competitive position operational excellence is everything.
And so if you think of strategy not statically endpoints like Professor Porter was,
but if you look at dynamically how you get there,
operational excellence is essential for a And think of those things I mentioned before about Netflix,
about their UI and recommendation editor and so on are international rollout, all those things.
they were in a battle to get more subscribers than other people.
And those were critical for that, right?
But in themselves,
they're critical in obtaining competitive position,
but in themselves or not sources of power,
typically, unless There's some very tight considerations here, very demanding considerations for the unless,
if they're really, they have to be material, but they also have to be okay.
people can't easily imitate them.
Either they don't understand what's going on, or they might be opaque.
So for example, think of TSMC.
So they put up, when they put up the latest FAB, there's, and get that operation.
are there are there a lot of steps in doing that they kind of know how to do
with their staff is trained to do it but it's not documented necessarily.
and not, and you can't imitate it, yeah, then maybe they have it.
I know if they have process or not, but it's, but it takes that level of complexity.
In my book,
I use the example of Toyota and a car manufacturing is complex enough that you can have this opacity in terms of material steps,
but it's, but it's not common.
And so if you're in a stability phase of business,
you're stuck with this funny thing, which is most of your day is on those issues.
And it should be.
Because if you,
if you,
if a competitor can and they can end up better than you and so you're on a treadmill and that's the way businesses,
that's fine and if you stop running that treadmill you get creamed and so you've got to do it.
It's most of your day but it's not power and there are those rare cases where it's so material and so in imbedo.
that it can be power, but they're rare.
I like the heuristic that if you haven't written it down or you can't describe it,
that might be a sign that maybe process power is a,
Yeah, yeah, and there is a consulting firm that offers to bring you up to speed in making
more like Amazon as a service right kind of along these same lines you talk about how the
only three things they create value in a company are power market size and operational excellence.
And I think hearing that will blow a lot of people's minds
because they think there's so many things that contribute to the value of a company and you whittle it down to these three things.
What can you say about that insight?
So, I'd say they're right and I'm right.
They're right because there are this incredible, I mean, businesses really hard, right?
And there are just a multitude of things you have to pay attention for.
I'm right because all those things fall into those three categories.
So it's an exhaustive set and it simply comes out of the math.
So we're both right.
That's right.
That's right.
Final question, the intent of a lot of your work is to empower founders.
I'm curious if you've noticed any broad economic trends or shifts that you think will make life easier or harder for founders
in the coming years.
Personally, I am very, very, about the debt trajectory of the United States and many countries around the world,
but I'll pick on the United States, but it's a trend going on everywhere.
We're on The last thirty years right there's been a crisis about once every ten years so there's the dot-com bust there's the financial crisis there was cobit.
You know i have nothing makes me think that the frequency will be a lot less i don't know what you know is these are all uncertain events but but.
Imagine if we got to one of those and we had no dry powder and dry powder for us is the
ability to
heavily deficit spend take on debt and
fortunately our government did that in both the financial crisis and in COVID and And because that people had jobs,
my own view about the financial crisis is that if we hadn't done that,
plus having Ben Bernanke as the head of the Fed, we would have gone into another Great Depression.
So, this current debt trajectory, you don't know how long it will take exactly one, but
eventually that will mean we will not have drive-out or people will not respect the credit worthiness of this country.
And so, that worries me a lot, and it utterly will affect.
you know,
the idea of company founding,
because if you get into a crisis like that,
it you know, all the capital markets lock up and it gets very difficult to do anything.
And to really stretch my credibility here,
I'll opine on just how hard a problem this is to
The reason this is so difficult for this country to solve in other countries is that it is right at the crux
of the delicate dance between capitalism and So, if you think about these, the problem, of course, that's driving all this is entitlements.
There's sort of discretionary spending, you the certain recovery programs and stuff, but those can go away.
The thing, the underlying trend that people just can't get their arms around is entitlements.
And anybody who looks at the numbers can see that.
Every economist knows that.
But that's not an easy fix.
And the reason it's not an easy fix is there are two opposing views of kind of what's going on.
And there's no way to resolve those two views.
One is, The capitalism is for patience and results in more and more inequality the government has to do something about it.
And the other is that the government is on a path that is creating socialism that will undermine our freedom and economic sufficiency.
And the poster child for the rapacious capitalism, one is, I don't know if seen the recent I you've seen it.
analysis of inequality in the United States has just came out much more robust analysis
and has said that basically inequality in the last 60 years the United States has unchanged.
But that's post transfer post tax inequality, which basically says the amount of taxing and transferring going on was about right.
So it says that the amount we're spending is about right from that perspective that it compensates for the other inequities and we should be spending that much so we should tax.
And the poster child for the other point of view of the dangers of government is the steadily
increasing without interruption percentage of the economy that is government.
And at two levels, 75 years ago, people would have thought absolutely impossible.
So, there are these two views about what's going on.
One is that we're compensating for the normal inequities of capitalism and the other is that we're headed down a path to socialism and ruin.
And that leads to a deadlock, which is you don't tax anymore and you don't cut spending ending, and that at least depths its.
So anyway, a long rant, sorry, but that trend is extremely politically difficult to deal with, and extremely threatening, and concerns me immensely.
not to leave listeners with a very sad state of affairs, I don't know.
I this is important.
I think it's important people think about this and know these things.
Is there anything that gives you hope?
Is there anything that gets you excited about either for founders or anyone in general,
just to kind of leave folks with maybe on a happy?
Yeah, I mean, I am an optimistrally in a way, you know, and I do, there's a
a famous Austrian and eventually American economist and named Joseph Schumpeter,
who wrote this wonderful book,
Theory of Economic Development,
a back when,
over a years ago, where he took the unusual view of saying that the vitality and economy depended And I ascribe to that.
I think that creativity and action are the ways society and people advance, and I think the U.S.
and a pre-society has huge advantages in that.
And think that I'm feel very lucky to be in a place,
I Silicon Valley, but be in a place in a country where that is vital and active.
And think that's sort of ground zero for me.
And I think you see that alive and well, I and there are people that are very enthusiastic about that as I am.
Beautiful way.
to close out our chat.
Is there anything else you want to share before we get to our very exciting lightning round?
Is there anything you want to leave listeners with or any last tidbit of advice?
I sort of alluded to it before, but just remember, action is the first principle of business.
You do stuff.
And my book is very oriented towards that.
The idea was not to tell you what to do, but to give you sort of guideposts while you're on that journey.
And so I just to people that are enthused about it, I encourage you to do stuff.
That's where it all starts.
And can think about it and maybe help a little bit, but it's mostly...
I love that point so much of something I was going to touch on,
but I didn't get to is just there's so many people that just sit around and theorize about a strategy of their business,
especially in the early stage.
Here's our grand master plan.
Here's an amazing strategy.
Or just read about startup ideas and don't actually it.
I love this final note of just like, just try it.
Just do it.
Don't just sit there and...
Yeah.
you know, and life is full of some rises.
You'll end up in a place you didn't expect.
Speaking ending up in a place you didn't expect, it's time for our very exciting lightning round.
Are you ready?
Oh, sure, I'll do my best here.
I'm not very good on lightning, but.
First question, what are two or three books that you recommended most to other people?
One book that is
extremely wonky
But but and I can only take it in very small doses
But is magnificent as one called the road reality by Roger Penrose who's this brilliant mathematician?
And it will be very daunting for anybody unless you're a deep math person,
but his brilliance in our edition just shines through in this thing, and it's just an amazing book.
I would say there's another book,
I wish I could remember the name,
maybe you can get the name of the author,
a book called Gene by this geneticist and I think Harvard Medical School Professor that's about the history of genetics.
And He is an absolutely luminous writer.
I it puts me to shame.
I'm embarrassed when I read it, because I think how pedestrian my writing is.
And incredibly knowledge about the history of genetics.
And I think that's such an important topic.
So those are two that I would recommend.
I would fairly, fairly wonky, but I like them both.
I them.
The author just looked him up, said, Yes, just amazing.
You read it and you go, how did he think of that phrasing?
I it's just amazing.
You have a favorite recent movie or TV show you really enjoy.
I'm a huge movie fan and have been all my life and I'm particularly keen on
Animated films but the movie that I've recently seen that I liked particularly was American fiction
I thought that was it
Didn't make any of sort of the easy choices in a movie and and as a result was
just incredibly interesting and thoughtful I think Do you have a favorite product you recently discovered that you really love?
In my office, just this last week, we actually put a Persian rug in our entry room.
And this is what's called a Farahans.
and it's 150 years old and it had an effect on me that I didn't expect which
is it is it is a work of great beauty.
And it was before,
it was all hand done, before machines, you get all this wonderful variation of the actual icons in a rug and the different dye colors.
And I find that every morning when I walk in, I go, that's really beautiful.
And it's uplifting.
And it shows you the...
importance of or the value of sort of the quality of art.
I it's just kind of blows my mind actually.
So that's probably not the usual product of discussion that you get.
No, I love that answer.
Recently, we've had some really unique choices.
One is a very nice mercy.
and a Rivian and a minivan recently.
We've got a lot of very, very nice things.
Oh, that's good.
I'm a hard guy, too.
So I didn't answer on the card.
Man, I love that.
We have a Rory Sutherland coming on the podcast soon.
He's one of the leaders of Ogilvy,
and he has a whole thing about how buying a home is like the best value of art to buy art.
If you live in a home that makes it, and as beautiful.
Yeah, I I'm a big believer in that, you know, I mean, I think that, you know, sir, you're your place and and how you connect to it has an important grounding effect.
And then before I talked earlier about creativity,
and I thought, surrounding yourself in an environment that stimulates that is really important, and so I couldn't agree with it more.
Two more questions.
Do you have a life motto that you often think about come back to share with friends or family?
One is what Clint Eastwood's advice to actors, which is don't just do something stand there.
And there are a lot of things that are long-termish with kind of low signal to noise.
And you can often just do a lot of stuff that you think makes a difference,
but it really doesn't and so that that's that's that's one the other one which is somewhat more profound I think it was one that I of a famous Sri Lankan journalist was a mentor of
mine and very dear friend and he had a favorite expression that I adhere to all the time which is everything is
always about something else.
Wow.
And that's so true if you're dealing with this power stuff when if you really dig down everything is always about something else speaking of power final question people that have a lot of power are
leaders in the world.
I'm curious.
Do you have a favorite historical leader?
So, yeah, so I have some that I admire a deal.
I'm a tremendous fan of Winston Churchill's.
You know, a quirky, most leader, most really great people are quirky.
and he qualified there things you could say about him that you know you might
not have liked that so much but but he was a genius and at great human sense.
He things long before other people.
I've got to him high marks.
Some of the great artists I admire enormously.
I'm reading a book right now on the last 20 years of Michelangelo,
which is a very interesting period because in his first 70 years, he sort of touched up day.
But he wasn't going to do sculpture anymore.
He just finished the last judgment, which was the wall of the Sistine Chapel and I think the last measure for us.
ago he did and a lot of his friends at that time he was exiled from Florence and living
at Rome and he had at this Roman community and a of his close friends had recently died or had difficulty.
So he's at this inflection point in this life at 70, which in those days was very old.
And yet he went on to do some of the most remarkable architecture in the history.
And so, you know, you've got to admire that, you know, I just of doing that which is that rare second act.
So, but I think for world leaders, Winston Churchill is very high.
I'm a fan of Teddy Roosevelt, I must say too, in this country.
So I love that Hamilton.
You are wonderful.
I feel like we have helped a lot of people up level their ability to think about strategy and modes and power Thank you so much for being here two final
questions Working folks find more online if they want to dig in further and how can listeners be useful to you?
Yeah, so I as I say, I'm idea person and I'm about trying to empower company founders and so only thing I can say
is read the book, spread the ideas, start own company, those are the things that would make me happy.
Hamilton, thank you so much for being here.
Okay, my pleasure, Lenny.
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 a leaving review, as that really helps other listeners find the podcast.
You can find all past episodes or learn more about the show at Lenny'spodcast.com.
See you in the next episode.
अधिक सुविधाओं को खोलें
ट्रांसी एक्सटेंशन स्थापित करें और अधिक सुविधाओं को खोलें, जैसे कि AI उपशीर्षक, AI शब्द परिभाषा, AI व्याकरण विश्लेषण, AI बोलना, आदि।
मुख्य वीडियो प्लेटफ़ॉर्म के साथ संगत
Trancy न केवल YouTube, Netflix, Udemy, Disney+, TED, edX, Kehan, Coursera जैसे प्लेटफ़ॉर्मों के लिए द्विभाषीय उपशीर्षक समर्थन प्रदान करता है, बल्कि नियमित वेब पृष्ठों के लिए शब्द / वाक्य अनुवाद, पूर्ण-पाठ तार्किक अनुवाद और अन्य सुविधाएं भी प्रदान करता है। यह एक सच्चा सभी-एक भाषा सीखने का सहायक है।
सभी प्लेटफ़ॉर्म ब्राउज़र का समर्थन
Trancy सभी प्लेटफ़ॉर्म ब्राउज़र का समर्थन करता है, इसमें iOS Safari ब्राउज़र एक्सटेंशन भी शामिल है।
विभिन्न दृश्य मोड
सारांश, पठन, मिश्रित और अन्य दृश्य मोडों का समर्थन करता है ताकि एक समग्र द्विभाषीय अनुभव हो सके।
विभिन्न अभ्यास मोड
वाक्य लेखन, वाणीक मूल्यांकन, बहुविकल्पी, वाक्य लेखन और अन्य अभ्यास मोडों का समर्थन करता है।
AI वीडियो सारांश
वीडियो को संक्षेप में देखने और महत्वपूर्ण सामग्री को तेजी से समझने के लिए OpenAI का उपयोग करें।
AI उपशीर्षक
केवल 3-5 मिनट में सटीक और तेजी से YouTube AI उपशीर्षक उत्पन्न करें।
AI शब्द परिभाषा
उपशीर्षक में शब्दों पर टैप करके परिभाषा देखें, AI-संचालित परिभाषाओं के साथ।
AI व्याकरण विश्लेषण
वाक्य व्याकरण का विश्लेषण करें ताकि वाक्यार्थ को तेजी से समझें और कठिन व्याकरण बिंदुओं को संभालें।
अधिक वेब सुविधाएं
द्विभाषीय वीडियो उपशीर्षक के अलावा, Trancy वेब पृष्ठों के लिए शब्द अनुवाद और पूर्ण-पाठ अनुवाद भी प्रदान करता है।