Startup Therapy Podcast

Episode #249

Ryan Rutan: Welcome back to the episode of the start-up therapy podcast. This is Ryan Rin joined as always by my friend, the founder and CEO of start Will Schroeder. Will you and I have been in the start up game pretty much since the start up game existed and kind of from those earliest days until now, we've been an era that said scale, scale, scale grow, grow, grow head count, head count, make it bigger, make it bigger, go faster. And now we're suddenly entering this sort of new age where small might be the new big and that scaling your head count isn't going to be as much of a thing as just scaling your output, scaling your efficiencies and, and doing things under, under a new uh new methodology largely driven by A I. But there are other things that play there as well like remote work. But I think to today's focus is probably gonna be more around A I but uh from your side. Well, um having come through this entire thing, are you gonna miss the golden age of start ups where it was about packing as many desks into an open plan office? As you could and, and hiring as many people as you could, you know, and all that. Are you

Wil Schroter: gonna miss those days? I'm gonna miss it so much. I'm, I'm gonna miss, uh, staying awake at three in the morning, every night, wondering if I'm gonna be able to make a massive payroll. I'm gonna miss having to kiss the ass of investors to raise tens of millions of dollars so that I could get done what I actually wanted to get done. I'm gonna miss having to sign 10 year leases on buildings that I never wanted to go to with tons of people that I don't even really know. Uh I'm gonna miss all that. I'm gonna curse you. Efficiency. Right. Oh,

Ryan Rutan: man. Yeah, it's an interesting time,

Wil Schroter: right? It is. And I, and I think we're gonna look back at um at this era where people used to in old timey days. It was just funny. It's like people coming up first time now you're, you're 23 years old, you're listening to this podcast you're listening to, to what we're doing and, and, and realize that you are in a moment of time that is going to look and feel the way we see stock photos or stock footage from like the sixties and the fifties where there are huge typing pools, all of all women back in the day, right? Um Of people like producing documents and you're like, wait, you had all those people just to type documents

Ryan Rutan: and for the 23 year olds, like, so one of the reasons you have that many people and despite, you know, we were actually using all 10 of our fingers to type then not just our thumbs. Um, but it still took, you know, inordinate amounts of time to create documents. Yeah, it's

Wil Schroter: incredible. And so I, I think, uh we're, we're gonna have a snapshot and the reason I'm saying this is for younger folks because they haven't seen these kinds of changes before and we'll talk about how we've actually been through this before. Uh But what's changing so quickly and I'm so glad we're covering this is for the first time in really forever start ups have the ability to start replacing thousands of people that would otherwise be in a huge job. Now. There's a lot of pushback to that. And I think it's misplaced by the way, which is, oh A I is taking jobs, jobs are coming away. We did a whole episode on this. No, they're not. They're creating 100 more jobs that haven't existed yet. And if you're not sure pick up your phone, look at every single app that's on your phone. None of those existed before that's happened and around forever, they all get invented like 15 years ago, right? This is how things work. A I will create an entire new layer of jobs and opportunities, et cetera. And what's gonna be so powerful or founders is more people will get, the will get access to do more things. Let me give you one more example, right? Just as I'm, I'm, I'm ranting here right now. Think of how many people don't have access to capital. OK. So, so we, we talk about it from all over, all quarters

Ryan Rutan: of the world that would be most of them for everyone listening. It's most

Wil Schroter: of them. What if he didn't need it? That's exactly if you didn't need it. What does that mean?

Ryan Rutan: We have examples of this in recent history, right? You remember when you and I started starting internet companies? Remember the costs involved banana server space, uh getting anything coded if you weren't doing it yourself. Like it was all like wildly expensive

Wil Schroter: 10 million to show with

Ryan Rutan: risk. That's it. You had to have so much money just to get started. And, you know, I, I want to marry this to the ethical question around, around A I taking jobs by the way because I think there's, there's a whole thing there that tends to piss me off when I hear people get, get up in arms about this. Um Just that cost reduction alone has allowed so many more people to start companies. Why do you think there was this massive start up boom? I think all of it just became more popular. Yeah, it became more popular but it still cost $10 million. Guess what? There wouldn't be very many people doing it. Right. What that those cost reductions did was turn it from being, you gotta be NBA level to play to everybody can join the rec league and try to figure shit out because it's not cost prohibitive. Right. At the same time as you're going through that and you have a $10 million need, you have to hire a giant staffing line just to try to figure out your start up. Imagine the risk involved in that. Right. Look no further than last year's layoffs after we saw these massive IP OS, these massive uh uh investment, uh tranches that were coming through uh post pandemic. And then what happened all of a sudden we see 10,000 people getting laid off. Well, where's the ethical question in that? Right. So it's not as if A I is doing something different than big businesses are already doing, it's just doing it in a slightly different way. But as you pointed out with the opportunity to create new stuff, as opposed to just cutting head cuts,

Wil Schroter: you bet. And, and I think you, we're at a point now uh where it's starting to become real. We're at like that, that just before the waves about to crest moment where everyone hears it coming. And obviously, you know, the press has been going nuts with A I I would argue that most founders that I talk to still don't quite understand what's happening. They hear there's this amorphous thing called A I, and they're like, ok, it's somehow getting applied to everything. Right.

Ryan Rutan: They're calling all their other friends on their flip phones while watching somebody use an iphone. Right. It's like, uh, I don't know, this is gonna catch all that. I

Wil Schroter: see it but I don't really believe it if you don't see it's because you're not using it. Right. Like, I, I am neck deep in this stuff and every day I'm like, you've got to be kidding me. Like, no matter how many times, you know, I use it, how many use cases I apply. I'm like, jeez, like every, every time I think it was like, maybe 10% on the way, it's 100,000% on the way. Like I can't believe this is V one and this isn't me trying to sell a I, I got nothing to sell. Right. Got you honestly, whether you use it or not, I don't care. However it's happening, it's happening whether you like it or not. Right? And it is happening at a scale and a speed you can't fathom that's it.

Ryan Rutan: That's it. Right. So we've, we've seen it change already just in, in like two years of kind of mass adoption. Uh Well, not even mass adoption, the level of adoption that we're at right now, it's moved very quickly, things have changed so fast. Um And that will just continue to accelerate. I mean, we're, we're sitting on 386 versions of these things at this point, right? We will, we will hit Pentium sometime soon and then it will just continue to go until we're at M two or whatever the hell we're using now, chip wise, right? It will continue to accelerate and become more

Wil Schroter: useful because I'm a video game nerd. Uh What I always tell people is like if you, if you know far back enough, this is as if the, the Atari 2600 was the Xbox series s you know, from today was the first version, right? Like it was we are light years ahead even on the first version. So as obviously, you know, we've given a I it too, let's just talk about a couple of use cases again. And this is for folks, you know, that are listening that have heard of A I, they don't quite get it. I wanna just give you a, I wanna start off with a couple of small use cases. So you can understand why this is so geometrically different than what we've had and how it affects staffing because this whole thing is about staying small. Well, let's first talk about small. OK. So um let's talk about a call center right now. A call center which is like the epitome of head count.

Ryan Rutan: It's the typing pool of 2020

Wil Schroter: four is set up because it does two things. It creates a user interface with people who are calling in obviously a human. Um and it creates a knowledge base of trying to, to, to uh figure out some transaction. Both of those can be completely automated, right? Um Talking to a human assumes that you just need an interface to, to interact with that understands what you have to say, right? I don't know how mind-blowing the people on customer service are and for who you call. But I would venture to say we could probably do better. But aren't you the people on the phone or the customer service reps would probably feel the same way. Um The other side is the knowledge um having a pool of 1000 people with roughly the same knowledge that all had to be trained up is a huge waste of time and resources, right? When you could have one essential A I that just does it 100 times faster which by the way, with 24 7 service in no hold times, right? No upside to having tons of people. Ok. So let's one use case, I'm just gonna use call centers, right? Let me go to the other side which people talk about a little bit less engineers. Yeah. People who write code, you know, the, the Holy grail, I can go into one of a million chat G BT like variants right now and write almost any code I could possibly want. And I don't know anything about coding.

Ryan Rutan: I have to say, man. Yeah, I've coded some pretty amazing stuff in the last few months. Um The last time I really coded anything that I would show anyone was probably 2001 2002.

Wil Schroter: I was writing server side includes and I, it's like, OK, this is starting to get beyond me. But OK, so I can now code in, in, in the, the new versions you're seeing now of like site builders, et cetera are allowing to use actual prompts uh in, in creating an entire site, meaning that the job of I have to hire engineers to write code is going away. I ironically with engineers helping you write that code. Um And so all of these things that we spent lots of money, lots of money to quote staff up for are going away. And I don't, I don't think people understand how fast this is happening or what the overall impact is. That's it. What we can talk about today is, is why the game is changing and why you should care. Yeah, I

Ryan Rutan: think, I think it's super important. So I, I wanna, I wanna talk about going to carry on to the point you're making here around reducing staff, right? So you're talking about like we can take what was 1000 person call center and take that down to maybe 1 1015, 20 people, right? There's something that goes. So I think when we think of it from a start up perspective where we're starting from zero, we don't have 1000 people reduced down to one where it gets really interesting is looking at how you can take those small resources and just provide so much more. So, you know, it's a staff multiplier, it's a force multiplier. Um It may fully replace staff in some cases, but there's all these really interesting use cases for things that just otherwise never would have existed. Right? I think everybody knows like the we'll use Netflix as an example. Netflix has been using some version of A I and algorithm to help with the recommendation engine for some time now, right? What you might not know is that Netflix is using A I to produce thousands of trailers in some cases for a single piece of content because it's tailored to the user and what they think that user will want to see to motivate them to watch that. Here's the thing that didn't take away any jobs, right? It did not because there was no version of Netflix saying let's hire enough people to make 1000 trailers for this week's episode of Dora the Explorer, right? It wasn't going to happen, but it creates a better user experience for us. It creates stickiness for Netflix, um which ultimately creates revenue jobs, all that stuff that we we do want to see happening. And so I think that we have to be really careful about assuming that, you know, by just by reducing head count. That's really the only objective here. It's not. Right. I think we'll get to that. But it's, it's about how much more can we provide. Right. Like, there are so many things I know you're in the same boat. Well, there's so many things that I have done for so long that now I do in 1/20 of the time or 1% of the time or I just don't even have to do anymore because I've replaced it with some sort of automated routine, which is amazing because I can focus on the shit that I really need to be doing. I'm really good at, I know everybody theoretically kind of hypothetically gets this um in terms of what the power of this thing is. Uh But I think we're still like, people are thinking about how we apply it to the individual level as opposed to how do we apply it as a start up methodology and how is this really, really going to change the game around how companies are built?

Wil Schroter: I think people are missing the, the output of this as well, making things cheaper. Yep. Here's the analogy I'd give you right. Being a carpenter myself, let's say back in the day, right. You and I were on the, the, the job site of building a house, right? And power tools hadn't existed yet. OK. And we're still sitting with our oldie timey giant saw going back and forth, right? And it takes us like, as a crew about a year and a half to build a single family dwelling. Right? But that's just how long it takes and it employs all of us et cetera. And then some idiot shows up, right, with a power saw, right? Like a circular saw or a drill of literally any power tool, right? And we're like, whoa, whoa, whoa circular saw guy, right? You're gonna take away my job because Ryan and I, we spend two weeks cutting 14, 2 by fours and that's important and you're gonna do that. Yeah, exactly. Right. Yeah. And, and you're gonna do that like in 10 minutes and you're taking jobs. No, you're missing the point. It shouldn't take this long to build a goddamn house. Right. It should, it should take three months. Right? Um And guess what happens when you can build a house in three months that used to take a year and a half. It makes houses cheaper. No, that means more people can afford houses, right? Less people are living in apartments or villages, more people are living in houses because you've brought the cost down if you don't have to pay for 1000 people to run customer support. Think of how much cheaper you can make goods and services. Think of how many more people can now get those goods and services. I think people only see one part of the equation. They're missing the rest now zoom out for a second and say, ok, cool. That's interesting. Um, so you're saying that I could maybe get into industries that could have been wildly cost prohibitive because they required 1000 person call centers. They required 50 engineers and Ryan and I can just do this ourselves and hire maybe two people for the same output. Oh, that's cool. Well, then we can take a shirt that used to sell for $75 and se sell it for seven because we don't have any of those associated cost. Yeah, that's the point. Right. Think, think of the power of that, you know, something that's really funny about everything we talk about here is that none of it is new. Everything you're dealing with right now has been done 1000 times before you, which means the answer already exists. You may just not know it. But that's so ok. That's kind of what we're here to do. We talk about this stuff on the show, but we actually solve these problems all day long at groups dot Start So if any of this sounds familiar, stop guessing about what to do, let us just give you the answers to the test and be done with it.

Ryan Rutan: I think one of the things that I, I keep hearing that's kind of the fears of people is that this ends up becoming like there, there's a few players that, that take. All right, I would rail against that uh, with with my last breath because I think what ends up actually happening, we talk about things like mass customization. Right. Well, now, because it's easier and cheaper to build, you don't have to get to $100 million company to make your bets pan out in a way that it works. I see uh uh industries becoming far more fragmented, not more consolidated as a result of this in, in really good ways, right? Fragmented in the sense that like instead of having, you know, a single, a single provider that does everything for every industry segment, you have a provider, her industry segment, her niche. Because you can now afford to do that, you can build something as small for as small of a market as you want to because you don't have all of these sunk costs to overcome in the long term financial success of the business, which ultimately changes, right? So, you know, I I love seeing entrepreneurs who go out and tackle like some really specific and tiny problem because they can now because you can reach that audience via the internet. The challenge still exists in, can I get to the point where I've built what I need to satisfy that market within a cost structure that ultimately allows me to pay myself back. My investors work when I won't have investors anymore. Now with A I and the speed and efficiency with which we can do these things, it means that A single person can start a business that services 1000 people makes a great income for that founder, particularly if they have no employees or very few employees and very little cost. And we can just see a much greater diversity of business ownership as opposed to the necessitous consolidation of that revenue under big brands, big umbrellas because that's what it takes to pay yourself

Wil Schroter: back. Let, let me, let me give a real world example that you're gonna remember. Uh This was again, bust coming out of bust. Um was the emergence of a company called, right? A juggernaut to their credit in in the dating space, crash. A couple of maybe the most important things in the start up world happen simultaneously. Um Cloud computing started to become a thing or at least shared hosting where you didn't have to have like literally your own server room to do something, right? Not an insignificant cost run

Ryan Rutan: down to unplug that thing. It's not working

Wil Schroter: exactly right. Uh The cost of bandwidth where a consumer connection became tens of dollars where it used to be. Remember the T one line, you, you, you'd have to get a T one line that would cost thousands of dollars a month just like literally connect more than five people to the freaking internet. Um So that came down. So, so infrastructure started to plummet. OK. Very important because that prevented an awful lot of people from ever even getting a step in it. What I would argue is the most important part of, of that era. This is like the early two thousands, the most, the biggest change that, that blew people's minds without reality on time was advertising for the first time, performance based advertising was introduced. You know, what we know now is cost per click. What we know now is affiliate fees, right? Um The early early entrance in that in that field, uh overture, which ended up getting bought by Yahoo and stolen from um uh Google um for a commission junction. Remember like back in the day or you know, the CJ legs back in um these guys fundamentally changed the trajectory of all start ups because for the first time, you could start with a tiny budget and grow it up. Now, now people will think twice about it, right? But that was unheard of at the time.

Ryan Rutan: It was a fundamental change, right? Because it allowed you to reach just the people you need to reach. You didn't have to have, you know, a million dollar ad budget to get in a magazine to reach the 25 people you needed to read out or reach out of their 10, right? That might work, right? It was, it was such a huge change and it made me so happy to see because it allowed people to say it doesn't matter how big it matters, how much I care about whether I want to go solve it and, and I think we got a long way towards that with, you know, the bus and, and all the things that you just described. But I think that A I is going to be the, the thing that carries that the rest of the way home and really allows people to build something meaningful for them, for the audience they want to serve without having to take into account that they're gonna need to go raise millions of dollars and, and put all of this risk by again, by the way, like most of the shit fails. I, I don't want to, I don't, we can't leave that aside. It's like, well, you're taking away all these potential jobs, all those potential jobs it would have been created and then lost anyways because the start up company would have failed, right? So I think that we, we cannot take the, the failure curve out of this equation while we're examining all of this holistically, particularly while questioning the, the ethics of all this stuff.

Wil Schroter: Well, OK, so let's build on that. Um If you looked at a pitch deck, you know, uh pitching to, to invest your circa like 1999 and you looked at use of funds, the pie chart, a massive amount of that would have been in advertising and uh infrastructure, right? Uh Less so in staffing um a as a as a as a relative measure. Now, if you fast forward now you go to mid two thousands, right? Um And, and you're saying, um what's that pie chart look like? Most um post servers are going down et cetera all of a sudden uh over the years and we see this firsthand because we see tens of thousands of pitch decks. Um that pie chart now almost always looks like this. The funding sl in almost every pitch deck, the pie chart is like 80% people essentially and then 20% marketing and random shit, right? The reason I say that is because now we're looking at it going, hey, that biggest piece of the pie chart, the whole reason you're raising it all is about to get eviscerated and that is great news for everyone. So right now, if I were to try to, if, if you and I were trying to build start, let's say in the nineties, and I would say what's a reasonable amount of money that we need to raise in order to kind of get things kicked off, I would say initially, probably around $20 million right? Given what hosting was given what it costs to just build a damn web page back then, right? $20 million was pretty reasonable. I would say if we fast forward into the two thousands, even almost up until recently, because not a lot changed other than social and mobile, uh which are meaningful. Um uh I would say about 5 million. Right. Give or take. Ok. Um, with where we're at now, it's not inconceivable that we could be sub $1 million of what used to be a $20 million route. Right. Like, we need to keep a handful of people fed and we're good and we're

Ryan Rutan: good. Right. I, I think one of the really interesting things we're gonna see like another direct prediction here. But we have watched seed rounds, pre seed rounds. All of these, we've watched them just exponentially grow in size year after year after year. I think we're gonna see, I think we're gonna see that change. I think we're gonna see AAA regression to significantly smaller rounds. Um or a or a lot more companies going, you know what like bootstrapping just makes all the sense in the world. Um get to where you need to be or you can at least get a hell of a lot farther. Uh Before because again, if, if 80% 90% of what you were doing was related to uh uh staffing, then you, you take that off the table, you have so much less to raise all of a sudden, it becomes an Amex raise again, right? You can just like I will just put this shit on my credit cards, right? You can't put 20 million on a credit card, right? You can't even put a million on a credit card. You can put 2530 40,000 to get you to a reasonable point to like, imagine, imagine how much easier, faster, cheaper people are gonna get to product market fit now, right? Which is where so much of the risk is tied up. It's gonna be absolutely bananas. Sure.

Wil Schroter: So, um, going back to my, my, um, my story about, ok, comes out of the earlier variant, which is the $20 million plus variant. And it was way more than that. I, and they built a good company but, but again, they were very early in the economy. Um This idiot out of frigging Canada shows up Marcus friend. Do you remember him? Um Plenty of fish, right? And when I say I, I, I'm kidding, I actually, you know, I'm not, I'm not, I'm not knocking the guy. I loved this guy, right? Because he was one of the early um beneficiaries of, of ad words or ads sets adsense. More specifically, Marcus creates a one man show called Plenty of Fish and does something unheard of at the time. He makes it free. He makes a dating site that's free, right? And it goes bananas, right? It scales so fast. OK? He becomes a major, major competitor to places like and, and, and what I loved about this guy

Ryan Rutan: in a really short period of

Wil Schroter: time in a very short period of time. Here's what I loved about this guy and by all means, look him up, look up plenty of fish, whatever. Um He used to, I'll never forget this. Uh Back when people started blogging this game, no one goes. He used to post photos of his ad sentence checks. A as like like thumbing his nose to the hit to his competitors, right? He's like, by the way, I'm one person in a room. I have no customer support. I have no marketing team. Like he, he would brag about how little there is to his operation and then then post these massive checks that he was getting, right? Because this was also at the the advent of uh adsense as, as revenue mom, there was a time when, when like advertisers like checks just didn't show up. You didn't have magic ads showing up on your site, you got paid, you had to, you had to hire an ad team and they had to go sell all these brands, ad

Ryan Rutan: team had to go sell the ads, right? Had to collect the money, right. Yeah, all of

Wil Schroter: that. And so, um for years, he basically thumbed his nose at particularly, which is, you know, the £800 grill in that space and they eventually bought him, you know, that's part of match group now. But this is what I'm saying. He said, here's what it takes match to go to market right by running the equivalent of Super Bowl ads and everything else like that. What if I did none of that? And I was able to, to, to basically offer the same basic service which is matching two people or not. And what would that look like? Hey, that's what we're talking about. Think of how many businesses are going to get created when someone's like, hey, what if I just did that without all the costs? Like, what, what would my business look like

Ryan Rutan: without all the costs, all the complexity with all the learnings? Right? Like, even, even until a year and a half, two years ago, there were a lot you had to learn, you had to know and have some core competencies or go out and hire for them, which is the, the more common route around, you know, building the website, building the funnels and engaging with marketing, building customer service, creating the content, all of these things that can now be done when we say cheap, like it's almost inconceivable. You and I have come from the dawn of the internet and built sites for lots of money for people back in the day. Right? The fact that you can spin up a site for $15 which includes your first two months of hosting. Um And the entire site is built out. I need some modification or whatever, but like you can get that done now for absolute peanuts, right. That wouldn't have even covered a company lunch to discuss how we were going to build something back

Wil Schroter: in the day. Let's talk about what happens when we don't have a lot of capital that's required. Ok. Number one, hey, I got a crazy idea. We own our company. Imagine that. Imagine that. Think of how much ownership dilution exists, not because it's necessary, but because it's, it's necessary to, to, to raise the money, to hire all these people and again, processes and efficiencies and things like that. Um, think of how many people will own 100% of their company, you know, among their team um as, as they can and should because you actually just don't need those gobs of money. This is one

Ryan Rutan: of the things that excites me the most. II I just love the idea that we're going to see so many more stories where, where the the owners of the company, the original, the founding team, um the original equity holders still hold like 90 100% of the companies that's going to feel absolutely amazing you and I hate nothing more I think than seeing these stories where it's like, OK, founder did everything they needed to do. They grounded out 1015 years, finally sold the company holding like 2.5 to 5% of the company. It's like, come on

Wil Schroter: man, because he had to, that was the toll you had to pay, right? Because the cost structure was so high. Now think about this, if, if capital isn't as much of a challenge as it used to be, think how much more time I can spend building a product because for those of you that had gone through it, the capital raising, we help people do this all day long. You don't understand how, how, how distracting that process is and it's twofold. One is actually being on the campaign trail and actually raising the money. But what I would argue is the silent killer. It's every day where you're running out of it where you constantly have a gun to your head where, where you, you're thinking to yourself, if I don't refill the bucket, I'm out of, I'm out of business and every 18 months from now, um that is more distracting than an idiot

Ryan Rutan: that and that and the fact that we talked to this on a couple of podcasts, but I want to bring it up here. Again, it completely constrains the potential outcomes. You have to go and raise more money, you have to sell your company, you have to take it public. There's no other way to successfully escape on that path. And so I, I love the fact that not only does this reduce the burden to get started, that they will hold more of their company, that they will also still have 100 options instead of three, right? Which feels so up for it, you can fail.

Wil Schroter: And so again, if we think about the different parts of the pie chart that we were all raising for OK, infrastructure again, I'm talking servers hosting and again, that's gonna be different depending on your business. We talk a lot about tech businesses, et cetera. Uh But, but that's, that's, you know, uh for some folks that's cost of goods sold. Um, so just in time manufacturing 3d printing um helps reduce that different story. The next is marketing, right? We're performance marketing. Everyone's still gonna need a marketing budget. You're still gonna have to spend money to grow. You'd be like, ah, well, there's, there's social media and there's, there's seo yes, but as those become more viable, they get more diluted. It's kind of just that simple, right? You, you know if, if you were on social 10 years ago and you crushed it geometrically different than if you're trying to get into social now and crush you. There's so much more uh competition. Um So there's always gonna be a paid component. But again, I'm, I'm gonna stick with this pie chart. The biggest part of the pie chart like 80% of everybody's pie chart right now is staff. Now. What no one really thought about was what happens when that just kind of goes away as a massive pie, right? A slice of the pie. What back fills it profit, right? Um But again, when that biggest chunk of the pie gets reduced by say, 50% not even like, you know, the 80% nothing crazy. 50% is a massive 10% is a lot companies do massive layoffs to get to 5% just to get an idea of how big, you know, how big that, that P is when we can start reducing like that. Again, one, if, if our, if our prices hold, that means that's net profit that we can use to, to put into marketing and things like that. The second part and like what I suggested a moment ago is we can make the price cheaper, they could mark his friend right at, at um, at plenty of fish or we can make the price zero. How many things get absolutely fascinating when you can offer them for $0 right? Or damn near $0 right? When you look at something, I'm even gonna use a hard good because I think people only think about digital goods when you can sell a t-shirt that was selling for $70. Not that t-shirts have a lot of hard costs. They're, they're, they're ironically like the, the poster child for low cost, you know, high, high up. Um But, but your, your cost of delivering that is literally 60 cents because you just have so few other costs associated with it. Um Your ability to bring products to market to change how products are, are consumed, becomes geometrically different. And I, and I think this is what we're about to see on the horizon. Yeah.

Ryan Rutan: No, I, I think it's, it's almost unquestionable that we're going to start to see things that were inconceivable. To be commoditized, get closer to being commoditized that we see new models for monetization uh that didn't exist before, right? In the, in the same way that, you know, uh our buddy from Canada took advantage of the, the the adsense uh movement because it didn't exist before. All of a sudden it popped up, right? As you were talking through the the marketing components before and you know, yes, it will, you will still need a paid budget, we still need these things and yet we will see new advertising methods or or twists on advertising and marketing models that never existed before. It will likely be incredibly cheap and incredibly more effective because they won't rely on mass marketing, they will be able to to niche market at scale by connecting different people's eyes. There's all kinds of things that we can conceive that will happen and and and plenty that we can't conceive that will happen. Um that will help to level that out as well, right. So even as we reduce staff costs, there are a whole bunch of other costs like the paid components of marketing, advertising and everything else that we do that will also come down, right? I mean, just it silly example, right? But you know, even if you are still staffing people, all of a sudden your t-shirts become a lot cheaper, even that has an impact, right? So as as across the board, as goods and services become cheaper it becomes even less expensive to build something new because the support costs, ongoing costs become that much less expensive and who knows where else this goes? Right. Energy costs could become significantly cheaper. I don't want to go too far down a rabbit hole here. But these are the things that will start to happen that will impact the overall cost of building anything from a t-shirt to a business to a house.

Wil Schroter: And my, my example of a house is by making houses cheaper, more people get to have them, right? This is a really an or benefit, right? Think of how many things people don't have just because they're, they're fundamentally too, too expensive to to to deploy. Look

Ryan Rutan: man, if you make t-shirts, 60 cents, restaurants will save money by not having to print those stupid signs that say no shoes, no shirt, no shirt. This

Wil Schroter: is that is the fundamental change A I is about to bring. Um But, but here's, here's what I want to kind of wrap with and talk a little bit about um a change in mindset among start ups uh uh among the narrative, you know, which is something we, we're, we're a big part of. I would like to see a new narrative where start ups can be proud of being small, but not the way we've done it so far. And I want to talk about how Jacked up the narrative has been so far. The current narrative when, when, when you're, you're prideful of being small, it almost feels like someone's patting you on the head saying, oh, that's a door.

Ryan Rutan: It's, it's patronizing or it feels like an excuse. Right. Ho, how many times have you seen this? Right. People will talk about, you know? Oh, well, you know, we're, we're trying to keep our head count small and everybody else in the room is kind of like, man, they didn't raise enough money to actually have a proper staff, right? That's

Wil Schroter: exactly it. And so up until now, there has been this reward for big and I get it, you know, lots of people tends to mean you're making lots of money, right? And that tends to be a good thing. There's a whole bunch of other challenges that come with

Ryan Rutan: it. It tends to mean you're spending lots of money. I don't know that you're necessarily making lots of money.

Wil Schroter: It's also true. That is also true. And so I wanna see this new shift in the narrative that when we start to see people have these big 80% pie chart, you know, part of the pie chart um uh staffing uh lines, I want people to start to say what I want people to start to say what's the biggest business we can build with the fewest number of people. And again, this isn't an anti people thing. This is a pro efficiency thing. I was doing an interview the other day, uh somebody's interviewing for a job here and uh they were asking about, you know, how big we wanted the company to be, et cetera. And I said, I just, I hope you understand this. I want as few people as possible, like every person we add, adds to our inefficiency, which we've done whole podcast about. Right? Um I get to know fewer people, like actually get to know fewer people, right? It becomes more distant. Um I said, but the prob the problem I see with most founders, this is, you know, kind of explaining that the interview candidate. I said they're asking the wrong questions when it comes time to, you know, hiring somebody. Their question is who are we gonna hire? And the question they need to be asking is why, why are we hiring it? All right, but what's broken that we have to go hire

Ryan Rutan: somebody? Now, I I look forward to the day when people start to flex a metric that looks something like this. It's the ratio of like staff or, or company size or maybe just even Opex. So we get beyond just, just the staffing lines, but the ratio of Opex to value created or people serve, I think like for, for you and I, we would look at this and go like we want to help every founder on the planet, right? We want the number on the right side of that ratio to be as, as possible and we want the, the number on the left side of the ratio to be as small as possible. I'm looking forward to, to people flexing metrics like this, which show how much impact you can have with as little resource as possible. Right? So it's just a, it's a business efficiency metric. Uh but this is what I would love to see. Right? Versus well, yeah, we just, we just hired our 1000th person condolences.

Wil Schroter: Yeah. Yeah. Listen. Um I'm glad you're creating jobs for the benefit of those people, right? So I, I get it. But what that tells me is you're asking the wrong question and, and I think what we're gonna start to see is a change in, in mentality, which is so beneficial, right? Because, because there's, there's no downside to us saying let's be more, be more um efficient. Uh recently Sam Altman from, you know, uh open A I CHAT GP T uh Sam uh said publicly that there's an inside bet among the Silicon Valley elite as to when the first company hits a billion dollar valuation with one employee, meaning

Ryan Rutan: the founder, right? Not, not the founder plus an employer, just some person. Yeah. Iiii I wouldn't, I wouldn't bet against that at this point.

Wil Schroter: It kind of how could you not get there, right. Let's go back to our friend Marcus. Uh you know, at plenty of fish. He, I mean, he gets a billion dollar kind, the billion dollars sort of, isn't the point. That's an arbitrary metric. But the point is he didn't need more resources. He, he had the money to hire hundreds of people. And he was like, and I remember him that same at the time. He's like, yeah, sometimes I have to pull, pull in my girlfriend because we have, like, too many customer service requests. Right. And I just, I loved how specific that was. It

Ryan Rutan: didn't even occur to him to use all of that profit to hire someone else. Like I could easily throw a person at this, just ask my girlfriend to step over.

Wil Schroter: I would love the new Scarlet letter in these conversations among founders to be, we just had to hire like 100 people and a and just like this, this scoff of like, why, what are you guys doing wrong that you had to hire so many people? Like, like what technology are you not leveraging? Like what benefits are you not electric? And certainly from investors. I think investors are gonna start to look at this because this benefits them in so many ways. That's the thing.

Ryan Rutan: That's the thing, right? Like they're gonna audit, they're gonna wanna know, right? They're gonna say like, look uh something really strange about your pitch tech here. It looks like you're spending 80% of the money you're asking for on people.

Wil Schroter: Well, we need 50 engineers. Why? Right. What is so shitty about the first five engineers? That you needed to hire 45 more. Like, what are they doing so exponentially poorly that you needed? So more, right. Uh, so many more or like within marketing? Oh, we had 14 people on the marketing team. Why? There's whole, like parts of marketing that actually don't require humans. What did you not understand about how the market's moving that require you to hire? Hire those people? Right. These are gonna be the, the new salient questions. And I gotta tell you it's good news for everyone. It's good news for everyone because it's gonna focus everyone on spending more time focusing on what they're actually building versus the amount of time and effort in people that it takes to build it

Ryan Rutan: overthinking your start up because you're going it alone. You don't have to and honestly you shouldn't because instead you can learn directly from peers who've been in your shoes, connect with bootstrap founders and the advisors helping them win in the start community. Check out the start community at www dot start to see if it's for. You could be just the thing you need. I hope to see you inside.

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