Thinking beyond frameworks | Casey Winters (Pinterest, Eventbrite, Airbnb, Tinder, Reddit, Grubhub)

Introduction

In this section, Lenny introduces Casey and provides a brief overview of the topics they will be discussing in the podcast.

Introducing Casey Winners

• Casey is a legend in the growth and product community.

• He has worked with or advised companies like Pinterest, Reddit, Canva, Airbnb, Tinder, Thumbtack, GrubHub and many more.

• He recently returned to full-time advising and is exploring new opportunities.

Topics to be Discussed

• The zero interest rate phenomenon in product management.

• What works best when interviewing product managers.

• The impact of GPT4 on the role of product management.

• When to trust your instincts versus your team's insights.

• Different kinds of network effects and how to leverage them effectively.

Product Management Frameworks

In this section, Casey talks about his experience creating frameworks for Reforge and whether he feels responsible for the lack of risk-taking among new product managers.

Creating Frameworks for Reforge

• Casey has created frameworks for Reforge that are tools in a toolkit.

• They are not meant to be a coloring book where you stay inside the lines.

• They are meant to be pulled out when relevant.

Lack of Risk-Taking Among New Product Managers

• There is a focus on doing things "the right way" among new product managers.

• This leads to a lack of risk-taking.

• Casey wonders if he is responsible for this since he has created frameworks for Reforge.

The Zero Interest Rate Phenomenon

In this section, Casey talks about what he calls the zero interest rate phenomenon in product management and how to avoid it.

The Zero Interest Rate Phenomenon

• The zero interest rate phenomenon is when product managers are not taking enough risks.

• They are too focused on doing things "the right way" and not willing to take chances.

Avoiding the Zero Interest Rate Phenomenon

• To avoid the zero interest rate phenomenon, product managers need to be comfortable with uncertainty.

• They need to be willing to take risks and make mistakes.

• They also need to have a clear understanding of their goals and what they are trying to achieve.

Interviewing Product Managers

In this section, Casey talks about what works best when interviewing product managers.

What Works Best When Interviewing Product Managers

• Casey likes to ask open-ended questions that allow candidates to showcase their thought process.

• He also likes to ask behavioral questions that reveal how candidates have handled specific situations in the past.

• He looks for candidates who are comfortable with ambiguity and can think creatively.

Leveraging Network Effects

In this section, Casey talks about different kinds of network effects and how to leverage them effectively.

Different Kinds of Network Effects

• There are direct network effects where the value of a product increases as more people use it.

• There are also indirect network effects where the value of a product increases as complementary products or services become available.

• Finally, there are two-sided network effects where there are two distinct user groups that benefit from each other's participation.

Leveraging Network Effects Effectively

• To leverage network effects effectively, you need to understand which type of network effect your product has.

• You also need to focus on building critical mass in one user group before moving on to the next.

• Finally, you need to make sure that your product is easy to use and provides clear value to users.

Casey's Current Projects

In this section, Casey talks about his current projects and what he is working on.

Current Projects

• Casey is still advising Whatnot and Eventbrite.

• He stepped back from the CPO role at Eventbrite in October but is still working on some long-term Marketplace strategy stuff and growth strategy stuff.

• He is also on the board of a company called Beak which is like Netflix for audio in Latin America.

• He is doing some angel investing in marketplaces and "Tech debt as a service" startups.

• Finally, he is revamping the product strategy program for Reforge.

Introduction

In this section, the speaker introduces himself and expresses his willingness to help startups.

Speaker's willingness to help startups

• The speaker loves talking to startups and is willing to help if there's something he can do.

• He points out that he cannot promise anything but is always available for a chat.

Challenges of the CPO Role

In this section, the speaker talks about the challenges of being a Chief Product Officer (CPO).

The difficulty of keeping product-market fit as a CPO

• It is hard to keep product-market fit as a CPO within a company for an extended period.

• Business needs shift over time, and it becomes challenging to maintain product-market fit.

• As an executive, it is impossible to do everything perfectly, and any mistake or misstep can blow up in a major way.

The role of perception in the CPO position

• A CPO must create the perception that they care about sales, marketing, etc., before taking care of their own team.

• Perception matters because first and foremost, a CPO is expected to lead the business at that level.

Diagnosing strengths and weaknesses in your team

• A CPO should diagnose where their team's strengths and weaknesses lie without bias.

• They should lay out these strengths and weaknesses with their peers and create timelines on which they will work towards achieving goals.

Advice for Product Leaders

In this section, the speaker gives advice on how product leaders can survive in their roles.

Being a com exec first before being a product exec second

• A big change from being a product leader to being a CPO or equivalent is that you are actually a com exec first before being a product exec second.

• A product leader must show that they care about the overall business first before taking care of their own team.

Diagnosing strengths and weaknesses in your team

• A product leader should diagnose where their team's strengths and weaknesses lie without bias.

• They should lay out these strengths and weaknesses with their peers and create timelines on which they will work towards achieving goals.

The Importance of Explaining Product Management

In this section, the speaker discusses how explaining product management can help the executive team better understand the company's products and functions.

Explaining Product Management

• Explaining product management helps the executive team understand products and functions.

The Zero Interest Rate Phenomenon

In this section, the speaker talks about a phenomenon called "the zero interest rate phenomenon" that he has noticed while managing PMs and designers at Eventbrite.

The Zero Interest Rate Phenomenon

• The environment in which many product managers have come up is distorted from when they started doing this kind of work.

• There is a focus on doing things perfectly rather than taking risks.

• Many new people in the product team act like they work at Google with infinite resources and time to make everything perfect.

• Startups require PMs to wear lots of hats, make decisions under uncertainty, and use their brains.

On Best Practices and Breakfast Rituals

In this section, the speaker talks about his internal blog post called "On Best Practices and Breakfast Rituals" where he discusses how there is no framework that allows you to not use your brain in product management.

On Best Practices and Breakfast Rituals

• There is no framework that allows you to not use your brain in product management.

• Frameworks are tools in a toolkit; you pull them out when relevant. They're not a coloring book to stay inside the lines.

Interviewing Early Career PM or Managers

In this section, the speaker talks about interviewing early career PMs or managers at Whatnot and how startups require PMs to wear lots of hats and make decisions under uncertainty.

Interviewing Early Career PM or Managers

• Startups typically require PMs to wear lots of hats, make decisions under uncertainty, and use their brains.

Startups and the Zero Interest Rate Phenomenon

In this section, the speaker discusses how startups have been acting like public companies with Google margins due to the zero interest rate phenomenon. This has led to ill-preparedness in real startups or public companies with uncertainty around them.

Ill-Preparedness of Startups

• Due to funding, every company has been acting like they're Google with Google margins.

• This has resulted in ill-preparedness for real startups or even public companies with uncertainty around them.

• During interviews, candidates struggle to solve problems creatively without data or customer feedback.

• The speaker emphasizes the importance of using one's brain instead of following a process decided by someone else.

The Zero Interest Rate Phenomenon

• The zero interest rate phenomenon is when interest rates are zero and everyone looks successful and is killing it.

• It allowed every startup to operate like a public company with billions of dollars.

• However, this will change over the next five years, taking us back to what product management used to be like.

• Research teams have been laid off as companies realize they don't need all these resources.

Advice for Product Managers

• Go to companies where you can learn quickly and try things out.

• Learn frameworks but understand that your job is not just to follow processes but also figure out how to add value for customers that translates into value for the business.

• Reorient your North Star if you've gotten away from adding value for customers.

• Encourage your team to ship and get feedback from users.

Investing in Research

• Invest in research depending on the type of job you have and the types of customers you have.

• For less sophisticated customers, try things, measure their impact, and only bring in research when the impact seems confusing.

Research and Product Management

In this section, the speaker discusses the importance of research in product management. They explain how research can help identify problems and solutions, and how it can be used to determine where to focus resources.

The Importance of Research in Product Management

• Research is important in product management because it helps identify problems and solutions.

• Companies with more sophisticated customers or small businesses require a more nuanced approach to research.

• Eventbrite focused on research for B2B side where problems were big but not well defined enough or where they didn't have the right solution yet.

• Researchers should focus on high leverage areas with big problems that are not well understood or where there is uncertainty about whether the solution will work.

Interviewing Product Managers

In this section, the speaker talks about their approach to interviewing product managers. They discuss why they don't ask about work history and instead give real scenarios to see how candidates would approach them.

Interviewing Product Managers

• The speaker's approach to interviewing PMs involves giving them real scenarios that they would encounter in the role.

• They want to hear how candidates would approach these scenarios and if they can come up with reasonable ideas without analyst support or research.

• Red flags during interviews include candidates who cannot come up with reasonable ideas or who do not enjoy practicing scenarios related to the job.

The Impact of Time and Metrics on Product Management

In this section, Casey Winters and his guest discuss the importance of considering the impact of time and metrics when making product management decisions. They also touch on the potential future role of AI in product management.

Importance of Considering Time and Metrics

• Not factoring in the amount of time it will take to see the impact on users or business is not a good sign.

• It's important to think more holistically about the types of metrics expected to improve versus track to ensure they haven't gone down.

Future Role of AI in Product Management

• If someone thinks that a PM job is just filling in frameworks and getting automatic promotions, then they may be replaced by AI.

• However, real PM jobs are less likely to get replaced over time because they require subject matter expertise, trading off different things, and making good decisions for the company and customers.

• At this point, using AI as a PM tool should be approached with caution since it's trained on sounding smart rather than always being smart.

• GPT4 can be useful for tedious work that may not be a PM's specialty, such as modeling or integrating with other tools.

Founder Intuition vs Team Expertise

In this section, Casey Winters and his guest discuss how much a founder should trust their gut versus relying on team expertise when making product decisions.

Balancing Founder Intuition and Team Expertise

• There's often a discussion about how much founders should trust their gut versus relying on team expertise when making product decisions.

• Founders need to balance their intuition with data-driven insights from their team members who have subject matter expertise.

• It's important for founders to listen to feedback from their team members but also make sure that everyone is aligned towards achieving the same goals.

• Founders should also be open to changing their minds based on new information and insights from their team members.

Founder Intuition vs Team Expertise

In this section, the speaker discusses the importance of founder intuition and how it can be difficult to explain to others. They also talk about the common mistake of delegating too quickly and not directing new hires effectively.

Founder Intuition

• Founders have an intuition about their customers, product, and business that is hard to explain.

• This intuition may even be subconscious.

• When hiring new people, founders should direct them until they show they really understand the business.

• Founders should not delegate too quickly because none of these people know the business as well as you do.

Delegating Too Quickly

• Many founders put new leaders in a delegate bucket too quickly.

• Founders assume that these leaders know more than them when in reality, founders know the right answer.

• Founders need to notice when their founder intuition has been usurped by team expertise or has ebbed in effectiveness over time.

Signals for Delegation

In this section, the speaker talks about how team expertise becomes more relevant over time as a company scales. They discuss different phases of a startup and when delegation becomes necessary.

Phases of a Startup

• Everything goes through the founder during product-market fit.

• When scaling a company after finding product-market fit, founders run into the classic problem: what got you here won't get you there.

• The reason for this is that there are more things going on that all reach the founder in some way but it means more breadth and less depth on any particular issue.

• Over time, team expertise goes up if you're lucky enough to scale a company.

Signals for Delegation

• Employees should proactively signal both directions: "Hey I need direction from you" or "Hey I got it from here trust me on this one."

• Founders should notice when their founder intuition has been usurped by team expertise or has ebbed in effectiveness over time.

• The reverse is true for people you hire. You're able to get really deep into things that maybe you were really deep into two years ago, but you just can't stay deep in anymore.

Sales Strategy and Founder's Hubris

In this section, the speaker discusses how founders can sometimes hinder their own company's growth by not delegating tasks to employees. They also touch on how some founders believe they have all the answers and are reluctant to trust others.

Founders' Reluctance to Delegate

• Founders who don't delegate tasks bottleneck themselves and hinder their company's growth.

• Many founders believe they have all the answers and are reluctant to trust others.

• Some founders prioritize building cool things over focusing on what customers want.

Pushing Back Against Founders' Hubris

• Understand that it is the founder's company, not yours.

• Find ways to be contrarian and prove your point through experiments or feedback from trusted advisors.

• Different founders respond to different forms of feedback, so figure out what influences them and build a case accordingly.

• If your point is refuted despite building a strong case, you may need to disagree and commit or find a new company/start your own.

Building Credibility as an Employee

In this section, the speaker shares his experience of joining Pinterest after working at GrubHub. He talks about how he built credibility with his colleagues by seeking advice from other CEOs and operators when his proposals were initially rejected.

Building Credibility

• Seek advice from respected CEOs or operators if your proposals are initially rejected.

• Even if someone else says what you're saying, it can still be more convincing than if you say it yourself.

• Disagree and commit or find a new company/start your own if your proposals are consistently rejected.

Example: GrubHub's Delivery Driver App

• GrubHub initially proposed building an app for delivery drivers, but the founder disagreed.

• Domino's was the first to have done this at the time, and GrubHub missed out on an opportunity.

The Importance of Technology in the Food Delivery Industry

In this section, the speaker discusses how technology played a crucial role in the success of their food delivery business. They also talk about how they were able to get drivers to start using their app.

Leveraging Restaurant Authority to Get Drivers to Adopt

• The company was able to push restaurant customers effectively by offering more orders and prominence in the UI.

• This strategy helped them get drivers to adopt their app.

Understanding Network Effects and Marketplaces

In this section, the speaker explains what network effects are and the different types that exist. They also discuss how social networks become cross-side or data network effect businesses over time.

Types of Network Effects

• Direct network effects occur when every additional user makes the product better for all existing users.

• Cross-side network effects occur when adding an additional user on one side of the network makes it more valuable for all types of users on the other side of the network.

• Data network effects occur when the quality or cost of something improves as more data is collected through a product.

Social Networks Becoming Cross-Side or Data Network Effect Businesses Over Time

• All social networks have to become either cross-side or data at Network effect businesses over time.

• Pure communication tools like messenger iMessage WhatsApp are direct number effect businesses but there isn't a clear path to make money with those.

• If you want to sell ads, you're becoming a cross-site network effect business, and creators versus consumers create a cross-site network effect business if you want to get

Network Effects and Marketplace Companies

In this section, the speaker discusses the importance of network effects for marketplace companies and provides examples of successful companies that have leveraged network effects.

Examples of Successful Companies with Network Effects

• Zillow: The real estate listing site created a sticky product by providing real-time pricing information on the value of homes, connecting buyers and sellers.

• GrubHub: Had strong network effects due to its comprehensive restaurant listings. However, it was disrupted by competitors like DoorDash who expanded selection through heavily managed marketplaces.

Disruption of GrubHub's Network Effects

• Cross-site network effects can be disrupted when a competitor dramatically expands selection.

• DoorDash and Postmates rose to prominence by building delivery networks, which allowed them to grow without much competition in less dense suburbs.

• GrubHub had an asset-light marketplace model where restaurants did their own delivery through their own drivers. Competitors like DoorDash were negative margin businesses as they hired drivers and managed logistics themselves.

• DoorDash delivered from restaurants they didn't have agreements with, causing controversy and lawsuits.

GrubHub vs Doordash: A Case Study

This section discusses the competition between GrubHub and Doordash, and how Doordash eventually took over the market.

The Rise of Negative Margin Delivery Services

• GrubHub went public after raising $80 million in venture capital and $100 million in an IPO, telling investors it's an extremely profitable high-growth asset light marketplace.

• However, negative margin delivery services like Doordash kept raising more money every six months from private markets. They used that money to lock hook up agreements with national chains which GrubHub never worked with.

• All this is happening and then the pandemic hits and all those negative margins turn positive for doordash for the first time.

GrubHub's Response

• Grubhub tried to copy the approaches of doordash and Postmates but they were kind of forced to do so.

• Armchair thinkers wonder why GrubHub let doordash take over the market that they built. But it would have been extremely hard for them to come out on top here.

• It would have seemed pretty risky had GrubHub acquired Doordash multiple times. Investors probably would have hated it but it would have been their Netflix moment where you know Netflix bet it all on streaming and they'd BET right.

Lessons Learned

• During existential threats, assume that disruptors are right and base your strategy on them playing an optimal game. Whereas I think you know GrubHub assumed the disruptor was wrong and that it would all play out eventually in their favor.

• Don't underestimate someone that's trying to do something that's going to eat your lunch eventually even though it feels like a terrible business model. If the market is rewarding it, the market will probably find a way to make it profitable.

• When everyone's finding a more efficient Network effect for demand on the marketplace side, you probably need to copy that as soon as possible.

Competing with Doordash and Uber

In this section, the speakers discuss the challenges of competing with companies like Doordash and Uber in the current climate where raising large amounts of money is difficult. They also explore potential strategies for disrupting these companies.

Strategies for Competing

• Money was freely available to companies like Doordash and Uber in the past, but this is no longer a replicable strategy.

• To compete with these companies, new approaches must be taken that focus on different angles.

• Building disruptors that focus on the pickup use case could be a potential strategy since it's an area where Doordash cannot easily compete.

• Startups are launching white label delivery services for restaurants as a way to avoid relying on Doordash, but they may struggle to build network effects on the demand side.

Adding a Marketplace or SAS Tool

In this section, the speakers discuss whether adding a marketplace or SAS tool can be successful for startups. They examine examples of companies that have attempted both strategies.

Examples of Success and Failure

• OpenTable is often cited as an example of a company that successfully added both a SAS tool and marketplace. However, its performance has been underwhelming compared to other marketplaces.

• OpenTable promised both a SAS tool to help restaurants manage reservations and additional reservations to fill up their restaurant.

• Restaurants are low-margin businesses incentivized to pump out as much food as possible. Delivery orders are pure margins since chefs are already there and rent is being paid.

Building a Marketplace vs. Adding a SaaS Tool

In this section, the speaker discusses the challenges of building a marketplace versus adding a SaaS tool to an existing business model.

Marketplaces vs. SaaS Tools

• The marketplace model unlocks cross-side network effects that make it easier to grow.

• Eventbrite drives 25% of ticket sales itself and needs to be closer to 50% to unlock real cross-side network effects.

• Fair is an example of a wholesale marketplace between independent retailers and brands that has unlocked this model in reverse.

• It's generally more successful for marketplaces to add a SaaS tool than for SaaS businesses to add a marketplace due to the need for direct relationships with customers and new skill sets required.

Challenges of Adding a Marketplace

• Marketplaces are incredibly hard, whether you start with them or add them later.

• If you're trying to add a marketplace, it's going to be very hard and will take time to de-risk the hardest part of that strategy.

Successful Examples

• Square, Substack, Patreon, and Eventbrite are examples of successful SaaS businesses that deal with both customers and their customers' customers.

Building a Successful Marketplace

In this section, the speakers discuss the key factors that contribute to building a successful marketplace.

Factors for Success

• Obsessed businesses and customers who transact with more than one supplier are essential for success.

• Marketplaces win on selection and standardization. The need for discovery is not always necessary.

• A successful marketplace drives demand to supply. If the primary reason suppliers sign up is for tooling or payments, it's not really a marketplace.

• Patreon and GoFundMe wanted to be marketplaces but found out that people weren't looking for more artists or causes to support. Substack has been able to pull off a network effect by abstracting away from newsletters and focusing on articles relevant to readers' interests.

Is Substack a Marketplace?

In this section, the speakers discuss whether Substack can be considered a marketplace.

Defining a Marketplace

• A marketplace is defined as driving demand to supply. Substack has been able to create a network effect through its recommendations feature and onboarding process.

• Twitter was an early hacky form of creating interest in articles relevant to readers' interests, but it wasn't built for that purpose.

• The sub stack reader allows users to subscribe easily and receive articles relevant to their interests.

Network Effect

• Eighty percent of new sign-ups come from Substack's network effect through its recommendations feature and onboarding process.

• Being there first helps with recommendations, but over time more people start to recommend you.

• Substack has released a stat that 40% of their new users are coming from recommendations or new signups.

Conclusion

In this section, the speakers conclude their discussion on building successful marketplaces and whether Substack can be considered a marketplace.

• The speakers were impressed with what Substack has built and its execution. While it may not fit the traditional definition of a marketplace, it has been able to create a network effect through its recommendations feature and onboarding process.

Why Consumer Subscription Startups are Hard to Build

In this section, the speaker discusses why consumer subscription startups are difficult to build into thriving businesses.

B2B SAS vs. Consumer Subscription

• B2B SAS is more predictable in terms of revenue and net dollar retention.

• Consumers are less predictable and have worse retention than businesses.

• Consumer subscription lacks net dollar retention characteristics, meaning that if a user retains paying you in year two, you probably make the same amount as you made from them in year one.

• Annual attention needs to be north of 60%, perhaps even 70% for consumer subscription startups.

Examples of Successful Consumer Subscription Startups

• Netflix, Amazon Prime, Spotify, and Duolingo have been able to achieve high annual attention rates at scale.

• These companies achieved success through massive op-x and economies of scale or through a network effect or some other bespoke growth loop that's not easy to replicate.

The Default Path: Paid Acquisition

• Paid acquisition tends to get worse as you scale because you target the best customers first. As you expand, every metric gets worse until it's no longer profitable.

• Network effects allow your product to get better or faster than the customers you target get worse normally through increased selection.

Retention Point

In this section, the speaker talks about how important retention is for consumer subscription startups.

Importance of Retention

• High annual attention rates are necessary for consumer subscription startups.

• Founders need to learn when retention dips and when they can no longer profitably acquire users.

• Blue Apron is an example of a company that raised $300 million in an IPO that valued it at $2 billion but is now worth only $50 million on the New York Stock Exchange due to poor retention.

B2C Subscription Business Model

In this section, the speaker discusses the challenges of building a successful B2C subscription business model and suggests alternative approaches to consider.

Challenges of B2C Subscription Business Model

• Retaining customers is crucial for success, but it requires significant effort and resources.

• Companies like Spotify, Netflix, and Amazon spend a lot of money to retain customers, making it difficult for startups to replicate their success.

• Many successful B2C subscription apps like Grammarly, Duolingo, and NuMe remain small and efficient for a long time before scaling up.

• Calm remains small with only 10 employees while Headspace has hundreds of employees. Calm never lost money which allowed them to pivot easily during changes in the market.

Alternative Approaches

• Pivot away from paid acquisition on top of freemium models as it is not sustainable. Instead, focus on building organic growth loops or network effects into the business model.

• Make the product social so that people bring in other people or build supply-side incentives into the content or education being offered.

Recommended Books and TV Shows

In this section, the speaker shares some book recommendations and favorite TV shows.

Book Recommendations

• "The Goal" by Eliyahu M. Goldratt

• "Thinking Fast and Slow" by Daniel Kahneman

• "Profit from the Core" by Chris Zook

Favorite TV Shows/Movies/Games

• "Party Down"

• "The Last of Us"

• "Kicking and Screaming"

Designating a Driver on Cross-Functional Teams

In this section, Casey and Marty discuss the importance of having a designated driver on cross-functional teams to ensure that projects are driven forward efficiently.

Importance of Designating a Driver

• Having a designated driver on cross-functional teams helps identify when someone is playing rank.

• Once the driver makes a decision, there is no escalation path. Disagreements must be resolved within the team.

• This approach allows for faster decision-making and learning from mistakes.

What Casey is Listening To

In this section, Casey shares some of his favorite music with Marty.

Music Recommendations

• Colella's second album Raven

• Orbital's new album Optimal Delusion

• De La Soul's classic album Stakes Is High (recently released on Spotify)

Conclusion and Contact Information

In this section, Marty thanks Casey for being on the show and provides information about where listeners can find him online.

Contact Information

• Casey's blog: accidental.com

• Twitter handle: @onecaseman

• Encourages listeners to pay it forward and help their companies build better products and businesses.