David Rosenthal is a general partner at Wave Capital and co-host of The Acquired Podcast.
For the entire 20th Century, you’d be hard pressed to find a better business than an American newspaper — Warren Buffett famously described them as “franchises” — and no American newspaper stood taller than the New York Times. Controlled by a single family bound by a legal oath “to maintain the editorial independence and integrity of The New York Times and to continue it as an independent newspaper, entirely fearless, free of ulterior influence and unselfishly devoted to the public welfare”, the Times served as the paper of record for generations of Americans and people around the world. But no good thing lasts forever, and the dawn of the 21st Century saw both the Times and this once-mighty industry devastated by the dual disruptive forces of the internet and the 2008 financial crisis. And yet by 2021, The Times, essentially alone of its former peers, has reemerged from the American newspaper wreckage and transformed itself into a thriving digital business with an order of magnitude more subscribers than its print heyday. Curious how it all happened? We dive into 170 years of history to find out! If you love Acquired and want more, join our LP Community for access to over 50 LP-only episodes, monthly Zoom calls, and live access for big events like emergency pods and book club discussions with authors. We can't wait to see you there. Join here at: https://acquired.fm/lp/   Sponsors: Thanks to Tiny for being our presenting sponsor for all of Acquired Season 8. Tiny is building the "Berkshire Hathaway of the internet" — if you own a wonderful internet business that you want to sell, or know someone who does, you should get in touch with them. Unlike traditional buyers, they commit to quick, simple diligence, a 30-day or less process, and will leave your business to do its thing for the long term. You can learn more about Tiny here: http://bit.ly/acquiredtiny Thank you as well to Vouch and to Capchase. You can learn more about them at: https://bit.ly/acquired-vouch http://bit.ly/acquiredcapchase   The New York Times Company Playbook:(also available on our website at https://www.acquired.fm/episodes/the-new-york-times-company ) 1. When you find yourself sitting in front of a big approaching demand wave... ride it!! The New York (Daily) Times was founded during the newspaper boom of the 1850s, and similarly Adolph Ochs took over the local Chattanooga paper at the start of that city’s mining boom. The NYT made huge investments in its reporting during the two World Wars as the public’s appetite for news exploded, while its rivals missed the ball worrying over preserving advertising space. Likewise NYT launched The Daily (which would become the biggest podcast in the world) immediately following Trump’s inauguration in early 2017. Arguably NYT’s biggest business mistake was missing the cable wave -- which Rupert Murdoch leveraged brilliantly to build Fox News into the most valuable news media franchise in the world. 2. Where there’s an entrepreneurial will, there’s an entrepreneurial way. Adolph Ochs bought the Chattanooga Times with $250 and sellers’ notes, and then acquired The New York Times out of bankruptcy with no personal money down and $100k of real estate debt. And turned them both into successes on a level no one (even himself at times) believed possible. 3. Recurring Acquired theme: the media business is still the second-best business of all time, behind technology. Media’s ability to generate dual revenue streams (advertising and subscription) from the same content product generates enormous leverage on investment, AND most of those costs are fixed vs. variable (especially in a digital environment). 4. This is why “content is king” has always been true in the media industry. NYT’s version of this strategy has always been to invest more in high-quality journalism than any of its peers. It was true in 1896 when Ochs took over, true during the World Wars and the Pentagon Papers, and perhaps has never been more true than today when NYT employs 1,700 journalists around the world and pays them an average of >2x the rest of the industry. 5. That said, distribution is critical as well. To build a world-class media organization you must be great at both content AND distribution. In the old media landscape, NYT built great distribution through its printing and delivery operations, as well as savvy investments like the Index which led to libraries and researchers across the country relying on the Times as the “paper of record”. However in today’s media landscape, the task of building great distribution falls on the newsroom and journalists themselves. The job is no longer finished once you hit publish -- reporters and editors must own the responsibility of getting their work in front of readers via social media and shareable story elements.   Links: The 2014 NYT Innovation Report: https://archive.org/details/pdfy-59s-4-I2qSvG6MnA/mode/2up Mine Safety Disclosures’ NYT presentation: https://minesafetydisclosures.com/blog/newyorktimes   Carve Outs: Ben: Titan by Ron Chernow: https://www.amazon.com/Titan-Life-John-Rockefeller-Sr-ebook/dp/B000XUDGHG Iteratively: https://iterative.ly David: Sabaa Tahir’s Ember in the Ashes series: https://www.amazon.com/Ember-Ashes-3-Book/dp/B074VDZB17   Episode Sources: http://www.internethistorypodcast.com/2015/10/martin-nisenholtz-on-bringing-the-new-york-times-online/ https://archive.nytimes.com/www.nytimes.com/books/99/09/19/daily/092299tifft-book-review.html?module=inline https://archive.nytimes.com/www.nytimes.com/learning/general/onthisday/bday/0312.html https://archive.org/details/pdfy-59s-4-I2qSvG6MnA/mode/2up https://archives.cjr.org/cover_story/sulzberger_at_the_barricades.php https://en.wikipedia.org/wiki/Adolph_Ochs https://en.wikipedia.org/wiki/Arthur_Hays_Sulzberger https://en.wikipedia.org/wiki/Battle_of_Fort_Sumter https://en.wikipedia.org/wiki/Daniel_Ellsberg https://en.wikipedia.org/wiki/Dotdash https://en.wikipedia.org/wiki/Edwin_D._Morgan https://en.wikipedia.org/wiki/George_Jones_(publisher) https://en.wikipedia.org/wiki/Henry_Jarvis_Raymond https://en.wikipedia.org/wiki/Iphigene_Ochs_Sulzberger https://en.wikipedia.org/wiki/List_of_assets_owned_by_The_New_York_Times_Company#Television_stations https://en.wikipedia.org/wiki/List_of_The_New_York_Times_employees https://en.wikipedia.org/wiki/Martin_Nisenholtz https://en.wikipedia.org/wiki/The_New_York_Times https://en.wikipedia.org/wiki/The_New_York_Times_Building https://en.wikipedia.org/wiki/The_New_York_Times_Company https://en.wikipedia.org/wiki/Yellow_journalism https://fintel.io/so/us/nyt https://media.foxcorporation.com/wp-content/uploads/prod/2019/09/18223214/Fox-Annual-Report-2019_Mid.pdf https://minesafetydisclosures.com/blog/newyorktimes https://nymag.com/intelligencer/2015/08/new-york-times-heirs.html https://nymag.com/news/features/40647/index4.html https://nymag.com/news/media/51015/ https://nytco-assets.nytimes.com/2021/02/Press-Release-12.27.2020-Final-for-posting.pdf https://stratechery.com/2020/an-interview-with-buzzfeed-ceo-jonah-peretti/?utm_source=Memberful&utm_campaign=f14650dd37-daily_update_2020_11_24&utm_medium=email&utm_term=0_d4c7fece27-f14650dd37-110888309 https://www.amazon.com/dp/B0058Z4NOQ/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1 https://www.amazon.com/gp/product/0316836311/ref=ppx_yo_dt_b_asin_title_o04_s00?ie=UTF8&psc=1 https://www.arcgis.com/apps/Cascade/index.html?appid=86354f1b322a4ec2a548e58ac3e83d49 https://www.bostonglobe.com/business/2012/05/11/new-york-times-sells-its-remaining-stake-boston-red-sox/ey4kwU4m6Xn2PYfcblrMcL/story.html https://www.enwoven.com/collections/view/1277/timeline https://www.fool.com/earnings/call-transcripts/2021/02/04/new-york-times-co-nyt-q4-2020-earnings-call-transc/ https://www.forbes.com/sites/jonathanberr/2020/09/30/failing-new-york-times-stock-is-on-a-tear/?sh=57459cfd6247 https://www.library.illinois.edu/hpnl/tutorials/antebellum-newspapers-city/ https://www.macrotrends.net/stocks/charts/NYT/new-york-times/revenuehttps://www.presscouncil.org.au/uploads/52321/ufiles/The_New_York_Times_Innovation_Report_-_March_2014.pdf https://www.npr.org/sections/codeswitch/2014/05/15/312850571/a-complicated-first-a-black-editor-takes-the-helm-at-the-gray-lady https://www.nytco.com/company/history/our-history/ https://www.nytco.com/person/a-g-sulzberger/ https://www.nytco.com/person/joseph-kahn/ https://www.nytco.com/person/kathleen-kingsbury/ https://www.nytco.com/person/meredith-kopit-levien/ https://www.nytimes.com/2004/04/25/weekinreview/the-public-editor-paper-of-record-no-way-no-reason-no-thanks.html https://www.nytimes.com/2009/01/20/business/media/20times.html https://www.nytimes.com/2012/10/02/opinion/nocera-how-punch-protected-the-times.html https://www.nytimes.com/2016/09/17/business/media/new-york-times-reinstates-managing-editor-role-appoints-joseph-kahn.html https://www.nytimes.com/2018/01/22/reader-center/ag-sulzberger-publisher-reader-questions.html https://www.nytimes.com/2018/09/20/insider/times-womens-section-female-reporters.html https://www.nytimes.com/2020/01/28/business/media/ben-smith-buzzfeed-new-york-times.html https://www.nytimes.com/2020/03/01/business/media/ben-smith-journalism-news-publishers-local.html https://www.nytimes.com/interactive/2018/opinion/editorialboard.htmlhttps://www.nytco.com/person/dean-baquet/ https://www.quora.com/Why-is-The-New-York-Times-called-the-gray-lady https://www.scribd.com/doc/224608514/The-Full-New-York-Times-Innovation-Report?campaign=SkimbitLtd&ad_group=1025X1162200X86792d9062cfc602c27b4a78b6a20b8f&keyword=660149026&source=hp_affiliate&medium=affiliate https://www.statista.com/statistics/315041/new-york-times-company-digital-subscribers/ https://www.wsj.com/articles/american-history-and-the-new-york-times-11602093219 https://www.wsj.com/articles/SB123660214438270341 https://www.youtube.com/watch?v=WVH0Yz0OMT0
We cover Sequoia Capital a lot on this show. Not only across our now four(!) dedicated episodes, but across a stunning nearly 50% of recent season companies where Sequoia was a primary or only investor — the most of any venture firm by an enormous margin. Today in this very special episode, we dive into the principles that have led to the firm's 49 years of unparalleled success in venture, and the playbook behind how they identify markets and companies that create outcomes worthy of the firm's namesake tree. If you love Acquired and want more, join our LP Community for access to over 50 LP-only episodes, monthly Zoom calls, and live access for big events like emergency pods and book club discussions with authors. We can't wait to see you there. Join here at: https://acquired.fm/lp/ Sponsors: Thanks to MITIMCo for being our presenting sponsor for this special episode. They are truly some of the best and most well-known investors in the LP communit, and their investment performance supports MIT's cutting-edge research, and world-class education. If you or someone you know is starting a fund or recently launched, get in touch with them at: http://bit.ly/acquiredmitimco , and tell them that you heard about MITIMCo on Acquired. Thank you as well to Masterworks and to Perkins Coie. You can learn more about them at: http://bit.ly/acquiredmasterworks (use code “Acquired” to skip the waitlist) http://bit.ly/acquiredperkins The Sequoia Capital Playbook: (also available on our website at https://www.acquired.fm/episodes/special-sequoia-capitals-investment-playbook-with-alfred-lin ) 1. Bring a prepared mind. Founders (as they should) typically think more about solving a problem in the world, and less about the market context around what they're doing. Sequoia has always focused on the market — which allows them to bring a prepared mind to conversations with founders both pre and post investment. Great partnerships and great investments lie at the intersection of these two perspectives. Focusing on the market takes many forms at Sequoia. It includes building and maintaining market landscapes, constantly looking for white spaces, and convening quarterly "blue sky" sessions within the firm. 2. The two questions that matter are "Why now?" and "Who cares?". Early-stage is different from other forms of investing. As Don would say, it's predicated on investing in markets undergoing significant change: today's solutions are wrong for tomorrow. A good answer to "why now" upends the Warren Buffet quote about reputations of businesses with bad economics surviving intact. For example, DoorDash and Instacart had great “why now's” (ability to access a whole new class of labor through mobile devices), whereas Webvan (also a Sequoia investment) did not. Similarly, the key to evaluating market size in the context of early-stage venture is to focus on the opportunity size tomorrow, not today. "Who cares" is a great lens to predict and distill this: if this new solution were widely known and available who (how many people/customers, what segments, with what buying power) will care (how much will it improve their lives or businesses)? 3. The goal is not buying low and selling high. The goal is compounding capital. In a compounding environment, gains from the next few years will always dwarf all cumulative gains from years prior. The goal is to invest in companies that are able to become compounders, help them do so, and enjoy the returns as long as possible. Identifying compounding (and whether it will continue) is hard to get right. The question Sequoia asks is whether the future for a given market, company or investment looks brighter than today. When the answer is yes: 💎🙌 4. Venture is a humbling business. You can make money even if you get the investment thesis wrong, lose money even if you get the investment thesis right, and you realize your losses many years before your gains. (Alfred has been at Sequoia for over 10 years and only just had his first two IPOs: Airbnb and DoorDash.) To succeed in venture over the long run you need all three of high IQ, high EQ, and hustle. (We would also add high patience to the list!) What you don't need are specific qualifications: Michael Moritz was a journalist, Roelof Botha was an actuary, Don and Doug were sales guys and Alfred was a COO. Greatness can come from anywhere. There will always be too much capital chasing too few good deals. It's true today, it was true when Alfred started 10 years ago, and it was true when Michael Moritz started 20 years before that. But the winning companies will always generate outsized returns by using that capital to their unfair advantage. Your job as a VC is very simple, but devilishly hard: invest in those companies. Links: Our two-part Sequoia history: Part I: https://www.acquired.fm/episodes/sequoia-capital-part-1 Part II: https://www.acquired.fm/episodes/sequoia-capital-part-ii-with-doug-leone Don Valentine's talk at Stanford GSB: https://www.youtube.com/watch?v=nKN-abRJMEw&t=2555s Our conversation about Sequoia's Black Swan Memo with Roelof Botha: https://www.acquired.fm/episodes/sequoias-black-swan-memo
We had to do it. After 12 years and 3,000,000x appreciation, we kick off Season 8 with the best investment of all-time and our biggest episode ever: Bitcoin. From the first bitcoin transaction of 10k for two Papa John's pizzas (worth about $350m today!!) to $40k+ BTC and maybe the moon beyond, we cover the whole crazy, improbable journey of how a single 8-page PDF document changed the world of money — and perhaps the world itself — forever. If you love Acquired and want more, join our LP Community for access to over 50 LP-only episodes, monthly Zoom calls, and live access for big events like emergency pods and book club discussions with authors. We can't wait to see you there. Join here at: https://acquired.fm/lp/ Sponsors: Thanks to Tiny for being our presenting sponsor for all of Acquired Season 8. Tiny is building the "Berkshire Hathaway of the internet" — if you own a wonderful internet business that you want to sell, or know someone who does, you should get in touch with them. Unlike traditional buyers, they commit to quick, simple diligence, a 30-day or less process, and will leave your business to do its thing for the long term. You can learn more about Tiny here: http://bit.ly/acquiredtiny Thank you as well to Vouch and to Capchase. You can learn more about them at: https://bit.ly/acquired-vouch http://bit.ly/acquiredcapchase The Bitcoin Playbook: (also available on our website at https://www.acquired.fm/episodes/bitcoin ) 1. Technological paradigm shifts are ideal opportunities for attacking incumbents. The traditional finance system worked fantastically well for 500 years, but it wasn't built for the internet. The fact that sharing your bank account or credit card number is required in order to transact, but there's no really robust way to protect against fraud when doing so, provided the perfect seam for a new entrant. Bitcoin and its creators saw this shortcoming and created a new form of money that worked like email. 2. In the early days of a network-effect system, usage matters more than use-cases. Because the value of a network grows as a function of Metcalfe's Law (value = # of engaged participants squared), in the early days simply growing the number of engaged participants matters more than the specifics of what those participants are actually doing. As the network's value grows, it will become attractive to successively more groups of users and use cases. Bitcoin started as the domain of researchers and fringe libertarians, then illicit transactions (Silk Road), then speculation (the ICO boom) before finally reaching adoption by the mainstream investment community. Each wave built enough monetary value in the network to make it attractive to the next set of users. Similarly Facebook went from sharing photos of attractive undergrads to how billions communicate, and Airbnb went from ratty airbeds to ~10x larger than any hotel chain, all within a few short years. 3. Distributing network value out to its participants creates large incentives for adoption. Rewarding miners with bitcoin itself created a huge incentive for participants to join and stay in the Bitcoin network. Although this dynamic got a bad rap during the ICO bubble when it was overused and overpromised by grifters and scammers, it remains a powerful strategy and will likely be used more going forward. Perhaps most excitingly, this incentive unlocks massive new potential for open-source software development: people who work on open-source software (or provide other functions) can now receive direct value for their contributions, without being employed in any traditional sense. 4. Just HODL, baby. (aka let your winners run) You can get rich quickly by getting in early on a winning investment. But you can only get really rich by holding a compounding asset for an extended period of time. Sequoia learned this lesson painfully with its Apple investment in the 1970's: selling its entire position for just a ~$6m profit within a few years. Similarly, anyone who bought 1,000 bitcoin for $10 a piece in 2012 could have sold them for $1m four years later in 2016. But four years on from that, they're now worth $35 million. If you continue to believe Bitcoin has a bright longterm future (which, to be fair, you may not!), what could they be worth in 2024? 5. We're only just realizing the implications of digital scarcity. For its entire existence before Bitcoin, computing and the internet was all about turning scarcity into abundance. (via infinitely replicable + easily distributable software and other digital goods) For the first time in history, Bitcoin and its underlying blockchain have introduced the opposite: scarce, non-replicable digital assets. Native digital currency (Bitcoin) and smart contracts (Ethereum) are the first big outcomes of this advancement, but there may be many more seismic shifts to come. Links: Satoshi's Whitepaper: https://www.bitcoin.com/bitcoin.pdf Matt Huang's "Bitcoin for the Open-Minded Skeptic": https://www.paradigm.xyz/Bitcoin_For_The_Open_Minded_Skeptic.pdf Nellie Bowles's "Everyone Is Getting Hilariously Rich and You’re Not": https://www.nytimes.com/2018/01/13/style/bitcoin-millionaires.html Square’s $50m investment in BTC: https://images.ctfassets.net/2d5q1td6cyxq/5sXNrlEh2mEnTvvhgtYOm2/737bcfdc15e2a1c3cbd9b9451710ce54/Square_Inc._Bitcoin_Investment_Whitepaper.pdf Episode Sources: Full list of episode sources available here: https://docs.google.com/document/d/16QCDNm2qzG3Bn5h1j1KXisxL_JGT7egDx7czX9ThHLY/edit?usp=sharing 
As regular listeners know, we typically cover some of the biggest companies who often receive the most media attention (see Airbnb and DoorDash). But today's episode is a little different. In our conversation with Courtland Allen of Indie Hackers, the largest community of startup founders, we dive into the stories of underdogs. What happens when there are millions of people doing small business entrepreneurship? How does anyone having access to the globally addressable market of 3 billion internet users open the door for the niche-est of products? We tell the story of Courtland’s own “Indie Hacker” journey, how he came to found Indie Hackers itself, and the lessons learned along the way.   If you want more more Acquired and the tools + resources to become the best founder, operator or investor you can be, join our LP Program for access to our LP Show, the LP community on Slack and Zoom, and our live Book Club discussions with top authors. Join here at: https://acquired.fm/lp/   Sponsors:  This episode is supported by Teamistry, a great new podcast from Atlassian that tells the stories of teams who work together in new and unexpected ways to achieve remarkable things. It's one of our best new podcast discoveries in 2020 and we think Acquired listeners are going to love it. Our thanks to Teamistry for their support, and you can listen here: https://link.chtbl.com/teamistry?sid=podcast.acquired Thank you as well to Kevel and to Capchase. You can learn more about them at: https://www.kevel.co https://www.capchase.com   Playbook Themes from this Episode: (also available on our website at https://www.acquired.fm/episodes/special-acquired-x-indie-hackers ) 1. As long as you don't quit your journey, you're still in the act of succeeding. Indie Hackers was Courtland's seventh company. Before it, Courtland had started six other companies, each with a few thousand dollars in revenue but never as big as he wanted it to be. Looking back, Courtland has realized that everyone has a certain number of companies they need to start before they succeed: for some, that number may be one, for others, 36. For him, that number was 7. So his advice? All you have to do is not quit before you get to that number. 2. The journey is as important as the destination. While Courtland was working on some of his earlier companies, he was miserable. A few of those working years felt like a complete blur. But sometime before he started Indie Hackers, he realized that in order to keep going until you succeed (see playbook #1), you must structure your life so that it's easy for you to not quit. In other words, you have to make the journey fun — almost like the emotional counterpart to Paul Graham’s famous “default alive” concept. With this reframe, Courtland began to enjoy the journey — enjoying the new people he met and the new things he learned. This mindset helped him level up as a person. Instead of worrying and asking "am I there yet?" he was able to enjoy the building journey. 3. Stories are always paramount. As we discuss so often on Acquired, stories can be an incredibly powerful force, and their value is one of the core theses/value propositions of Indie Hackers. One insight Courtland came to from Hacker News was that people didn't want to just read comments about people who didn't succeed. They wanted high quality, verified stories that were trustable in some way. Indie Hackers sends a survey out to users 6 months after they join the community. One of the questions the survey asks is, "would you have started your company if not for Indie Hackers?" 15-20% say they would not have started without some story or interaction on Indie Hackers! 4. Don't try to create budgets — sell to people that already have them. Courtland originally tried to monetize Indie Hackers via advertising, and shared advertisement opportunities with the Indie Hacker community. But he soon realized that these smaller businesses weren't exactly the best customers to sell to. Eventually, he transitioned to selling to enterprises, and was pleasantly surprised by how much easier it was to sell. The sales process simplified is: educate, then win. If you're selling to someone with a budget, you essentially bypass the education step. 5. Utilizing platforms, like everything in business, has tradeoffs. There are no hard or fast rules in business. Everything has tradeoffs. Platforms may help with distribution but make it harder to build a brand and also create risks and dependencies. For Courtland, it was important for Indie Hackers to have its own brand. Additionally, he already had a distribution strategy (Hacker News). Hence, it made sense for Indie Hackers to be its own site, as there were many risks but few benefits to using some other platform like Medium. 6. Trust and mission alignment are critical in acquisitions. Acquisition terms are about much more than just the purchase price. Sometimes, other considerations are more advantageous than cash (e.g. equity), and there are creative ways to align their incentives. For Courtland, it was crucial that he retain freedom over his time and control over the direction of Indie Hackers. Hence, it was — and still remains — key that Patrick and Courtland's relationship have a high degree of trust. 7. Acquisitions can enable established brands to take bigger risks. “Intra-preneurship” can be difficult because the initiative is constrained by internal processes and standards as well as external expectations. Hence, you can often take bigger risks through an acquisition. Google video versus YouTube is a great example of this. 8. There is an infinite number of "indie hacker" opportunities. There is no end to the number of niche problems that can be identified and served. Big businesses and platforms create massive opportunities to go for the long tail. New businesses can build on top of these platforms or build for these platforms, creating tools to help people use them. For example, there are thriving tools business ecosystems today for Stripe, Shopify, WordPress, and still many more use cases yet to be addressed.   Links: Indie Hackers: https://www.indiehackers.com
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