Longevity as the Moat

`2:08:53`

And I was like... You did. Did the math. Yeah, you're like, "But I only work 40 hours a week." I go, "Yeah. 40 hours a week, over 27 years, Right. whatever that number is, I think it's 54,000 hours or whatever Yeah. Yeah, it's something like that. Yeah. the number is. And my question back to you is, "How many people have worked on the same thing for 54,000 hours?" Yeah. I don't know. Yeah, I mean- Tiny. Tiny amount. Yeah. I just like that you spread it across time. Probably. Yeah. Yeah, I mean, yeah, I suppose. I mean, again, it's, like, one day at a time, so it wasn't intended. You were laying bricks. I was just laying bricks. I just keep doing it. I mean, and then it just adds up, and the path gets bigger and adds up, and that's what happens. But yeah, I've always admired things that have stuck around for a long time. We used to have a podcast back in the day called "The Distance," which was a podcast that we I listened to it. did for a few years, of businesses that have been around for 25 years or more.

`2:09:41`

And maybe that's not even that long, all things considered, but it's quite long for most. Yeah. No, that's incredible. And it was awesome, and most of these are family-owned small businesses. They just nailed some things and got them right, and I love businesses like that have been around for a long time. — I'm not talking about us here, but there's something about, if it's been around that long, it's not a fluke. You can have something that's hot for a while, and it can go out. That's kind of a fluke, or a trend, or a fad, or something. But to be around for a long time signals that there's something, that is repeatedly right about this thing, right enough to stay in business for a long time. A lot of these businesses are tight. Like, you could have a dry cleaner, their margin's thin, and maybe it just is enough for them to get by.

`2:10:28`

But they'd rather still be doing that than something else. And so, they're in it for a long time. It's not that it's a great business, but it's a sustainable business. And that, to me, is a great business. If they can keep doing that, Right. There you go. It's the same insight you had earlier with the leaf. You're like, "Why don't you look at this leaf- — Yeah. —...it has evolved forever." — Yeah. — Do you know who Mark Spitznagel is? — No. — I read his book called "The Dao of Capital," and this was probably seven years ago. — Hmm. — He runs this hedge fund. I don't even know if he's still doing it anymore. But he has an entire chapter in that book on conifer trees. — Uh-huh, yeah. — He's like, "They're the tree that is present and can survive in the most- — Yeah. —...extreme environments on Earth." — Yep. — "They've been evolving for extreme time period," and he was drawing all these parallels between a great business that could survive- — Yeah. —...using the insights he derived from studying these trees,

`2:11:15`

which I think is, is very fascinating. — Yeah. — I love it. I've often thought of our business as an oak tree. I love oak trees. Oak trees are trees that I love. — Bezos uses the analogy of Amazon as an acorn that grew into an oak tree. — Hmm. I don't think about it as the acorn so much. That's cool, though, — Yeah. —...especially "A," "Acorn," "Amazon." — Mm-hmm. — There you go, whatever. Wonder if he thought about Acorn as a company? — No, it was... — Never. — You remember this. You're old enough. — Yeah. — The directories were in alphabetical order, like... — Oh, yeah, that's why... — Remember? — That's right. Remember, there wasn't that many websites, — That's right, that's why he named it. —...so you could actually list them all. — That's right. I remember that. I remember reading that. — And he almost did, like, "Abracadabra." — Hard work or something like that? Yeah. — No, it's like Abracadabra or something like that. — Yeah. — And then people thought it was cadaver, and they're like... — Ah. — It's like, that's not a good association. — Funny. They don't sell cadavers there, do they? — No. — No, they don't. They don't. It's amazing. The "Everything Store" doesn't sell cadavers. — Yeah. — Okay. So, I've always thought about our business as an oak tree,

`2:12:03`

which is like a... You know, oak trees are very stable. They can withstand a lot of storms. They don't grow very fast. They're actually quite slow-growing. Some are faster than others. But in the Midwest, where I came from, a bur oak is a very slow-growing tree, but it lasts a long time, can weather a lot of storms. And I've always found that to be a very appealing kind of tree to be, versus a cottonwood, which grows really fast, makes a lot of noise. Like, you can hear cottonwoods when it's windy. They make a big mess. Everyone notices them because there's cotton all over the place, and they die in about 75 years, or something like that. And they come down hard. It's just not as interesting to me. I don't need to be flashy. I don't need to leave signs all over the place that I've been here. Just going to be nice and quiet, build a great business, keep a solid foundation, add a little bit every year, so it just feels more stable,

`2:12:50`

and weather storms. Over the years, in the tech world, there's a lot of... If something comes out, it's like, "It's a killer. It's a Slack killer. It's a Basecamp killer. It's a whatever killer." When you've been around for a long time, you see that played over, and over, and over. There's a lot of things that are killing, supposed to kill something else, but very few of them can withstand and outlive the storms that come. So, you can be hot for a while. But the hardest thing is just to stay around, to stick around. So people are like, "How do you compete?" Well, we just stay around longer than everybody else. — Yeah, the line I have on this that's repeated over and over again in these biographies is, "You just stay in the game long enough to get lucky." There's going to be- -Yeah. —... something that happens in year five, 10, 15, 20.

`2:13:35`

— Yeah. — Usually, an innovation invented by somebody outside your company- Right. —...you can take advantage of. — Right. The example of this, like, Coca-Cola with refrigeration, they didn't invent refrigeration, — Uh-huh. but it drastically expanded their market. — Yeah. Yeah. — Tobi! — Tobi's interview with COVID, in a sense. Like, COVID saved Shopify in a lot of ways, right? — He needed that difficult time period- — Yeah. —...to then grow, and to realize all the things he was doing wrong- — Yeah. —...and he realized... — And people were shopping online more, and all that stuff, too. — Well, he had that huge spike in- — Yeah. —...stock price which he talked about, and then, it going down. — Yeah. — But it's when he realized, "Oh, like, I'm cosplaying." — Right, yes. — "I'm a public company CEO, and this is what I do." — Yes. — He's like, "No! There's still..." I love what he said in the conversation where he's like, "There's not one right way to do something. There's probably 100." — I believe that. — "At least 100." — Yeah. I think the way you did it, if you had to do it again,

`2:14:22`

you'd do it the same way. But there are 100 different ways to do that same thing. — I want to go back to what you just said, though, "Something can be hot, it can be a fad." The maxim I have for this is, "Time is the best filter." It's the only filter I trust for businesses- Mm-hmm. —...for ideas, for books. I usually read a lot of old books, but it works for people, too. Because a huge influence on my thinking is, like, Charlie Munger and his whole thing. It's like you need to build a seamless web of deserved trust with high-quality people. — Yeah. — And the only way you know if somebody's high quality is time. — Yep. — And him and Warren's case, they knew the same people for decade after decade after decade. -Right. — I'm rereading the book "The Snowball." — Uh-huh, oh. —...of Warren Buffett right now. It's the 700-page biography- And the amount of friends that he accumulates in his 20s, 30s, 40s, that are still around when they're in their 70s and 80s- — Yeah. —...is absolutely remarkable.

`2:15:10`

For a business, time carries most of the weight, as another maxim. I got that from Munger because, when you read "Poor Charlie's Almanack," his thing is that you should master... There's only a handful of big ideas in all these different disciplines, so, you know, biology, physics, economics. — Right. — He's like, "And if you just master the big ideas," he says, "those few handful of big ideas carry most of the freight." — Mm. — And reading that and thinking about his... He prioritized durability in a business. — Yes. — And I was like, "Oh, so time carries most of the weight. You just have to survive, which goes back to your blubber, having a margin of safety. — Blubber and small units. — Yeah. -That's a big part of it, too. This is a bit of an aside, but it's tied to it, and I think it's important to talk about, is pricing.

`2:15:56`

So, with Basecamp, for example- — Mm. —...nobody can pay us more than 299 dollars a month, okay? It doesn't matter how many users you have. So, you could be a big enterprise, and 299 dollars a month is the most you can possibly... Our prices go way low, but that's the most we allow you to pay us. Now, many of our competitors will be, "Hey, you want to pay us 50 grand a month? You got 2000 seats, we'll take it." I don't want their money, because what I want is a static group of customers. If you think about static, like an old TV, like the dots, they're all equal-sized. You should be able to pick out 10 random customers and lose... I don't want to lose customers, but if you could pick out 10 random customers and lose them, I think you have a good business. If you could pick out a 100 random customers and lose them and be okay, you have a good business. What you don't want are a bunch of outlier companies that you cannot afford to lose.

`2:16:42`

You don't want customers that you cannot afford to lose. And so, by equalizing our pricing and not letting anyone pay us more than anybody else, we create a bunch of small units, which are individual customers, and if you take one out, it's not like Jenga, where the whole thing's going to fall. It doesn't matter in a sense, because everyone's essentially equal, no matter how big you are. And then we can develop software for the customer base as a whole, and not for a handful of customers that pay us a lot more than everybody else. And that's the enterprise game, is getting as many seats as you can, and landing these whales, and I just don't find that interesting. I also don't find it durable. Durability is about a lot of small things. And if someone wants to chip away at some of those, it doesn't matter because there's a lot more left. That's kind of what we were aiming for with durability.