Full transcription: may contain unintentionally confusing, inaccurate and/or amusing transcription errors

Bertrand: Episode 6 of “Tech Deciphered.” 

How are you, Nuno, today?

Nuno: I’m well, although today I’ll be very grumpy throughout most of the episode. There’s a couple of articles that we’ll be discussing that I have some objections to. But overall I’m doing very well. How about yourself, Bertrand?

Bertrand: I’m doing good, it’s a good day. I’m not sure if I’m as grumpy as you on some of these articles, but we will see, we will see.

Nuno: Maybe we’ll get to get grumpy at each other as well?

Bertrand: Oh, I hope not. So, we have a few articles today we will be talking about: 3 main topics. 

One around, how to help you in term of start-up idea: how to evaluate it, how to get a good sense as an entrepreneur, does it make sense? 

Talking as well about, product management – high level: what are different types of product management. 

And finally, we will talk as usual, we’ll have a section around gadgets, and this time we’ll have a focus, of course, on the new Mac Pro.

How much is your startup idea worth? (02:23)

Nuno: Yes. So let’s start with VC and startups and we’re going to be discussing two articles to start with: one is actually, how to know if your startup ideas worth a dollar or $1 billion.

Bertrand: And I prefer a billion, personally.

Nuno: I think most people do, but maybe it’s difficult to get to a billion, and then we’ll talk about, threads from Twitter from Tren Griffin who summarized the podcast with Andy Rachleff, who obviously is a former GP at Benchmark, who I believe is still the CEO of Wealthfront, and he’s sort of synthesizing some of the findings from there.

So, let’s start with the positive things. There’s a lot of two by twos in particular, two “two by twos” that are used by Ali. 

The “pain versus frequency of use”, two by two, and then the other one, the “Howard Marks consensus versus right or wrong”, two by two, which Andy actually also mentioned in the podcast, apparently.

I think frameworks are really useful for a couple of things. They’re really useful to highly simplify very complex decisions, and certainly for people to put into perspective, what are the analogies in that specific space? =

Pain vs Frequency of use Framework (03:26)

Nuno: The first framework is a framework that has on the x-axis pain, and on the y frequency of use. And so the different quadrants as he categorizes them are: 

The top-right quadrant so high frequency frequency of use / high pain – sort of the holy grail in start-up. 

Bertrand: Yes, usually we’re all excited when we see something like this.

Nuno: That’s the one we love.

 Then the low pain / high frequency of use is “step forward” “innovation /inventions” “Schlep blindness” as he categorizes.

Bertrand: Maybe some example: we would categorize a Zoom or a Slack in that category. 

Nuno: Yes, because they’re coming into a market where there was no perceived pain for messaging for communications in groups, etcetera, and still they were innovators, and they need to step forward, and they are high frequency use tools and services. 

Bertrand: And to be clear it’s always a question of perception: myself being a big user of video call, of email, I could feel it was not right, something was not right, I remember myself looking for solution for video call for our needs, at App Annie, and I was not satisfied with anything on the market. So it’s really a question of perceived pain. 

Nuno: Yes. 

And then the high pain / low frequency of use: we have the “Rich Barton Playbook”, Rich Barton the founder of Zillow, Expedia, and Glassdoor. And that playbook is the “Power to the People” playbook where users generate information that create data loops, which later help aggregate the consumer demand quickly and match it with suppliers, and I’m here directly quoting Ali on his article. So interesting also that a lot of plays here are highly transactional plays, so they are high-value transactions.  

Bertrand: Rare transactions, but high value transaction.

Nuno: And then the last quadrant so, low pain / low frequency of use: are brands and luxury goods as defined by him, I’m not sure I totally agree with that categorization, but that’s the low pain low frequency side of the quadrant  .

So talking about the positiveness of these frameworks. Again, it allows you to distill something that’s very complex into something that’s very simple. If you’re an entrepreneur, or an investor, or venture capitalist that allows you to sort of put things in perspective and create what I call the analogizer mindset, which is, where would this fit in our realm of decisions?

For example, as a venture capitalist, the fact that we need to come back to the decisions that we’ve made over time and also frame future decisions, it’s very important that somehow we can put these decisions in perspective. So all of that is very, very valuable. 

I think the problem of these “two by twos” is they’re obviously overly simplistic.

So in time they’re snapshots. They’re helpful in looking at the past, sometimes. They’re rarely very helpful in looking at the future. So at least you can distill a simplified analysis of a market, et cetera. But I don’t know, personally any venture capitalist that makes their decisions on “two by twos”.

And so, my issue with this type of analysis is: there’s always going to be exceptions. Also, there’s always be going to be companies that maybe there’s a misunderstanding of what consensus, for example, in the “Howard Marks” framework, what this consensus actually mean. 

Howard Marks framework (06:35)

Bertrand: Let’s talk about what is the Howard Marks framework? 

Nuno: The Howard Marks framework, the 2×2 is on let’s call it the y-axis consensus or non-consensus, and then on the x-axis wrong or right. 

And obviously everyone likes to be right and non-consensus and that seems to be the venture returns quadrant, where’s there’s at least two to three years head start. 

The right and consensus is is the quadrant that normally has a lot of competition, he calls it relentless competition. 

The wrong and consensus is not fun, and then the wrong and non-consensus “sucks to be here”. So they’re both really bad because obviously you’re wrong. 

Bertrand: Yes, you’re wrong, consensus or not…  

Nuno: …you’re wrong, so that’s not good. 

Bertrand: Actually people might make even more fun of you if you are wrong in the non-consensus situation, so I guess there is some political risk in some ways being in this quadrant.

Nuno: Of credibility almost. 

Bertrand: Yeah. At some point, if it sounded too crazy, maybe it really was too crazy.

Nuno: I don’t think there’s anything fundamentally wrong with this framework. Again, what I don’t think it does, is helps you make critical decisions like, for example, will I invest in this company or not over time? I don’t think it’s particularly helpful to most entrepreneurs either because you might be looking at something that you think is not consensus, but you might be missing a lot of data points to figure out if it is consensus or not.

For example, one space where there’s a lot of stealth companies emerging in the market is the area on artificial intelligence . So sometimes it’s very difficult to know what’s consensus and non consensus driven. You can look at papers, you can look at the academic papers in what’s been published.

You can look at IP, but you can never really figure out, is this sort of going against, the market or not? Have we figured out something that nobody else has?

Bertrand: Let’s stick for a second to the Howard Marks framework. I would argue that, actually, as an entrepreneur, I’ve seen the Silicon Valley machine pushing a new trend every six months or 12 months about some new thing: can be about chatbot, can be about VR, and suddenly you see all these companies popping up, getting a lot of  VC money for six, 12, 18 months. And then, suddenly, the interest vanish for whatever reason nearly as fast as it started. And I would argue that’s a perfect example for me of a consensus driven  that went wrong in these cases. But I think that you can see when something is consensus,   and it gives me second thoughts as an entrepreneur if I’m thinking about a new idea: that if it’s too much consensus, if it’s too much in the news, it gets me less excited because I’m worried that people are getting there for the wrong reason.

Be they, entrepreneurs or investors, and the minute the winds are changing,  and winds will change over the journey of a venture, no one will be there anymore: the entrepreneur will pack his bags and do something else. And the VCs were not really sure why they were there in the first place , and lose interest. Personally, I would say that, I’m trying to be careful if I identify something as being consensus. 

And I might push more the entrepreneur for instance: why are you really in that space? Is it just because it’s hot, and you want to do something hot, or because you have developed deep expertise in that topic, and lucky for you  it’s hot right now, so you’re in a good place.

Nuno: I think there’s a couple of points here to untangle. 

Number one, consensus is also a timing thing. So sometimes if you’re going to raise money, let’s talk about an example.

VR, right? VR was hot for a very long time. And now today we’re still waiting for the VR promise to realize itself. At the end of the day, the issue is there were a lot of early investors that invested in VR, but actually they were making a non-consensus attribution to the market. They thought the market would actually going to take some time to seed and raise, and then what happened, as you rightfully pointed, is: a lot of people jumped into it because, those guys are doing, we should do it as well, and became a mega trend, and then a lot of capital went into that market. I think there’s a timing issue to consensus that’s sometimes lost. And so I would entangle the timing piece to start. 

Lemming mentality in venture capital (10:27)

The second issue I would raise and would untangle from what you just said, is: there is a bit of lemming mentality in the venture capital space because it’s large pools of capital being attributed and you’re always sort of looking over your shoulder.

If we’re doing this, why isn’t Sequoia doing it? Why isn’t Benchmark doing it? Why isn’t Greylock doing it? Why isn’t Lightspeed doing it? Et cetera, et cetera. And I think that mindset in general, I agree with you fully is negative. Right? Because it misses big opportunities that might come from the side.

And so the lemming mentality that you feel a lot in venture capital is, in my opinion, not a good thing. And it sometimes props up markets. It’s negative because it’s sometimes props up markets that have no right to be propped up. Those markets don’t exist for the next 10 years, or there’s a lot of capital influx into it that are killing maybe companies that had superior technologies or products, right? 

The case for critical thinking in VC (11:11)

The third thing, at the end of the day , and this is I think where we might actually agree fully, and it’s not that we’re disagreeing on the first two points, but just to make us come a little bit to the middle in terms of where do we see common ground: I do think being an investor requires a tremendous amount of critical thinking. And I think in the venture capital profession, sometimes that is missed. 

There is too much of: oh, what are the guys next door doing? You know, for crying out loud, most of the venture capital firms in the Bay area are either around Sand Hill road somewhere, or they’re around South Park somewhere in San Francisco. So talk about like herd mentality and being in the same places, let alone making different decisions. 

That said, I think those that, and for me that’s the point I take away, those that make decisions that are based on their own critical thinking, even if it goes against what the market is doing, but because it makes sense that it’s going to be a right play, it’s going to be a play that will basically have a big market to go after, with a great founding team, and with a path that may take to that. Those normally win. 

And so I think having critical thinking, having your own perspective. I think the spirit of benchmarking and looking with others are doing in VC, in my opinion, never works. I’m shocked that’s still so many funds do that.

But I don’t think that necessarily illustrates that these frameworks are super necessary in the world. We can create all sorts of frameworks and two by two, as you know, I was a senior expert in McKinsey, I used to pull together a lot of frameworks. The issue for me with frameworks is they sometimes hide, or hide too much of the complexity behind decision making.

And so that’s why I think it’s helpful to make us ponder and think through things in particular in retrospect. I don’t think it’s particularly helpful in leading us to decisions going forward. 

Bertrand: Yes, I think it might help to understand why we’re making the decision. It might help to understand what KPIs are you going to follow going forward because are more aligned with this decision.

And also, might help you understand who you want to compare this company with. In the framework around frequency of use versus pain, for instance,  it’s pretty clear that it’s a question we will always keep talking about: how often do you use a product, especially in the consumer space, how much pain are you trying to solve? And I must say I like how it end up classifying different type of companies based on their quadrant. For instance, if I take Zoom or Slack, frequency of use very high, but the pain might not have felt so high, because we had mail before Slack, we had Webex before Zoom. So, the pain was not as acute as, some product brand new, that basically was solving from scratch a pain. And I’ve seen many investors who did not like that type of space: if it just better than before, oh, it’s not exciting, oh, it’s not 10X, or 20X, or whatever number.

Nuno: Yeah.

Bertrand: So I think it helped maybe also entrepreneurs better explain, “Hey,  that’s where we are. That’s how you have to think about us. That’s how you have to judge us.” If you want to judge us based on high level of pain, low frequency of use., that’s not the right way to evaluate our business, to evaluate the opportunity. And in a way that might help both sides of the table to better understand each other. And if you understand better each other, you can better agree on what are the right KPIs to analyze, to understand. But also, what type of playbooks, should you really try to focus yourself on.

Nuno: And, there needs to be a differentiation between the fact that you’re more comfortable in one side of the axes versus the other, on whether you can create value on one side of the axis or the other.  I am a high-frequency guy. I spent most of my time in the upper part of the Y axis there, on high-frequency stuff, and the reason why I do that is I think I have an unfair advantage when I look at companies. I know what I’m looking for when I’m looking at retention / engagement curves, at cohort analysis, at funnel and analysis, and all the things that are really intertwined with high frequency, where you can really look at patterns.

That said, it doesn’t mean that if I look at the low-frequency play, I shouldn’t look at it properly. And I think that’s where you take away the biases. it’s where you bring in expertise that you might not have to evaluate that space.

Bertrand: Exactly. 

Nuno: And it’s where you really make the call on the company. 

Introducing feedback loops in VC (15:28)

The second point, I fully agree with you, and I believe we’ve talked about it at a previous episode, but it’s never too much to reemphasize it:

Taking notes of the decisions you make as an investor, be it an angel investor, a venture capitalist, a growth investor, et cetera, being very thoughtful about what the investment memo is or would look like, being very thoughtful in revisiting those decisions and figuring out why you made them and really learning from that in some ways, is very powerful and actually very few people do it well. 

And, it’s actually even more important than that: the fact that you do that does not, I repeat, does not to take away from you being able to make decisions in the future that go against precisely the patterns you’ve seen in the past.

Andy was an incredibly successful investor, and he’s an incredibly successful entrepreneur and operator. Who am I to talk about this guy? But in some ways it might be that the things he talks about are skewed towards the successes he seen as an investor and as an entrepreneur, which is not all the successes that have happened in the world to entrepreneurs in general. 

And I think that’s what we need to understand, which sometimes we don’t know what we don’t know, because we’ve never seen it, because we’ve never invested in that space. And I am a very big proponent of that: of the de-biasing piece, of let’s be analytical, let’s look at stuff. But then let’s understand that we may actually have to depart from that analysis.  

Bertrand: Makes sense Nuno, I think it’s a great point. We want to know these frameworks exist, they are useful to help us position our thought-process as an entrepreneur, as a VC. But at the same time, we cannot live by them, because they have limited value, it’s just a two-by-two, businesses are more complex than that. but once in while it’s useful to simplify, abstract and take a bigger picture view. And at the same time, what’s next might be totally different from yesterday. 

Nuno: I always used to say this when I was working in a team environment: the first thing we need to know is the analysis, the fact, the truth.

We can then at some point choose to fully ignore all of this and say, actually, let’s make a call that’s totally outside of this for these reasons. But let’s start with that. Let’s start with what is opinion? What’s facts? Let’s start with what’s actual analysis. What’s actually stuff that is based on some assumptions that might not be verifiable.

And once we understand and have all this context together as a team, then we can make the decision: okay, we’re going to follow by this because this is what the numbers are telling us, or we’re going to just ignore it because of X, Y, and Z. But let’s start with the ground and let’s start with that before moving forward to making decisions.  

Pitching VCs do’s and don’ts (18:01)

Bertrand: So to continue on our VC start-up startup section, another interesting thread, this one by Eric Paley on Twitter, his thread is about “Don’t waste a VC pitch arguing”. 

So his point is that: that’s not the right time. Don’t start to have contentious claim and end up out of a 45 minutes meeting spending, I don’t know, 20 minutes disagreeing, arguing about some claims that might not be actually, and it’s his point, not even the key hypothesis of your business. And I guess his point is that, there are better things for you, about selling your company, explaining your business, make sure you have explained clearly enough, and probably also making sure you don’t end up in a situation where at your very first meeting there is strong opiniated disagreement on stuff that might not matter so much actually for your business. 

Nuno: And I agree with most of the points he makes. I know there’s been a bit of backlash, people disagreeing and some well-known VCs disagreeing. 

So let’s start with the beginning. I do think it’s a bad idea just to argue for the sake of it and, and have an intellectual discussion on something that probably is not even the most important piece about it.

So let me, unbundle the whole discussion here. One, we have to agree that a pitch, when you’re pitching to a VC, it’s an act of sales . You’re selling something. It’s a high touch sales. Some people might say it’s almost like a partnership, but still it’s an act of sale. It’s a high touch sales environment. In a high touch sales environment, disagreeing for the sake of disagreeing is not necessarily a great idea. 

Bertrand: You don’t sell to customers that way usually, I can tell you.

Nuno: Yes. That said, there needs to be a build of credibility. So you’re building your credibility when you’re having this dialogue and this discussion with the other person on the other side of the table or with the team. And so a couple of things that are very important that I always recommend to entrepreneurs:

One is obviously know your facts, know your market really well, your competition really well. If you don’t and if someone calls you on it, you look into it, nobody knows everything. So that’s number one.

Two, intellectual honesty. For me, that’s one of the things I spend the most time on with founding teams. And I normally spent a lot of time on intellectual honesty on what I call their “superpowers”, which is if someone is particularly good at product, I’m gonna check them on:  is this person intellectually honest on product, or in product management, for example. But intellectual honesty, I think it’s really important, which is you stand your ground, but you also acknowledge there are other ways of looking at the same problem, the same issue, et cetera.

The third thing is at the end of the day, you choose your battles. That’s basic 101 communication dialogue issues . You don’t fight every single battle just for the sake of it, but there might be a couple of really important assumptions that if a venture capitalist is questioning you on for example, market sizing, and you strongly believe in your market sizing, then you should defend it, and you should explain why and you should get into the dialogue.

And it’s not about winning a debate. This is not debate competition. This is about making sure, and there’s where I agree with Eric, making sure that you get the next meeting, that you get the next interaction, that you get interest in going into the next level. Because all of these things are nuanced, they’re gray. They’re fuzzy logic. It’s not about being , one or zero, it’s about are we closer to one or are we closer to zero. And so in that gamut of discussion, I think you can have very positive conversations with venture capitalists.

I do have to say that I’ve had a lot of investments that I’ve made that I’ve had heated arguments with the entrepreneurs when I first met them, or certainly in the first few meetings or calls. I have to say that the one thing that does not work for me at all is when I see an entrepreneur that budges to everything I say. So if I say, “Oh , basically I believe that market is bad despite you having spent, I don’t know, three weeks doing a market analysis on TAM.” And the person doesn’t defend it and say, “Oh, you are probably right, maybe I did this the whole wrong way.” That doesn’t work for me.

So if you have a strong point of view, if you put something forward as an analysis, and you have spent time on it, you should stand by it and have the discussion . That doesn’t necessarily need to be an argument, but you should at least explain to me why I might not be seeing all the analysis or all the facts that you are seeing.

Bertrand: Yes and to go back to the sales situation and analogy, actually there is a way to sell called challenger sale, and the idea here is that as a sales person, you start your meeting, your discussion, with challenging your customer and you start with challenging by maybe sharing a few stats that might be counterintuitive or that might challenge the position of your client and, so obviously, it’s a bit different from arguing, but it’s being ready to start a discussion  on a perspective that might surprise or shock your customer, but I have seen that working actually quite well.

When you are bold, in what you say, but you are able to defend it, very strongly, to explain it, very carefully, to be able to show that you come actually with a solution and that ultimately you end up demonstrating that you understand pretty well your industry, the use case, the pain point, you might end up being in a very very good situation. So if as an entrepreneur, practicing that way, but with a VC  that might be something actually quite interesting. So, again it has to be defensible, it has to be well explained, it has to be smartly done, but if you start challenging things, in the right way, and you are able to defend your argument then it might be an interesting way to start a dialog.

Nuno: And let’s not forget a good way of selling, and certainly a good way of raising money, is to create this notion of fear of missing out. And it’s not that I defend that investors should invest because they fear that they won’t get the latest great deal, but you as an entrepreneur, that’s almost one of your obligations, which is very thoughtfully, very carefully to craft a message and a schedule of interactions, and a path of interactions with your potential investors that leads them to believe that you are a valuable asset, that others are interested in you, or that others might be interested in you.

So that’s one way of selling. Again, I’m not proposing that everyone should do this, but certainly it’s a valuable way of selling. And if that’s the case to your point, as you were saying, it is quite important that at the end of the day, we have a little bit of challenging going back an forth, that we can show as an entrepreneur to a venture capitalist, we can show the venture capitalist maybe you are not seeing the whole picture. Maybe this is the piece you’re missing here, and that is very powerful in sort of creating or helping create that FOMO.

Bertrand: So, now, let’s move to product management and overall, project strategy.

We found two interesting articles. 

One from HBR, an analysis from a team, led by Julian Birkinshaw. And, this is about creative thinking, and what fueled WeChat success and their approach of grand design. 

And another article, which is actually a very interesting counterpoint around the Google approach, and talking about a decade of dead Google projects.

Product management: agile vs waterfall (24:19)

So, let’s go back to WeChat, and Grand Design thinking. Nuno, maybe you want to share a bit more about what is Grand Design thinking?

Nuno: Yes. Grand design thinking is the fact that you have someone that has a vision driven by the design of the user experience you want to create, that’s a little bit more all-encompassing, and that vision is shepherded through time, there’s normally a leader, either a grand project manager or a CEO, or someone that leads the grand design of a product that owns sort of the truth of what the product stands for. This goes against sort of the classic design school of thinking that’s very agile, where you trade things very quickly and you move them back and forth, and there’s a lot of design thinking applied to it, where you do sprints around design thinking, and iterate very, very quickly.

My takeaway from these two articles is a little bit horses for courses. And what I mean by that is: if we believe that you can just launch a product, iterate the hell out of that product, that product will be hugely successful, we’re probably wrong. So at some point in the life cycle of a product you need to start with grand visioning. I hear a lot of people because of the advent of agile software development, the advent of multivariate testing, A/B testing at scale, et cetera, many people saying: “Well, we’ll just launch and see what happens.”  

Sort of the classic , Napoleon way, right? “We engage and then we see”. But Napoleon I’m sure also planned a lot in advance before he did the engage, and then we see part. And I think that’s what the Harvard Business Review article is alluding to. There needs to be a little bit of what I call waterfall mentality at the beginning. Where there needs to be definition, design, architecture, where you need to understand what user pains are you actually thinking about, where actually might be worthwhile writing a product requirements document, a PRD that specifies a lot of these things.

And then how you iterate on that product going forward, depends a lot on how you’re structured in terms of product development. But the mis-number of today’s world is people are not spending enough time up-front on designing the experience, figuring out why the pain is there, what are we trying to create in terms of UX, et cetera, et cetera.

Bertrand: Yes, I totally agree with you. This article resonated very well with me. I feel that there are a lot of let’s call them brain dead product managers, who just don’t want to seem to think: they’re just looking at results of some tests. And, the best you are going to get with that approach is a local maxima. Because you are not going to be able to discover, bigger stuff versus thinking harder about the big picture, about the different use case, about different approach.

So for me, it’s really key that we have this discussion. Because I feel that there is too much of reverence and, fanatism actually for these bottom up, A/B testing, type of approach. Where, no one has a vision, no one has a strong perspective, no one has a backbone about what the product should look like. Because if you don’t do that, that the best way to get to the same product than everybody else, and something that is just somewhat successful, instead of being insanely successful.

And I agree with this article, when they, take some example, like the iPhone for instance, it’s very clear: it’s a product that was designed based on a grand design thinking. And yes, there was some iteration: first version without even 3G, first version without an App Store, so of course you can still iterate somewhat.

But you keep it very clean, whatever you add, you make sure that it’s still connected to your grand design, your grand vision. And ultimately that’s how, I believe, you truly end up with revolutionary product.

And, I also believe this approach is not just for the beginning. It probably has to stay there for a long time. If I pick the iPhone, the approach has been relatively similar for the past decade.

If I take WeChat, I probably agree that it has also been a similar approach for the past decade. And yes, there might be some change now, because a decade is a long time in software, and you might want to re-revisit some of your early hypotheses that led you to this grand vision. But ultimately, I think that’s not something you should have abandon after just a few years, and say: oh now we just base our strategy purely on product feedback.

I’m a big believer that product feedback, customer feedback, is super important. But, you really have to combine some bottom up approach with a very strong vision and strategy. And when you combine both, you can have something truly fantastic.

Nuno: I totally agree with you. I would go one step forward, back to my point on horses for courses. The opposite is also true, which is, if you only do the design thinking, the grand design thinking up front, the definition of architecture, et cetera, and everything is the hands of what I’d call god the monopolist, or a grand designer, that controls everything, there’s also a great risk there. So at some point you need to start measuring, you need to start situating, you need to start doing multivariate testing, you need to start seeing what works for users or doesn’t work for users, and you need to basically create also a pipeline of rapid iteration for this.

So, again, what we’re defending here I believe, Bertrand and I are both in very strong agreement on this, is not that it’s one versus the other, but you need to have both. And what is many times lost, actually, surprisingly enough, I’ve seen that happen more often than not, what happens is people come to me and say, we have this great designer, we have this great person, we know this product is going to be like that. And I’m like, “How do you know? You haven’t touched the market yet, so how do you know how the market is going to react to it?” “Well, we’ve done a closed beta test.” Well, that’s not a random sample, that’s small. So, again one doesn’t eliminate the other but you need to have both of them in mind.

I do believe that product, strong product ownership is necessary and important. I do believe that having a vision on what the user experience needs to look like, what the user flows that you’re trying to push into end users need to look like, is very important. I do believe in, particularly if we’re talking about technology choices on the back end that are very long-term focused, you need to have clarity on what those look like very up front, so there needs to be more of a waterfall thinking around that. But ultimately then you can really gain from the advantages of agile, the advantages of having rapid iteration, a lot of measurement, a lot of the ability to test  different options.

Bertrand: Yes. And for sure, some of the big disasters that happen in product might have started actually with a grand vision approach. A grand design approach. If I take the example about Segway, for instance, where they were planning for half million unit a year, when they sold 300K units for six years. And I remember at the time, there was a lot of hype around this company. They were very good at building hype how they were going to revolutionize the world of transportation and stuff.

So, it’s a great example of a great vision that never connected with the reality of   the market. And I can see some, some other product, General Magic we talked about is a great example of that: great vision, potentially great design, completely disconnected from how you can execute at the time and place, being at least 10, if not 15 years, too early. And another example that came to mind, is also Magic Leap, another Magic something I guess, where there was this article in “The Information” where they talk about: they built a factory, they prepare to sell hundreds of thousands of units, and they end up selling, I believe, 6K units. 6,000 units. You don’t build a factory for 6,000 units. 

Never. 

Nuno: You don’t, yes.

Bertrand: So you can get into big failure mode if you follow that. But, I also believe that you can get in absolute brilliance with this approach.

A decade of dead Google projects (32:43)

Nuno: And if we move to the article on Google and all the dead Google projects and Google products, some of them that have had very strong reactions like Google Reader. 

Bertrand: I loved this product. 

Nuno: Yes, I knew you were gonna say that. 

And so there have been products that have been deprecated or killed that , we’ve seen a lot of reaction from product users over time. So the interesting thing about the Google article is twofold. One, I do think Google has a different approach to product management in some ways. All the product managers at Google are incredibly highly empowered, in figuring out, how the product looks like and how it get delivered, et cetera. I do feel there’s sometimes less of a grand design approach to it, or certainly less commitment to it. One could argue that Google Plus was maybe an attempt to have a stronger commitment, and it didn’t quite work out well. But maybe there the fact was that the grand design was flawed in the first place rather than the approach of grand design was flawed. 

Bertrand: They faced, for once, a very strongly entrenched competitor. Facebook.

Nuno: Yes.

Bertrand: And there was no way that by doing the same as Facebook, you could win against Facebook.

Nuno: Yes. But there’s a different topic here on the Google article that is really interesting as well, which is product portfolio management. And product portfolio management when you have hundreds of products, and I remember back in my days, both at McKinsey and before that at GSM Association, I worked on a lot of product portfolio management and a lot of product planning, projects that basically led us to culling projects, culling products and how do you decide what to cull and not to cull. This is actually a very complex issue, and how you think through it is actually very important. So who controls the process of making those decisions is in and of itself, a difficult process.

So the Google approach , everyone still has this view on Google, which is Google is great on some products, but it’s not a great product delivery machine. It’s not certainly one of these machines that can create a product and we’ll know, this is gonna work. They launch a lot of things that don’t work at all. And I think that’s by design rather than by anything else. But in some ways there’s still this reaction to Google. Okay, this product that they’re launching, they launched Duo and they launched all these things, is this going to stay alive or not?

Bertrand: Actually I start to wonder if it starts to be counterproductive for Google. Because I have seen so many initiatives that now people are very suspicious. By default, it’s launch, and it’s like: “Okay, another of these projects from Google, that’s going to get killed in two years. Why I am wasting my time.”

So, I wonder if they have not reached that point where it’s time for a new strategy, for a new playbook. Myself as a consumer, I can give you a clear example. I bought, a Google Pixel slate, a year ago, and a few weeks ago I learned that they are discontinuing the series and they won’t do tablet again, at least manufactured by Google, based on  Chrome OS. Seriously guys, in one year you do a turnaround on hardware device?  Usually you would try a few more years, to make sure you have the spine to go forward for many iterations. I would argue that many Apple products were not that good their first version.

The core of the product was there, but it took them two or three iterations to really get it right and go to a great product. How do you discontinue after just one iteration of a hardware product? For me, that’s beyond imagination. But, the big issue is that, then you have people who are buying your products. Because in the case free product, that might be one thing, but in the case of a paid product, you make some investment. You are not just buying for that one product. You are buying for the V2, for the V3 that’s coming. You talk about, others about what you have bought. And then, you look like an idiot to have made such a commitment to a platform.

And I think that, there’s only so much they can play that game, without pissing off consumers.

And I start to wonder if we have not reached that stage, and it would be interesting to see that now that Google has changed organization will we see more or less of this at Google? But I can definitely see that as being a big question mark. Or maybe Google… having a way to more clearly provide visibility in term of: what the status of the project? Is it an experiment? And then we’re very clear. At some point there used to be a beta tag, but they would keep beta tags for 10 years.

So it was not very informative. But if they could provide more visibility into their level of commitment, that will help consumers but also their partners. Many partners are betting significant money to, for instance support Google Glass. But why would you do that, if it’s not serious at Google? So I think that’s something that could help to create, to bring back some more credibility on new product initiatives.

Nuno: This mindset is probably a mindset of the early noughties where you could try things and it was the advent of web 2.0 and it’s gonna be different, and we can release, and we can change, and we see how it moves. and Gmail came out of that. And a lot of other great products that did very well came out of that. At the end of the day I agree with you that they need to start, probably focusing on less number of products but really be very thoughtful on how they launch them. Because in some ways consumers were not their beta testers, right? In particular if we have tens of millions of consumers using a product that’s already a significant product. So the way they manage that, needs to be probably much better. Much , much better done. 

And in particular as they toy with hardware, hardware is relentless. If you do something and then you disappear from the market two years later as you were saying, that just does not work.  And we’ll see what will happens with Stadia, we will not discuss Stadia today but we’ll see what happens with Stadia, because that is a big deal, it is a big platform, and we’ll see if they’re gonna commit to it or not. Because if they continue doing this track record of, we launch, and then well, it’s not working, we’re out, as you said it affects partners, affects OEMs that they collaborate with and particular on the hardware side. It affects consumers who don’t trust the brand anymore because they’re like, “Why would I use their services?” et cetera.

Bertrand:  Yeah. Ultimately it would limit your ability to launch further products, down the line. And, when you start to be the size of Google, $800 billion market cap company, hundred plus billion dollar in sales, the way you behave and you launch product, might not be the same way that you did 15 years ago, at the height Web 2.0 wave, as you were just talking about. So, I love Google, it’s a great company, I’m very excited by a lot of their product, and I just wish there was more, clear visibility into, what they truly plan to do with some product line.

And I think the opposite view of obviously is Apple.  If I take Apple, they’re just launching a product after very careful consideration, and it is very clear, that they very very rarely abandon any product. Because they have put enough effort thought about making it great. If not at the first version, they have the core that will be great V2 or V3.

Nuno: Agreed and there’s almost the opposite issue, which is what you just named about the usage of Google products. Which is people like us, we love their products, I love Hangouts, I still use Google Voice a lot, I use Google Fi for international traveling, so I use a lot of these products and we’re always like, are they just gonna stop doing this at some point? Are we gonna stop having Google Fi? Are they gonna finally deprecate Google Voice? It’s not like Google Voice has been that well updated recently. And so from a consumer standpoint that creates a level of anxiety that doesn’t make a lot of sense.

Bertrand: Yes.  

Launch of Mac Pro (39:48)

Bertrand: Now is gadget time, with the launch of the new Mac Pro. A lot of excitement, on Twitter, in the press, on YouTube, and at the same time, a lot of questions around its price. I personally love the touch about $400 wheels on top of a $50K workstation, but maybe let’s talk a bit deeper about that.

Nuno: So starts at $5,200. Is that it? And can go up to $52,000.

Bertrand: Yes. 

Nuno: Does that include the $400?  

Bertrand: No.

Nuno:  It does not include the $400?

Bertrand: And that’s, without a screen. 

Nuno: And without the screen, of course, that makes a lot of sense.

So… Who is this for?

Bertrand: I think it’s clearly for professional users. 

Nuno: What sort of professional users? Like, high visuals… A lot of compute. 

Bertrand: Obviously, it has to be in 3D graphics, it has to be in video, it has to be in photography, it has to be in audio treatment, it has to be in potentially, anything that require lot of power. And something that cannot be  deployed easily over the Cloud. Because if you have access to the Cloud, might not be the most rational thing to have a workstation.

So there is still a decent market for workstations, and another piece with the Mac Pro is that it’s totally configurable, it can be switched also, over time, so if you want to change your video card, if you want to change your CPU, that should be relatively easy, which is not the case with any Mac laptop or computers. So that’s also a key, differentiator with this Mac Pro. At least, when I’m talking about lack of configurability, I’m excluding, obviously, what you can attach externally, but in term of internal configurability this is a pretty unique Mac computer.

 Nuno: This is however, commanding a huge premium over the market. And it’s not like, today, Mac totally dominates this market at all. Certainly it did many, many moons ago, but it doesn’t anymore. So, why, how could this command this type of premium in the market at this stage? What is unique about the proposition of a Mac Pro versus other sort of Windows-type solutions, or “Windows plus NVidia”-type solutions in the market?

Bertrand: So, interestingly enough actually, Apple sell more PCs than any other manufacturer by very far if you focus on the segment beyond $1,000. So, that’s already one thing that we always talk about volume of Windows PC, but it’s always actually a lot of very low-end PCs. So, users who are looking for more, higher end models are usually going to Apple and to the Mac. Now, if we look at the true professionals and workstation, that’s probably a very different story, because actually, Apple was not very, focusing on this segment for many years.

They tried with the previous Mac Pro, which looks like a trash can.

 Not a good way to be seen having bought just an expensive “trash can”. So that one was bad for them. I think it impacted their credibility on the workstation market, and not just credibility that it was simply not answering the needs of this type of customers. 

Marketing through Youtube celebrities (42:44)

Nuno: They’ve gone on a total charm offensive and, in some ways, they have figured out who moves these devices. And so, they went after MKBHD, iJustine and a bunch of other people in the market, to really seed the idea that this is the superior, computer right now, available for professionals. One could sort of see this playbook coming, so there is a little bit more thoughtfulness on the fact that these social reviewers, effectively… Or YouTube reviewers, however you want to call them, have such huge followings that they are the ones commanding real referrals, even in this space, and they’re Pro users themselves. How would you look at this? Does it seem very differentiated in the market? 

Bertrand: I think it makes a lot of sense, I’m impressed that Apple has such a focus now on this type of distribution. Going after YouTubers, I think makes a lot of sense. Especially with physical product that you can demonstrate more easily , and that’s true, it’s a very different approach from let’s say, the launch of the I Phone 12 years ago. If you remember, actually the first to get an iPhone to try out and to give their feedback: we have much more traditional, media and journalists from: Wall Street Journal, New York Times…

Nuno: Walt Mossberg and all the great crowd. 

Bertrand: Exactly, the usual suspects . So, the world has changed in 12 years: the way people consume information about tech product has changed dramatically. That’s the right approach but it’s still pretty impressive to think that Apple is so careful working with these guys now, and for me that makes a lot of sense.

Nuno: MKBHD, I’m a huge fan of his, and look at his reviews around mobile phones and mobile devices, it’s fascinating to me how these reviewers have become brands themselves and how commanding they are, in terms of market access, for all these different devices out there.

Bertrand: Oh, course  of course the way they represent the end in the traditional media, which was a place where you house a lot of people, a lot of journalists and you have a few stars paying for the rest, in a way. And now it’s the opposite, you just have a few stars who  pay for nobody else except their own organization, because now behind the scene when you are so big, you probably have a small organization to support you.

Apple’s Metal graphics API (45:05)

But yes, it’s a very different approach. Might not be that scalable but for one individual, that might still be a very good opportunity of doing what you like.  But for me, what’s important and there was this very interesting article about Metal, and Metal is Apple homegrown technology to deliver 3D graphics. I was very interested by this article because one issue with the Mac Pro is really will the software be there? Because if you talk about professional applications, yes, there are quite a few professional applications for Mac. But actually, there is a big, empty slot in terms of software lineup: it’s 3D software.

Apple has  decided not to use any Nvidia product in their lineup for a long time, it looks like it might be coming back to some previous dispute with Nvidia long time ago.  And now, it’s only AMD Technologies on the graphic card, obviously it might change over time, but one corollary to that, is most professional 3D graphics have been designed now for Nvidia Technologies, leveraging Nvidia API or also Windows API, like DirectX.

And beyond 3D graphics, GPUs have evolved to GPGPUs, General Purpose GPUs, meaning they go beyond graphics and they do usually scientific calculations or AI training or AI inference. And actually, there is a big issue is that  there is not much, if anything, on Apple’s side, to support this segment. So it was very interesting to see Apple launching the Mac Pro with terrific 3D graphics cards, not just one, but two, not just one core GPU, but two GPUs on one card. So, very, very powerful, we are talking about more than 50 teraflops.

So, impressive specs, the big question is will anyone use them?  Because you will have to support a new API, and Apple being Apple, they launched Metal. Metal was launched actually many years ago, 2013 or 14, for the Iphone, as a way to break out from Open GL and provide much better performance because Apple was in a way, no pun intended, but was able to go to the “metal” with their technology. And now, we are Metal 2.0. 

The big issue is that, if it’s widely supported in the iOS ecosystem, it’s more new, to the Mac ecosystem . And maybe one more important point is that, except this new Mac Pro, most Macs have not been equipped with very good graphic cards.

So what you could buy only a few months ago, before the MacBook Pro 16, were pretty disappointing 3D cards inside your iMac or inside your MacBook Pro. So there is a big issue in terms of install base, the install base doesn’t have access to a lot of high performance integrated graphic cards. And you could argue that might be why Apple has actually started to promote two years ago an eGPU solution. So eGPU lets you attach with Thunderbolt 3 an external GPU, which you can do on PC as well, it came on Mac one or two years after it was available on PC. Still, no support for Nvidia cards.

So, I don’t think Apple can have enough success to attract software developers if only the Mac Pro has access to powerful graphic cards. They need to equip their range of Macs with better graphic cards. Hopefully, they also bring more diversity of cards. I think if the PC environment has been successful, it’s because it’s not just an AMD Play, it’s AMD, Nvidia and others, trying to fight back, like Intel . So, I think they need to put that wider hardware ecosystem into play for 3D and then we will see more porting of software. Else it will be hard, or we will see a few specific solutions where they are just so excited to support the Mac Pro but the wider community will  not be supporting the Mac Pro, even if the API makes a lot of sense and even if some high version exists, the version everyone else has actually  might not be so good on  the 3D side. 

And, again, we see Apple playing the full stack, which we discussed before. All the way from, consumer electronics, all the way up to content and services with Apple TV Plus. Again, back down with semi-conductors and designing their own semi-conductors to create their own experiences. Not afraid to push their own standards, or to push almost defacto standards into the market. Not afraid to destroy standards and destroy tools that are in the market. You know, obviously, we can’t, forget the demise of Flash, almost solely because of Steve Jobs and Apple. Or certainly the early demise, maybe it was foreseeable that there would be a demise…

But he was right. 

Nuno: But he was right, he was right. And so, again, we see them going after a multi-play right there, pushing their own semi-conductor approach to the world, they are pushing their own APIs, they’re making sure that their ecosystem is the best ecosystem and see if that works. To your point, this isn’t the very high end and, at the end, you know, can they actually propagate this further down, and make this work as a full play for their ecosystem? I have no clue. but, that’s the game that Apple plays.

Bertrand: We will see some clue, if it’s not just the MacBook Pro 16 that has access to  high performance AMD cards. Do we see the same with the new MacBook Pro 13 or 14? What will we see from the iMac? What will we see from the Mac Mini? I think if we start to see that Apple starts to be serious again, with 3D components, not just in their iOS devices, but in their Mac devices, I think it might start to generate more attraction and interest from solution vendors.

But I think it’s time for Apple because they were really, truly going to lose the race in 3D, and that was getting me worried, because there is only so much you can market very powerful computer, computer for professionals if 3D graphics software is off the map, I mean, there is only so much you need power for video, for music; where 3D or scientific calculations, yeah, there will always be more. There will always be more, in terms of needs. So they cannot lose this market.

So that’s what probably makes me quite hopeful, is that they have probably understood the importance of this market. It might not be just from a dollar perspective, by the way, but strategically, how you want to be seen as a company. Strategically, you want to make sure that your devices are not just used to consume, but also to create and that you you cater to that whole chain. So in a way, it gives me hope to see the new Mac Pro. Now for me, it will be what’s the execution going to look like for the rest of the Mac lineup.   And I guess, next year we will know what’s going on for other Macs and we will know if 3rd parties are following and investing. But let’s be clear, it’s not going to be easy for 3rd parties, because they are going to have to support Nvidia specific solutions for Windows, Microsoft DirectX specific solutions, Vulkan solutions, if they want to support Linux and Android, and Metal for iOS and Mac.

So, life for 3rd parties is getting harder, but ultimately, I think it makes a lot of sense. Each platform is going to be quite vertically integrated, and if you want to get the best of every platform, you will have to make some decent-size investment in each platform specificities, if you want to deliver the best performance to your users.

Nuno: So, a proper Game of Thrones in 3D graphics.

Bertrand: Indeed .