Wednesday, Oct 12, 2022 • 1h, 8min

20 Product: Spotify's Gustav Söderström on Why Product is 100% Science and 0% Art, Why You Should Look at the Competition and then Do Something Completely Different & Why Talk is Cheap and Product Teams Should Do More of it; Structuring the Best Debate

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Gustav Söderström https://twitter.com/gustavs is Spotify’s Chief Research & Development Officer. He has the CPO & CTO responsibility, overseeing the product, design, data, and engineering teams at Spotify and is responsible for Spotify’s product strategy. Gustav is also an entrepreneur and investor who has founded and sold startups that he co-founded to Meta’s Oculus in 2014 and then also his first startup which he co-founded and led as CEO, up until their acquisition by Yahoo! Gustav is also the host of the podcast mini-series -- Spotify: A product story https://open.spotify.com/show/3L9tzrt0CthF6hNkxYIeSB?si=ee7b1d24f99e4711 -- which offers a glimpse into the decisions that have guided Spotify’s product evolution. In Today's Episode with Gustav Söderström 1.) From Selling Companies to Yahoo and Meta to Leading Spotify's Product: How did Gustav first make his way into the world of tech and startups? What was it that made Gustav so compelled to join Daniel Ek and build Spotify? What does Gustav know now that he wishes he had known when he started? 2.) "Never Fight a Macro Wind": What does Gustav mean when he says "never fight a macro wind"? What models can product leaders construct to measure the size, importance and timing of a macro wind? What can product leaders do to change the macro wind and have it blowing in their back and not their face? When did Gustav experience this? What did he change to have the wind blow in his back? How did this alter his mindset and mentality? 3.) "Do Something Completely Different to the Competition": Why does Gustav believe startups should do the complete opposite to the competition? Does this change if your competition is other startups vs incumbents? What is the story of how Spotify did the complete opposite to Youtube? Why did it work? On the flip side, when did Spotify do the complete opposite and it did not work out? 4.) Mastering the Learning Process: How does Gustav approach the learning process for all new skills and disciplines? Why does Gustav believe that all technology leaders have to be the master of their domain? How did this lead to Gustav going back to University to study machine learning? What are the single biggest mistakes people make in the learning process? 5.) Gustav: The Product Leader: Why does Gustav believe that product is 100% science and not art? What does Gustav mean when he says, "talk is cheap and so we should do more of it"? How does Gustav structure internal debates? Who sets the agenda? Who is invited? What makes a good vs a bad internal debate? How does Gustav make everyone feel safe? What can leaders do to ensure an environment where everyone feels they can debate with the boss? 6.) Spotify: The Crucible Moments: What is Gustav's favourite near-death experience in the Spotify journey? Why did Spotify decide to make the move into podcasting and video? How does that additional complexity change the product paradigm of an audio-only platform? How do the single most impactful platforms in the world approach market expansion and when to add new products? What are the best companies in the world not merely technology innovations but also business model innovations? Items Mentioned in Today's Episode: EXCLUSIVE NordVPN Deal ➼ https://nordvpn.com/20vc https://nordvpn.com/20vc Try it risk-free now with a 30-day money-back guarantee!
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Speakers
(2)
Gustav Söderström
Harry Stebbings
Transcript
Verified
00:00
This is 20 product with me, Harry Stabbings and 20 Product is the monthly show where we sit down with the greatest product leaders to discuss the art and science of product scaling product teams and much, much more and stay with such a special one as I was joined by a dear friend and one of the very best in the business.
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00:16
Gustav Söderström at
Spotify
is chief research and development officer. Gustav also has the CPO and CTO Responsibility overseeing the product design, data and engineering teams at
Spotify
and is responsible for
Spotify
product strategy.
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00:30
It is also an entrepreneur and investor who's founded and sold startups that he co founded to Meta's Oculus in 2014 and then also his first startup, which he co founded and led as
Ceo
up until that acquisition by Yahoo!. Gustav is also a podcast host with an incredible mini series.
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00:45
Spotify
, a product story. It's one of my absolute favorites. If you haven't checked it out, it's a must and I also want to say a huge thank you to Shack,
Daniel Ek
, Woody Marshall, She share code and many more, some amazing questions suggestions today really did make such a
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Break
03:51
But now I'm so excited to hand over is the one and only Gustav Söderström, chief research and development officer at
Spotify
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Harry Stebbings
04:06
This is an incredibly challenging show for me to do with like a serious face because I know you socially, I think the world of you socially and so now I get to put on a professional face and welcome you to 20VC so thank you so much for joining me.
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Gustav Söderström
04:19
Thank you for having me it's an honour and likewise
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Harry Stebbings
04:21
That is very kind. I've also been stalking the shit out of you for the last few days professionally and so this has been great fun but I want to start with a little bit on you go stuff. So tell me how did you make your way into the world of startups and then come to lead the product or get one of the generational defining companies of our time with
Spotify
.
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Gustav Söderström
04:37
So I'll try to do the brief version of the history of my life,
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Harry Stebbings
04:39
You've got 3-4 minutes.
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Gustav Söderström
04:43
So I'm sort of actually this involuntary entrepreneur, I graduated from
the Royal Institute Of Technology
in
Stockholm
sort of electrical engineering, computer science that was the tail end of the IT crashed, there were literally no jobs to be had and so I found a group of friends I wanted to work on these big boring Swedish companies like
Ericsson
or something but I couldn't get a job.
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05:02
So I decided with a bunch of friends to start a company because all these investments have been made during the IT Era in 3G And smartphones and so forth. It was all there but no one believed in it.
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05:12
So we started this company where you could send text messages over data instead of
SMS
and already back then even though you paid per kill a bit it was still 1 /1000 the cost of sending the same and 160 characters over text message. So that took off in in a little bit in Sweden and in the nordics the problem was that the carriers back then control the world and they were selling
SMS
bundles, they didn't like that.
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05:32
We ended up selling this company to
Yahoo!
because they had the biggest messenger application in the world but it was desktop only and they wanted to go big in mobile because mobile was starting to happen here and they had all these relationships with the global carriers, I ended up working at
Yahoo!
in
Sunnyvale
for a bit and I can tell you it was a troubled company already back then so fast forward but 2,5 3 years later and I think four or five years later I was back in
Stockholm
trying to figure out what to do and through a mutual friend I met Daniel, the co founder and Ceo of
Spotify
and he showed me this amazing application because
Spotify
already existed as an application on desktop, but what he wanted someone to head up with,
Spotify
mobile was going to be because this was 2008 and the iPhone had just come out, but there was no app store yet.
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06:17
I got lucky at a moment in time where I knew something how to develop for lots of different mobile phones that many other people didn't know. So that's how I came into
Spotify
starting to head of product development for mobile.
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Harry Stebbings
06:27
Can I interrupt you? Because there's just two things I want to pick up on first. Number one is like Shack Actually told me about your entrepreneurial early days. One thing I very much seen the best product leaders is really kind of the founder mindset and that accountability and ownership mindset that they bring product, how do you think being a previous founder makes you a better product owner and product leader?
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Gustav Söderström
06:49
Well, I do think it is the ownership aspect, I can't help but think as a
Ceo
, even when I'm a
Spotify
, which can be annoying for maybe for the Ceo for my peers because you think about everyone else's ship as well, but I think it's important to have a holistic perspective, I kind of have to believe in the whole thing if I don't feel I understand why
Spotify
is should succeed.
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07:10
I can't help myself, but asking like why are we doing this this way? So I have that mindset and I think it's more helpful than not, but I can't really help it.
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Harry Stebbings
07:17
I've known Daniel for the last few years but Daniel 2008, can you just take me back? What was it about Daniel and
Spotify
that convinced you that this was going to be, what was now a 14 year journey that you were going to commit to. What specifically was it?
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Gustav Söderström
07:31
It was two factors, it was the people Daniel and many of the engineers who worked at
Spotify
and built this amazing product. It really was the product when I tried it like everyone else, I just couldn't believe that it, that it was true. I thought it was a fake, I thought they had a file server standing somewhere nearby because it was too fast.
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07:47
So it's obviously the product
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Harry Stebbings
07:49
Shack was running in the background with cd right?
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Gustav Söderström
07:51
Exactly. And then it was a very technology centric and sort of meritocratic idea based culture was like fierce debating and the best idea one out and I really like that. So those were two other factors.
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08:02
And Daniel was very humble, I said was he actually still is a very humble person, he claims himself that he's an introvert even though I think it's actually very skilled these days, but just a very mellow person kind of personality.
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08:12
I really like non hierarchical debate intensely with them. So those were some of the factors. The other factor was simply naivety. You know how they say that ignorance is bliss. I had no idea about the music industry. If someone had told me there's no chance I would have started statistically, it would have made no sense to join the music startup. But luckily for me, I had no idea. So I joined anyway.
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Harry Stebbings
08:31
You're clearly not a VC because there's no such thing as naivety. It's just insight and wisdom that made all right.
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Gustav Söderström
08:38
You're right I forgot to phrase it the correct way
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Harry Stebbings
08:40
I want to split the show today into two kinda separate parts. One is you have this incredible podcast series and there's a couple of core themes there that I love and I want to unpack.
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08:49
And then the second is really unpacking lessons from the
Spotify
journey. If we start with your amazing podcast series, which I love, I actually listened to it on my runs, which is, I wish it was shorter because I'm getting less and less fit. But my question to you is you say in it, never fight a macrowind, you will lose. What did you mean by this? And can you explain that to me?
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Gustav Söderström
09:09
Sure. So macrowins are these big societal changes that are sort of bigger than any one individual or any one company. So what is a Macronwin?
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09:18
Typical Macronwin would be cheap broadband. It's happening, you're not going to stop it, it's going to disrupt things. You should just accept it. Another one was smartphones, machine learning. It's another such macrowind when these things happen, I still see a lot of companies and product people who try to fight these things as if you can stop them. This has been true for us as well. We've lived through some of these.
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09:37
I've literally had to learn this lesson and what you should do instead of fighting it is obviously too to rethink your position, try to reposition yourself so that instead of having this wind blow in your face and slowing you down, you somehow get it at your back. But the lesson is that the quicker you accepted and reposition the better you're just not going to stop these things.
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Harry Stebbings
09:54
Can you give me an example of a macrowind when that you went in the face off and then pivoted and decided that it was better to have it behind your back just so I get a feeling for it.
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Gustav Söderström
10:04
Of course there are two good examples.
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10:05
One is when I joined
Spotify
, we had what was then a very profitable business model which was you give the application away for free on desktop computers because people didn't think they wanted to pay for music, then they start investing in music playlist and building libraries and then they realized that actually wanted to listen to those playlists on the go on their mobile phones, we charge for the mobile application so simply put we charge for mobility and that worked beautifully for several years and we loved it VCs loved it, they invested a lot of money.
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10:33
But then all of a sudden it turned out that this macrowind was blowing called smartphones and we started seeing people that not only use their mobile phones more than their desktop mobile first, but many users that were mobile only, there was no desktop, so we didn't have a free tier at all for these users.
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10:47
So our business model broke... now we were not incentivized to want to see that in the short term and we could see our user growth actually starting to slow down, but when we accepted this and we took the pain and the risk of repositioning all of
Spotify
, figuring out a way to give away the mobile experience for free, even though that was what we're charging for.
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11:07
We literally change the entire business model, we instead got this wind at our back and we started growing literally exponentially actually very clear example, if you look at the growth curve, you can see the micro wind blowing in our faces, then you can see when we figured out that we got at our backs
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Harry Stebbings
11:20
Take me inside the room there.
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11:22
How did you get over the fear of the cannibalization of an existing business model that was also working, you make it free, you could have a lot of the premium users churn and just be ad supported users but free. And actually you saw the cannibalization of existing user base is how did you get over that concern? And what did the internal discussions look like that?
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Gustav Söderström
11:40
So I know precisely when we realized this, there was a deck from Mary Meeker that showed the projections of smartphone growth, overtaking desktop growth and we looked at that and we said, holy crap! So we discussed that a lot. We kind of found the confidence ourselves to do this. But the big problem we had was actually that we have other stakeholders in the labels and the labels didn't see it.
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11:58
They were not looking at Mary Meeker's slides and they were not so keen to risk the entire business model that they had just figured out. So that was actually the bigger problem. And we had to wait all up until we had stopped growing and actually started losing users before they agreed to give us the licenses we wanted.
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12:13
But by then we had prototypes and researched and A/B tested a bunch of different concepts. So when we got the licenses, we actually knew what we wanted to do and had already built the experience and we launched it almost overnight when we signed the contracts, How do you know whether it's a sustainable fundamental shift that you're fighting against or a unsustainable.
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Harry Stebbings
12:33
One point being that a lot of consumer behaviors were changed in
Covid
that have now come back and actually have gone back to original behavior patterns, How much data do you, you need to know whether something is ongoing and continuous versus actually time bounded and temporary.
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Gustav Söderström
12:47
It's a great question. And I think
Covid
is a perfect example because you knew that this would actually end the question, was this a fundamental shift in behavior or a temporary shift? And we had exactly this discussion. When
Covid
started, it was much easier with something like the shift of mobile.
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13:03
There was no real model where you saw people going back to desktop computers and other macro shift is from curation to recommendation. Whereas Mike Mcdonald puts it from social media, recommendation media, that's not going to reverse. So those are quite easy. But
Covid
was hard. So we literally had the discussion should we model this as a temporary anomaly?
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13:20
Keep investing for example, in the car, even though we saw a car usage dip completely during
Covid
or should we just say no one is ever going to drive again. Let's reposition for the home use case. We chose the former, We're going to model this as an anomaly and we kept investing in the world.
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13:35
Going back to normal and I can tell you that was incredibly painful because we thought it would be over in six months and in 12 months and 18 months later it didn't look like it was going to go back. It's actually only now that we clearly see it going back to the normal behaviors, home usage, going down, car usage and mobile usage going up. So it's hard. But we had that discussion.
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13:53
We try to model the world and make predictions about how the world is going to work. I love models basically. It's a structured way of thinking that gives you both predictability, explain ability, but also share ability. If you explain your models then others can use the same model and you can distribute the way you think about the world.
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Harry Stebbings
14:09
What I love doing these shows is the flexibility I have with the schedules. I'm with you. I love models too. But I'm also aware that you can't predict markets and sometimes your model is wrong and don't try and be smarter than the market.
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14:21
I guess my question to you is how do you know when your model is wrong and you actually just need to change 12 months into your investing in the post
Covid
. We will go back to normal. Should you wait six months more? I mean, especially as a public company, it's even tougher. How do you know when your model is broken and how do you know when to change?
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Gustav Söderström
14:38
Very Tricky question. So, first of all regarding models, there is this famous saying that by definition all models are wrong. That's why they're called models. If they weren't wrong, they're actually reality. But the whole point of the model is it simplifies reality because reality is too complex.
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14:52
So they are wrong. So you're always taking a risk in data, machine learning terms. You're doing dimensionality reduction, reality has infinite dimensions and you're reducing it to maybe five.
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15:01
And if you pick the wrong dimensions, you didn't model the spread of disease, it's going to be wrong because that was not a dimension you had in the real world is multidimensional. So that's the one way to try to avoid it. That comes from Berkshire Hathaway and how they think about the world is you should use at least three models with different dimensions if they all agree chances that you're completely wrong are much lower.
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15:21
But using one model and I've done this mistake early in my career, you think you figure out how something works, you're like that's how it works and you just do the same thing again and again and using a single model and your mistake in the world for being simple.
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15:33
It's just that you manage the model like a small moment in time and then it breaks completely. So I've gotten better at using multiple models. There's no way to catch all of it.
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Harry Stebbings
15:41
One of my favorite features in
Spotify
is to go to radio. It is also buried like three clicks in and I didn't know about it until someone told me about it on
Twitter
. And when I think about the shift from curation to recommendation.
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15:54
Being so central to the future of content discovery and content platforms, why is it so buried? And is that a product mistake? I would love to say that someone else's question, but it's it's a perfect question for me.
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Gustav Söderström
16:06
Trying to figure out one answer is stay tuned, you will be happy.
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16:10
Another more telling answer is we made choices between what the main paradigm is.
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16:15
The main paradigm of
Spotify
was play listing, that's what
Spotify
was and what we grew up around the use a curation and then we started play listing for you and we had to decide should we have the radio channel as the analogy or should we have the personalized playlist as the analogy and they kind of do the same job, a personalized playlist within a certain genre.
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16:34
Like chill, it is very similar to starting a chill radio, you will get the same songs actually, we've struck a little bit with which use of paradigm to use older people, they like radio paradigms and younger people, maybe not so much not calling your older, but you know, it's fine, I'm fine.
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Harry Stebbings
16:50
I'm wearing a Panama hat
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Gustav Söderström
16:51
You are listening to your old young person, so we're trying to figure out how we can combine these things fundamentally. It's a problem of many parts of the application, sort of performing the same job for the user if that makes sense?
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Harry Stebbings
17:06
Is that not a product mistake?
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Gustav Söderström
17:07
I think it's a product mistake, it's very easy to add features and everyone is going to ask for many features. It is incredibly hard to remove features and this is like scientifically proven by I think
Daniel Kahneman
and Adam Grant to rescue where they gave
Harvard
students a cup first, they asked what they would pay for the cup and the other half of the class, they gave the cup and ask what they would sell it for.
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17:26
And it turns out people value something they owned 1.5 times as much as they value. Never having had it that I think is a good product lesson, like it's going to be 1.5 times more painful to remove something than it was valuable to give it in the first place.
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17:38
So we're very careful with that and that's the reason why we have many of those features in the app that kind of duplicate the same use case, We're always trying to streamline and simplify it because there is this invisible cost of the application becoming more and more complex as you said, it's really hard to find that feature, that's because even though it works really well for some people that's because it competes with the other features and if we put that in front we would get another cost somewhere else.
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17:60
So this is the trick of like serving enough use cases, but not over complicating the experience
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Harry Stebbings
18:04
The hard thing with
Spotify
, like
Twitter
where users love it and it is such a part their daily life, you have very visceral feedback and opinions as you said, that people request a lot?
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18:16
How do you determine between the customer data that you listen to and engage with ingested into product roadmaps versus those where you say I get it, Harry's moaning from
London
about go to radio being a couple of deep, but it's not a priority. How do you determine between the two?
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Gustav Söderström
18:32
There are a couple of common tricks. One is you separate new users from existing users, you're going to get very different metrics. Existing users will have a habit. Your metrics May go down for a feature and then if you try it on new users, you never had that habit.
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18:45
You May see that if you're not taught the old paradigm, this is actually better. It's just that you train your user based on another paradigm. So that's one trick to figure out sort of some man.
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18:53
But the truth is, if it's actually better in some global sense and then you can make the choice, should we take the pain of retraining the existing audience, because we know that if you just change the behavior, you will be more happy because if you never knew this old behavior we can see that that's one trick, the other way is to back to radio to try to figure out what it is you want to achieve?
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19:12
Do you really want a radio or you're looking for a session that you can tune more easily that can go across genre, what is it that you really want to do and see if you can present that in a way that doesn't complicate the application, but just adding more features.
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Harry Stebbings
19:24
I totally, yeah, I find that fascinating between you and existing uses. I do want to touch on competition. We spoke about kind of product decision making, that sometimes in many cases, often for startups, competitions, roadmap drives a lot of bad road map you've said before in your show, which is look at the comp and then do something completely different with lover contrarian opinion.
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19:43
So this is great. But why do you believe this? Can you explain it to me a little bit on why it's better to do something completely different?
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Gustav Söderström
19:50
I think this is especially important for a smaller company going up against a bigger company. If you assume that the people in the bigger company are smart and competent people, which I think should assume what they're doing. Their strategy probably makes a lot of sense to them.
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20:03
They're doing it because it plays to their strengths, maybe they're leveraging their distribution, their hardware. They're used to base their payment method. And so if you think about it, should you as a smaller player, go up and try to do their strategy with less people, less budget and less assets, You're just going to become a lesser version.
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20:21
That's a likely outcome. So especially as a smaller player, I think you should do the opposite. Try to figure out if there is a position where that bigger player isn't playing right now and ideally doesn't even want to play because it's contrary to their business model, there is some sort of collateral damage of what in strategy terms is called a counter position.
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20:38
If you're a bigger play, it's a credible strategy to say we see some new behavior feature, user interface, really working, let's implement it and give it to our user base before they find it in this other user base and you've seen this play out in the world.
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20:51
That's a reasonable strategy if you're a much much bigger player. But
Spotify
has always been and still is a much smaller player than our competitors. So we tend to try to think about contrarian strategies.
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Harry Stebbings
20:60
Can you walk me through an example where you decided to do something completely different as
Spotify
to your competitors, where it worked or didn't work, but where you chose to do something completely different with this mindset back to mobile.
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Gustav Söderström
21:13
I described earlier this macrowind of smartphones started really blowing hard and we needed to figure out a free tier for the mobile phone, it was paid only at the time if you looked around then. And you said who our biggest competitors on mobile, free music listening it was and still is
YouTube
. And so what was the
YouTube
experience? Music wasn't is one of the biggest use cases for
YouTube
, they have a fantastic experience.
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21:35
That experience is foreground on the man playing with video, that's what you can do on
YouTube
. So it is amazing for discovering new music. But then when you put the phone in your pocket, the free application doesn't background. So it stops playing. We looked at this and one strategy would be that is what the market wants.
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21:50
That's the biggest player. We should go and get those same foreground on demand video licenses, that YouTube has. But the contrarian approach which we chose in this case was to say what if we did the complete opposite, what if we licensed a functionality that would work exactly where
YouTube
stops working.
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22:06
So we actually did the opposite. We licensed a back and shuffled here where you can play any playlist you want in shuffle mode in the background forever, but you actually can't play on demand in the foreground. So it turns out that
Spotify
mobile works exactly where YouTube mobile doesn't work.
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22:21
So we kind of said, okay, let them keep the foreground discovery that they're really good at as long as we get all the background listening and for us that's been very effective because it turns out that most of the listening is actually in the background. So that was an example of trying to be as contained as possible.
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Harry Stebbings
22:35
Can I ask you a bold question, how does that thinking change when
Spotify
now has video. I listened to all of my podcasts on
Spotify
. I love it as a podcast player now, but actually there's now video and often I'm listening to it like walking and I'm kind of looking at it and I'm in
London
and I'm kind of about to get run over and that would worry Shack.
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22:55
How does that change your product paradigm? Thinking when suddenly you do actually have to worry about user engagement and video, not just background play.
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Gustav Söderström
23:03
So back to the contrarian view,
Spotify
is the vast majority background application. And so that's what we optimize our music licenses for first of all in podcasts. We don't have to license. So we are allowed to play video on demand in the foreground as well.
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23:17
But if you look at what use cases were going after because we're mostly background application. The use cases were going after all these long, mostly backgrounded sessions, right, podcast. Typically we're not going after the foreground sort of silent ju jitsu videos that make no sense when your background because there's just a lot of panting.
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23:34
We're going after the traditional podcast And so what we did, starting actually with Joy Rogan podcast was we built video into
Spotify
, we didn't know what the usage would look like, but without saying exact metrics, what happened was exactly what you said.
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23:49
People consume the majority of the shows in the background, but they do bring it up every now and then we are using video mostly for the talking heads format, if that makes sense. There are these famous moments of Elon musk smoking weed for example on Joe Rogan podcast. It turned out to fit very well with us.
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Harry Stebbings
24:03
You disappointed me. I thought we could do the same. You've got some nice garden plants in the background.
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Gustav Söderström
24:08
I'm in Sweden, it doesn't work that way.
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Harry Stebbings
24:10
I'm in
London
, it doesn't work that way either. But no, I get you totally. Can I ask that, is there a time when actually you sat around the table and you went shit, we should have copied them. It could be
YouTube
, it could be any of the other competitors were actually doing the different didn't work out.
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Gustav Söderström
24:26
There are certainly tons of things. We should have been faster. I think lyrics as an example of that, which we now have a very engaging, that was obvious. So we've certainly been super slow for various reasons on these things. In that case it wasn't really because I had a contrarian view it was actually, which is often the case because of how the music industry works.
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24:44
So if you work normally at
Twitter
or
Google
or
Facebook
or something, you are as a product person, what you do is you try to figure out what the best possible thing is that you could build and then you try to build that, what you do when you work in the music industry is you try to figure out what the best possible thing is.
Share
24:57
Then you go to the labels and you try to license the lowest common denominator of what is license Herbal. And that often means that you can't build the best possible product. You have to build with much much narrow construe.
Share
25:08
And often actually the cost is a constraint because the job of a music label is to take a piece of IP. And try to sell it to as many times as possible a foreground, right background, right, video, right sync rights, all of these rights. You can see that as very annoying as a proper person or you can do what I do and see it as constraints are what makes the world interesting.
Share
25:25
Can you do something really good even within these narrow constraints? That's actually been the biggest problem I would say for that reason if you think about it, there hasn't been that much innovation in music listening. It is search playlist and so forth.
Share
25:38
We're working really hard. But it's not like other mediums where things changed completely. I think the biggest innovation, clearly in the last 6/7 years has been
Tiktok
who found like a new format of using music for something completely different.
Share
Harry Stebbings
25:50
How do you think Tiktot did that? helped me understand that
Share
Gustav Söderström
25:53
So it started in 2014 as musically there was a lot of trial and error. I've spoken to both the founders and there was a lot of trial and error and they sort of happened on this use case and they didn't start by going licensing stuff. There is a duty in being small enough that people don't care.
Share
26:09
And that's actually problem with being big. We can't really just try things. We have to license them first, which means we take the cost up front.
Share
26:15
So back then they were small enough to try this and they tried to do something different actually, but they found product market fit, they kind of saw in the data, what people were actually doing with these clips was recording dance videos and they lean into that and then later they started licensing and then they got acquired by dance and got more distribution and so forth.
Share
Harry Stebbings
26:29
Final thing on your shows. I want to touch on before we dive into basically a free for all from Daniel Shack Alex Nordstrom who finally actually responds thank you Alex is a crucial one, but it's better to be lower on a tool. A mountain than higher on a smaller mountain. Sounds wonderfully poetic. What did you mean by this? And why is that
Share
Gustav Söderström
26:50
When you worked with something for a very long time, whether it's a certain type of machine learning algorithm or maybe a certain user interface or a business model by definition, it's going to be very well optimized because you spent so much time on, it's going to be very efficient, but that also means that there isn't that much potential left in it because you've optimized and you're close to the summit of that mountain.
Share
27:11
And so that's a problem. And most companies get their, if they're good, they get there. So when you're at that peak, the problem is to get somewhere, you have to sort of change something fundamental, which in this analogy is you have to jump to a different mountain and that May sound a mountain that has a higher sum. It has more potential.
Share
27:27
The problem with that is when you jump from the peak of that first mountain, you're actually very likely to land somewhere at the base of the new mountain, you're actually gonna lose altitude, which means in product terms, your core metrics May go down and in many cases you might end up spending millions of dollars in a year just to get to where you were in the old paradigm.
Share
27:45
And as you can imagine, this is tricky in a public company, Wall Street pressure and many employees and boards and so forth. I've literally had this problem where speaking to sea levels and boards, where you explained that we spent millions of dollars in a year to get to exactly where we were 12 months ago and people ask so exactly why is that a success. Right?
Share
28:01
But then 12 months later you May have lowered your turn by 30% or something because you've iterated for another month. This is notion of first having the guts to move from one mountain to another and then having the patience to iterate your way back up to even control is very Tricky. But it happens inevitably and you can't avoid it because you're going to die if you don't.
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Harry Stebbings
28:19
Was this the case with the introduction of podcasts? Obviously we made the shift purely away from just music, obviously podcasts and then also kind of video podcasts as well. Was that the case where actually it took a year to invest to reach feature parity with podcast players. I'm intrigued on that one for sure.
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Gustav Söderström
28:35
Actually podcast was mostly additional. So we didn't go down down in metrics. Those cases have been when we change the user interface for example completely or you change the different recommendation algorithm or you change something fundamental. Your metrics May go down podcast was different because it was mostly additional.
Share
28:49
But it is true that it took a long time or internal goal was get the podcast catalog on the service and build best in class podcast player. Feature parity. That was the first stage. And then obviously the idea was to pull away to your point that took over a year. It was painful to spend that time, but it wasn't the problem of actually losing altitude in the meantime.
Share
Harry Stebbings
29:07
Where did you loose altitude? If you think back, what was it like? Oh God, we're back at the bottom of this mountain.
Share
Gustav Söderström
29:12
So let's take the same example that we discussed because there's context around it. When we finally launched this mobile free tier that was contrary into
YouTube
and they risked our business model. What happened was leading up to that because fewer and fewer people used the desktop free tier.
Share
29:27
Actually from the outside what happened was our conversion metrics look better and better looks like a larger and larger percentage were becoming premium but that's not because more we're converting, that's because the free user intake was going down. Right?
Share
29:38
So from the industry point of view, the conversion was at an all time high. And what do you think happened when we launched this massive free tier? It just dropped everyone downloaded a free app. No one converted for months. Right. The M au metrics the growth was very inspiring. That was an exponential curve but premium conversion was an exponential curve in the other direction.
Share
29:56
And as you can imagine many people labels and investors were wondering if that was going to catch up or if this was if we were down to like single percentage point premium conversion instead of like 30 40%. It did catch up first. We also needed to invest in ads monetization. So basically the analogy here is user metrics went up but monetization, both free ad monetization and paid conversion that dropped severely in altitude.
Share
Harry Stebbings
30:19
Are you shooting yourself in this moment? You have your board like putting pressure on you. You see single digits conversion, your investors are putting pressure on you. Are you nervous as a product leader?
Share
Gustav Söderström
30:30
I think you should always be somewhat nervous and paranoid and yes, I would say this, I had a lot of faith that conversion would go because we had seen so many years that the core correlation was, the more you use the free product, the more likely you are to convert to pay. We call it, the more you play, the more you pay, which always made sense to me, you're going to start paying for a product you use and love.
Share
30:49
You're not going to pay for something you don't use, right? So getting it to use it more means you're gonna not want the ads, you're going to want offline, you don't want to speak. So I was pretty certain of that. That was my worry. The worry when we launched this free tier was if it was actually good enough.
Share
31:01
This contrarian hypothesis that we had, it could have been B. S. It turned out to be true, but that we couldn't test that scale really. So I was very nervous about that. I think investors and labels are much more nervous about the conversion metrics and the ads metrics and also to be quite honest, I wasn't responsible for the conversion of the ad metrics.
Share
Harry Stebbings
31:19
So maybe other people are very nervous but they did a great job and it's wonderful when you don't have responsibility for certain things and the pressure zone. It's funny I speaking of other people within new york, I spoke to Daniel before the show.
Share
31:32
The number one thing he said that I had to ask you was, he said ask him about talk is cheap. I want to dive in this. What is talk is cheap. What do you mean by this and how does that come out in how you communicate bleed are?
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Gustav Söderström
31:43
It's sort of play on words. I believe deeply in this notion of Socratic debate. I love debating with smart people and I fundamentally believe that if we pay these high salaries that we pay in the tech industry for supposedly the best brains in the world, we should really maximize the value of that sort of rented brainpower.
Share
32:00
And yet I find that most specifically most us companies, they're quite hierarchical and very smart people often don't really understand what they're doing or why and they're underutilized.
Share
32:10
And if you think about it, that means they're actually overpaid for what they're doing, not because they're not smart enough because they're not leveraged enough in the tech world for a long time. There's been this notion of talk is cheap and that code decides arguments. So what I decided in order to sort of poke fun at that is to say talk is cheap.
Share
32:25
So we should do much more of it. In fact just talking and debating with really smart people who are not afraid of you importantly, which I think is also sort of a Swedish societal traits that you're not so afraid of. Authority is way cheaper than right code writing code is one of the most expensive things you can do.
Share
32:39
So this thing of code decides arguments. I never really bought that you should only do when you're quite sure writing and shipping code to millions of people and waiting weeks for a. B test is not cheap. And my favorite example of this is the Greeks and I guess it was democracies basically reasoned his way into the atom in fifth century BC.
Share
32:56
That shows how far you can get with just reasoning and debate. So it's very powerful. And I think if you do write and structured ways with the right people, sometimes you can sort of reason your way all the way to the end of something and literally save years by not doing something.
Share
33:10
And so that's what I mean with talk is cheap instead of having only one wants my teams, I tend to have a lot of quite long meetings with the entire team where we debate something, even if it's like one person quote unquote, owns it, inputs and the pushback from the rest of the team makes that person and that idea much better.
Share
33:26
And this is not new. This is what Nasa has done forever. But for some reason it's not that practice. I feel people talk more about the opposite separate swim lanes rather than how to work together.
Share
Harry Stebbings
33:34
I'm going to dive in here and put my side and you're going to tell me I'm a moron. I think talk is very expensive, especially in early stage companies, it's about speed of execution, it's about getting shit done and I'm invested in a couple of companies where we want to talk to debate. Yes, there's theorized on the future of privacy. No judgeship learn iterate, go, go, go. Why am I wrong?
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Gustav Söderström
33:56
The way to think about it is there's a difference between being fast and being right. You can go very fast to know where your code every day, but if you're fundamentally wrong, you're just going to get to know where extra efficiently and fast.
Share
34:08
I found especially if you're doing more complex thing and maybe this is actually because I come from the music industry, we're building products had to be licensed as the lowest common denominator between 34 majors. The impact of being wrong being 34 years because that's a term of one of these licenses and maybe we've been trained as a company to be more careful because the cost of being wrong was incredibly high.
Share
34:28
But I actually think that cost of being wrong forced us to model the world better and longer maybe because we were afraid of mistakes. But I actually think that grew in skill at
Spotify
. Of course you can debate endlessly. You need ownership, You need to make decisions and
Spotify
is certainly being guilty of being too unclear in who owns something and it can slow the organization down.
Share
34:47
But fundamentally, I think now we have a really good balance where quite a lot of people actually have a fundamental strategic view and this debate builds a lot of alignment that actually makes you faster, especially if you need to do something that is bigger than your own team.
Share
Harry Stebbings
35:00
My final one on this is I do like it in many ways, especially for larger companies, often more junior people or even middle tier people will not feel the security to express their true opinions against good stuff. You say something and you say it with energy and charisma and conviction.
Share
35:16
It takes quite a lot if you're new or junior to say, I totally disagree with you. How do you think about creating environments of safety where more junior people can have debate and disagreement in a productive way.
Share
Gustav Söderström
35:27
I saw that shift pretty clearly when we started hiring more us people were just used to hierarchy. There were a lot of misunderstandings between Swedish people and Americans in many ways.
Share
35:36
Swedish people are better at some things, but they're much worse at other things. They do. The Swedes do this form of silent disagreement that Americans interpret as actual agreement, but it's not, you're just silent and you disagree. So lots of cultural challenges there.
Share
35:50
But I think the way to do it is to model the behavior back to what I liked about Daniel is he models that behavior. So in his team you can debate quite fiercely, you can tell the Ceo in a pretty heated voice that you disagree, you don't like that and you're not going to get fired.
Share
36:02
I think it starts there. I try to do the same thing, having heated debate with my direct reports often in front of their direct reports and sometimes it's a little bit shocking maybe for them, their figure like now my boss is going to get fired and then he or she isn't and it's fine and then they learn that okay.
Share
36:19
It's apparently okay to disagree. That doesn't mean to your point of efficiency that you don't need to make decisions, you need to sometimes disagree and commit. But I try to call people out in a positive way in the meeting and say like, what do you think about this?
Share
36:31
And obviously the first time someone might be nervous. But if the rest of the people in the room said what they actually think other peop tend to as well does zoom and
Covid
change the way that you do these sessions and these debates.
Share
Harry Stebbings
36:43
And do you feel that there is a change in the quality of the debates in a virtual versus in person world.
Share
Gustav Söderström
36:49
I've been trying to figure this out. I actually think some of them have gotten better. The notion of seeing everyone on screen and having to sort of mute, it's given a bit more structure because you have the obvious problem that some people would dominate a discussion when it's live. And I have actually seen less of that problem over zoom.
Share
37:04
The other thing I've done, which is interesting during
Covid
is I've simply put my airports in and then had like remote walking talks with individuals with groups of people where you work for a few hours and sort of group talk. So I thought when
Covid
happened that what would really suffer was strategy discussions and that kind of ideation, but it hasn't.
Share
37:22
So I would say one of the things I also tell my teams that I think is quite different from what many other companies do is I find that a lot of executives, they look at their organ, they try to split it as much as possible. They try to divide and conquer and cut up the organ as many independent units as possible for the purposes of sort of parallelization. That makes sense.
Share
37:42
From a point of view, I've chosen to do the complete opposite in my organization because even if I have a really big organization with thousands of people at the end of the day, it's just one user who is going to use this application. They're not gonna care whoever built this, they don't care about who the library team is or who the search team is.
Share
37:58
The experience need to feel as if it was built by a single developer for a single user. So when people come and talk to me about swim lanes and how they want more independence and so forth, I tend to tell them that they're doing the wrong sport. We're not doing competitive swimming, we're doing synchronized swimming, it's much harder, but it's also much more beautiful to watch.
Share
38:15
That's what we want the product to look like. And that means that it's quite different to work and
Spotify
than many other companies. You're going to have more debate because I'm always trying to synchronize my leadership team instead of trying to divide them. And basically what I believe in is this old maximum you want to go fast, You go alone, you want to go far, go together. Certainly
Spotify
wants to go far.
Share
Harry Stebbings
38:33
So we over emphasize on that in terms of synchronizing leadership, I'm too interested, what have you done that has worked and what has not worked that you've disregarded.
Share
Gustav Söderström
38:41
If we start with what has not worked the mistake you can do in this not having swim lanes. It's very unclear who is responsible for anything. Everyone is responsible for everything. No one makes decisions often in
Spotify
because they're too nice.
Share
38:53
That's actually a bigger problem than people being too aggressive in other companies, you May have the opposite. That if it's unclear, people are going to power grab, I've seen the opposite. It's like people don't wanna step on other people's toes so they don't make decisions. So that's a problem with this model.
Share
39:04
So you still need to make it clear where the ultimate decision or responsibility and accountability lies and that's a balance. If you go too far, you're going to create a swim lane and this person is going to run away and do something and think that everyone else in the company is a moron and everyone else is gonna think everyone else is a moron.
Share
39:20
The Tricky thing with this is finding the balance of accountability and ownership. So you feel agency but still having a single strategy and having alignment. So I'm kind of forcing, let's say you own what the end user experience looks like.
Share
39:32
You actually have to take your strategy, bring it up in this form, debate and defend it. It maybe other people disagree and they have to disagree and commit, but your responsibility is to be able to explain your strategies and answer these questions and if you're there and you can't answer any of these questions, you're probably going to adapt if you're there and you can answer all these questions then it's fine.
Share
39:50
So it's sort of self regulating. But what I'm doing is I'm forcing people to sort of bring up their ideas and have them not critiqued but have them debated.
Share
Harry Stebbings
39:57
We mentioned like hierarchies there often with scaling companies bluntly, leadership changes are very normal and they happen and they have happened that
Spotify
as they do in every company, you and Alex I believe the only ones who survived multiple layers of leadership transitions obviously with Daniel, my question to you is a question from Shack.
Share
40:17
How did you have to reinvent yourself with each stage? And what moments did you have to develop the most? So it sounds like an episode of hunger games, the only ones left your gun, your death cake please.
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Gustav Söderström
40:31
So I think there are two pretty distinct moments. One is in the early days coming into
Spotify
and having done my own startups. Those startups were small when when I sold them, they were 20 people or something like that.
Share
40:44
So I had a very distinct leadership style which I sort of learned in the army which is leading by example very simple but very effective. If you want people to do something you just have to do it yourself first, right?
Share
40:53
So if you want your team to work weekends to hit a release, bring your sleeping bag and you sleep on the floor next to your team, you can't code, then you go and buy pizza for the team or something.
Share
41:00
It's incredibly effective and so for small teams, I still recommend that and I think people under estimated but I came to this point that
Spotify
where it didn't scale, you can't sleep in that many different rooms at the same time and I just had to change and that was quite painful.
Share
41:15
So I had to change from this sort of leading by example, it was painful in two ways, I ran out of time to many teams and also you can't really be that deep on everything. So I had to change my leadership style and instead start to coach other leaders to lead teams.
Share
41:30
And that was a painful moment for me because I didn't really have any coaching or anything like that. I just had to sort of reason myself, what is it that's happening?
Share
41:38
Why am I constantly running out of time and when you do something that works, you're likely to just keep doing it and keep doing it. So that was one challenge.
Share
41:45
Another challenge was when deep learning really happened around 2014 2015 or something like that when it started happening and I had been out of
University
for quite a long time, so I didn't really code anymore and I felt that I wasn't deep enough in this to credibly lead this change because it was very clear to me that it was a fundamental change.
Share
42:01
So I basically had to go back to school and start from the basics, start doing the math coding, doing all the examples bottoms up and implementing all the code.
Share
42:09
And then this took a long time until I could start reading scientific papers and sort of educate myself on this, that was hard because it cost so much time for me and for my family, but I think it was incredibly important and it certainly paid off for me and hopefully for the company.
Share
42:24
But that was tough because this was a tough time for
Spotify
as well to find all that time to re educate yourself on something rather complex. When something like crypto comes along, if you're going to be a technology leader, you need to understand it deeply, otherwise you can't evaluate what you should do.
Share
42:38
So that was another moment of kids back to school again, start coding, have to read, you have to start reading papers, it's hard to keep up with, it's easy to slip into like I'm just a manager now, totally agree.
Share
Harry Stebbings
42:47
It's hard. You could have hired in, you could recruit ahead of, you could bring those skills in house and remain in the same position that you are. Why did you decide to integrate vertically yourself versus add on with an existing talent?
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Gustav Söderström
43:01
I mean, I'm an engineer at heart, I hate working for people who don't know what I'm talking if you talk to your boss and you're like this guy or this girl doesn't have a clue what I'm talking about. You have a hard time respecting them. So that's how I feel. I feel like an impostor.
Share
Harry Stebbings
43:12
If I don't understand what I'm supposed to be responsible for the second thing, whether it's sleeping in the office with your team, whether it's the late nights running to get the pizza, whether it's going back to school to learn Ml your family respectfully are the ones at home without you. How do you communicate the value of what you're doing to them, where they see the importance of why dad's not there?
Share
Gustav Söderström
43:32
Ask them to listen to the podcast now, it is a great question. So, I've heard many people talk about this. I've certainly felt it myself, you're so engulfed by your work and you get a lot of feed positive feedback from work, as long as at least as long as the company is going well and you try your best to be a good leader and inspiring and so forth. And then at home you're actually not inspiring at all. You kind of suck.
Share
43:54
And so my wife, she is the one who said this, like, I need to come and see you at work every now and then. So I understand what it is you're actually good at, because at home, I don't see it, like, and I think she has a really good point there and like, you need to be impressed by each other and remember that because when you see herself day to day, you mostly see the the not so impressive sides of each other.
Share
44:15
So we try to do that. I try to make sure I see her doing the stuff that she's really good at and she's made sure that she sees and cares about some of the stuff I do, and then you find this like love and respect for each other and you re find it, that's the best way I've found. I try to do the same with my kids every now and then bring them along and see what I do and that helps.
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Harry Stebbings
44:31
But there's no cure for like you want to spend time with your family and I am quite Esther Perel who obviously spoke of brilliant minds and I'm sure you know well, but she says you're most attracted to your partner when they are in their element, when your wife sees you needing a product review, she's like Gustaf maybe, I'm sure.
Share
44:48
And like final one on just you and then we're going to do a near death experience and then wrap up with a quick fire. Do you have any other? I've seen you and your wife and it's this beautiful marriage and relationship. Do you have any like genuine relationship advice to me on what it takes to have such a strong and loving marriage and relationship Tricky question.
Share
Gustav Söderström
45:08
I mean, I actually met my wife when I was 20, she was 19, we didn't marry for many years.
Share
45:15
We had a very long sort of trial period. It's like a Freemium model.
Share
Harry Stebbings
45:18
Right?
Share
Gustav Söderström
45:19
So when we married, we were pretty sure. So we were together for a long time before we married. I was working quite hard. I was traveling the world before I started working very hard. She studied and traveled. We lived in different places.
Share
45:31
So we had a lot of freedom and have known each other for quite a long time before we actually started living together. So I think that was important. Neither one of us felt I need to go explore and feel like I'm missing out. We had done many of those things even though we met earlier, I would also say that my wife and I were certainly differently many ways, but we are very similar in values.
Share
45:49
We almost never have disagreement on values what we think about things then we are very different in terms of our skills completely different and I think that's a benefit. She's fantastic at the things I'm really bad at.
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Harry Stebbings
46:01
We complement each other really well and we all share a common dislike of loud music and parties. I remember congregating with you in the corner but I totally get you and I appreciate that final one on just the leadership, you come across as so self assured, calm, confident with conviction.
Share
46:16
When you review your leadership Steger staff, is there any elements where you're like, I could be better here? That is a weakness of my leadership.
Share
Gustav Söderström
46:23
I think everyone has imposter syndrome. And certainly when you when you're fortunate enough to work in a company that grows as much, even if you have the same title, I've been sort of CPO cto for several years. It changes every year because first you're CPO of a tiny Swedish company.
Share
46:38
Then your CPO of a Scandinavian company then of a global company, then I'm listed new york company. The job changes all the time and every time you feel like there's no way I can be that person, you're an imposter all the way. I think, I think I've grown to understand my weak spots better with age.
Share
46:54
I already told you one, which is I sort of have this global Ceo perspective, which is helpful I think is one of the reasons why Daniel likes having me around because he feels like I care about the outcome of the company. But it is also Tricky when you get in other people's ship. That's always Tricky. So I have all kinds of laws.
Share
Harry Stebbings
47:10
I would also say elegance of communication. It's Tricky when you get in other people's shit Gustav wonderfully so beautifully elegant. The final element that I do have to touch on before a quick fire.
Share
47:22
I spoke to me before the show and he said there are many near death experiences that are kind of wonderfully entertaining slash educating. If you were to choose your favorite near death experience to tell what comes to mind for you.
Share
Gustav Söderström
47:35
Like Mike said there are actually a few, I've seen
Spotify
have negative growth actually losing users and contracting at least twice. And I speak to people in the industry is very rare, People have seen that, but the company never survived to talk about it, right? It's very rare to actually see it and survive.
Share
47:49
But I think the favorite near death experience story that I don't think it's widely known quite early on we talk about the labels and negotiation with labels as sort of being frustrating. But it's not in a sense because it is their job to represent these artists and try to maximize the value of their I. P.
Share
48:04
And I actually think they're doing a good job of it frustrating as a product person. But we've developed this really good relationship with the music industry and these labels. But early on it was different. I don't know that they actually believe that
Spotify
would work.
Share
48:15
Maybe they felt that you could get access to cheap VC money here expecting us to sort of belly flop over. And so it was more tenuous relationship. And they certainly didn't understand the model. And so they were very scared of the free tier, the desktop free tier. And their notion was that if you just make the free experience worse more people are going to convert.
Share
48:33
And I was the opposite notion. As I said, I think the more you play the more you're gonna pay that's what the data showed. But one of the labels sort of put a gun to our head and said you can't have a free tier anymore. In that case we're gonna pull our catalog from free and premium. And so for us we decided it was existential and we decided to fight it.
Share
48:49
So we built this thing called the switch, a switch that you could pull that would basically remove like a quarter or a third of the music catalog will break everyone's playlists basically be horrible experience for both free and premium users while our competitors would have full catalog. So probably catastrophic. But we decided to fight it and say this is important enough, that we have to take that risk.
Share
49:09
So we built this and I remember sort of being responsible for the one should pull the switch. And we had a team negotiating the licenses. So we were supposed to pull the switch at midnight and basically take off this catalog and millions of users who get this match is like your music is gone somewhere around half past 11 at night. We were sort of starting to say our goodbyes to each other.
Share
49:29
And then that was a pretty scary moment. And then the call came in not long before midnight that they had back down and we could keep this catalog. And so for me, that was sort of our cuba crisis. I think we were very close to total annihilation in that moment.
Share
Harry Stebbings
49:44
God, that is pretty terrifying. Why did you decide to fight?
Share
Gustav Söderström
49:47
I don't think we had a choice. We believed in the strategy. We have we believe that this was the model, at least for us. Freemium was the only model we had seen other players. I think it was like Nokia comes with music and stuff who tried to go straight to premium and it didn't work.
Share
49:59
People didn't think they wanted to pay for music at the time. You needed a free tier for us, we had to make sure that this was a credible threat that we were actually prepared to go down and we were we would have, I don't know what would have happened, but we were final one for the quick fire.
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Harry Stebbings
50:12
You mentioned the constraints that labels bringing, licensing brings if labels and licensing were entirely
Spotify
entirely integrated. Just in a hypothetical world, from a product perspective, with the removal of constraints, what would you do in an ideal world?
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Gustav Söderström
50:26
I think what I would do is I would try to make the music experience much more interactive. I think this is what you see with
Tiktok
as well. I think users want to participate in the music, they want to use the music today, they can use it to make dance videos. But I think there's so many talented musicians out there, but the licensing world means that they can't use a beat from the song that they love.
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50:45
If you think about coding as an analogy when you want to learn to code what you do is you go to guitar and then you have this vast library of open source code that you can use and you can look at and you can start prototyping from and building and there isn't anything like that in music, there is no key for music.
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50:59
That's probably what I would change. And I think that's the reason why music has actually had very little innovation. The track is sort of still three minutes and an interim two courses 100 years later, almost that's probably what I would try to do just innovate on the format.
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Harry Stebbings
51:12
I read somewhere about Olivia Rodrigo and how she has changed the structure of her actual songs to accommodate the changing algorithms of music whereby choruses are much more brought forward. Is that true? And is this a new music creation process to fit technology?
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Gustav Söderström
51:29
Absolutely true. We've seen small versions of that as well. When you move from the download world to the streaming world, there is in a financial sense, no marginal cost to try another track, which means you're going to start exploring more. So it gives more artists an opportunity.
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51:42
You're also going to start to listen to a lot of new music like sleep music and focus music. Whereas if you paid a dollar per three minutes, you probably wouldn't sound track your sleep entire industries popped up because the business model changed and they adapted the music, but you also see it because people now have show attention spans, you can see the chorus moving closer and closer to the beginning of the song, right?
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52:02
Everyone is trying to optimize for the first few seconds and I don't know if I think that's good or bad, but it is what it is like incentives and systems drives behavior for sure.
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Harry Stebbings
52:11
I totally agree. We see it on
Tiktok
, it's all about grabbing the attention in the 1st, 2nd and a half, which is absolutely when you get to my age, Gustav and you have to be in front of the camera. But anyway, but I want to dive into a quick fire. I could talk to you all day.
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52:24
So I say a short statement. You give me your immediate thoughts, does that that sounds good. This one was actually from Daniel which is what is the future of podcast and audio and he added will future Harry have a job which is an unnerving edition.
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Gustav Söderström
52:39
I can't say exactly what it is. That's a secret. But what I can say is that I think it is at least as large as social networking to three billion plus.
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52:46
The way I think about it is I think music and actually podcasting is a core human behavior like communication and that means that the total addressable market should be the same. That's the reason that I keep working here. I think we're far from scale at this business, not on schedule, but I'm intrigued.
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Harry Stebbings
53:02
Do you agree with Mike Mignon a suggestion of the disregard of the social graph and the movement into the media recommendation engine for sure.
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Gustav Söderström
53:11
Spotify
went through this journey and this is one of the macro wins that we saw quite early and Mike and I have discussed this at length.
Spotify
started as a, I wouldn't call it social media, I would call it curation media different version of the same thing, which means the internet started with you taking something offline friends, books, music and then asking your users to curate it into graphs.
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53:30
Playlist from graphs that was a pattern. Right. And that's where
Spotify
grew up and then it shifted from curation to recommendation where users weren't prepared to put in all of that work to soundtrack themselves. We actually had an in between which was editorial, what we had editors so professional play listers that helped curate for you.
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53:46
But the natural extension of that is to start combining the editors with machine learning. Right. And now we have many machine learning set. So we actually made a bet on the shift from curation recommendation or social media to recommend media four or five years ago and rebuilt the application quite drastically.
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54:01
And today I would say we are a recommendations based company much more than a curation based company, completely unfair again. But joys of being my show, which competitors do you most respect and why I have a great deal of respect for all of these sort of big tech companies. The usual suspects the googling
YouTube
apple amazon
Facebook
and so forth.
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54:20
But what I think is interesting specifically and impressive about this set of companies that I think is different from the previous set of companies. I think there's a reason we call them technology companies and some people say that makes no sense. Car companies were also technology companies at the time everything was a technology company until it became old.
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54:37
But I do think these companies are a bit different because I do think they think of technology itself as the strategy. What do I mean by that? I mean that people try to label them, they try to label amazon as a book company and then as a book and diapers company and as a as an everything store.
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54:52
Then they started doing AWS and like people can't like pin these companies down. Same with
Google
they were a page on the internet search page then they became the start page of the browser and then they became the start page of a browser and os and they did email and then they did photos and so forth. These companies, they refused to be categorized as what they are and they keep changing all the time.
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55:12
And I think it's because they think of technology itself as a strategy. So technology is this gift that is going to present opportunities to you every five years. It's going to be a broadband, a smartphone and a I a crypto or something and the job of this company is not to say like no we're a car company, we're gonna do cars.
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55:26
They're saying that we're a technology company we're supposed to understand and master these technologies very quickly and then figure out how we can change our business model to leverage these things. And that's why they keep changing. And so I think there is some chance that these companies will be around longer because they refused to answer to the question, what are you?
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55:43
They just say like, I don't know, ask me tomorrow. They keep changing and that's how I want to think about
Spotify
as well. One of the reasons we went from music to podcasts and audiobooks and people sort of wanted to keep us in the music companies shouldn't be doing this. And then it's like, okay, I guess you're an audio company but you definitely shouldn't be doing video.
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55:58
People want to sort of keep us back, but I don't think there's any stopping. I think you always need to like ladder up and so I think of us as a technology company in that sense, my job is to understand technology and how we need to reposition ourselves all the time to leverage this new technology.
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Harry Stebbings
56:12
There's no reason why that we would be at the end of history right now in terms of technology, it's one of the biggest lessons that she taught me, which is like people always want to put you in a box number one until you have to earn the right to do the next thing.
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56:23
But what's got you to where you are won't necessarily be what gets you to the next thing and actually it's one of the biggest transmissions I've had again, thanks to shack. Which product leader outside of
Spotify
do you most respect and admire people answer mostly the same things.
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Gustav Söderström
56:39
But to say something unexpected, there is a product that I have specifically fallen in love with over the last year. I actually don't know the name of the product leader. I try to learn new stuff every now and then and after machine learning, I took a break and then now I'm trying to learn a few new things and one of them is playing the piano.
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56:55
When you're working at a music company, you should probably be able to play the piano. I've been using this application called the simply piano. You hook up to your piano over meeting I really like it for two reasons. First. It's really good application.
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57:07
What you want to do when you start to play piano. You don't want to start with these child songs. You want to start right away with the rock songs. So what they've done is they've painstakingly and I have a lot of empathy for this because I work in the music is they've painstakingly licensed all the popular music.
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57:20
So you literally get your taylor swift or whatever it is that you want to play and, and they've staged it so that you start playing and you're actually only filling in a few notes here and there, but it sounds amazing. You think you're a full bleed piano rock star from day one.
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57:34
So you're having a lot of fun. It's like a competition. You get scores for hitting the right notes at the right time and so forth. It's like a little game and it takes like maybe five minutes to master a song and then it gets progressively harder.
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57:43
And at the end and I know because I am at the end I got this sort of end of year note from them where it said it was the top 1% of their user base as I've gone to the very end at the end you're actually playing the full songs, all the chords and accompaniments and so forth. That's actually my favorite application right now.
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Harry Stebbings
57:58
The hard thing is that often for me as an investor, great products don't always lead to great investments, fundamentally. A lot of products like that as great as the products are, unless you get the incentive frameworks right for usage point being, it doesn't lead to a great investment often. And that's the thing that I find so hard as someone who loves product as much as me is you have to be more multifaceted.
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Gustav Söderström
58:19
It does. And actually I'm glad you brought that up because you asked about like insights sort of through my career. I've always been incredibly passionate about technology, even for the sake of technology and products, and I find so much joy and like I wonder if we could build this thing, just see if we can build it. And at the beginning of my career that means you undervalue the importance of the business model.
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58:38
But what made it click for me and I think this is true for many. So what I talked to my teams about now is the greatest innovations are when you find a new technology and you change not just the product and how you use it, but you change the business model. Those are always the most disruptive changes to some people who care mostly about design or product.
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58:55
It May almost feel like making money something bad and something negative and it's only Vcs to care about money. The way I phrase it is, if you want to build the greatest product on earth, it's going to require a lot of engineers. If you have a 20% margin and your competitor has a 40% margin, you both make a dollar, they're gonna hire twice engineers, they're gonna build twice as good product.
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59:14
You want to finance that product passion. So you need a good business model. I found that a useful way to get people more interested in how you can innovate on business models as well. My big passion is actually to try to combine consumer innovations with business model innovations, it's much harder, takes longer. But if you can do it, it is the most exciting thing and it tends to have the most impact.
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Harry Stebbings
59:33
There is a business model innovation. I cannot believe I'm saying this with Web three in crypto it's a Tricky question.
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Gustav Söderström
59:40
I love crypto from that technology angle I'm a sucker like many people for this. This is like two computer science innovation. I'm very excited about the possibilities of trust, less cooperation and so forth.
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59:51
But like everyone else the very near term May be a bit dissolution with the fact that while the promises there for sort of trust this corporation actually one of the biggest problems seems to be how you trust other people on this network and you sort of go back to the web to world to actually verify who someone is.
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01:00:07
So I think it's early, I am fundamentally excited about it from a technology point of view but I don't yet have a have an opinion on if there is a business model there, I have a feeling that like Ai and other things it will take quite a long while there's a chance that it becomes a fundamental part of the infrastructure just further down that actually powers a lot of things and it's very valuable but it might not actually be on the consumer end.
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01:00:28
That might be one of the mistakes that consumers don't care so much about cryptography but if you can solve fundamental problems on the TCP IP level could be incredibly valuable and ultimate one for you.
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Harry Stebbings
01:00:37
What would you most like to change about the world of product.
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01:00:40
Like mine is like the rise of like operated product leaders and what I mean by that is the operated product leaders bring in process bureaucracy. The only word they ever say is alignment and they do very little.
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01:00:53
They bring this red tape and process and they really irritate me.
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Gustav Söderström
01:00:57
I did spend a lot of time earlier in my career on frameworks and models to work efficiently. We had some internal frameworks and we used lots of external ones. I don't spend so much time on it anymore because the company is so big that the different product leaders within my work they tend to have their own processes and sort of higher level. What I would like to change is to try to demystify it.
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01:01:17
I'm trying to do through the podcast. People talk about whether product is science or art and most people tend to answer that it's art but I think that's mostly for self preservation purposes. That's the so called conspiracies against the latest furniture said you want to protect their own profession by making it seem really hard. There are lots of product.
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01:01:34
People who have seen a lot of products so they have good instincts and they can make the right decisions but they can't explain it and then it looks like art. I think they're really good product leaders, they can actually explain their thinking that's much more valuable because then you can share it. So I actually think product is 100% science and syrup.
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01:01:49
I know it's going to upset some people. I feel like my mission then is to try to demystify it for example through the podcast and make it much more accessory.
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Harry Stebbings
01:01:58
If you think it's 100% science then it is 100% replicable and it is not 100% replicable. It is clear that like Tony fidel
Scott Belsky
, the innovations and creativity that comes from visionaries like them. And I would say from you absolutely in the same category, I'm defending you here, you are wrong. It is not because we can't replicate just to have 100 times over. That's why you are you.
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Gustav Söderström
01:02:21
But I think really great leaders, they are able to introspect themselves, synthesize how they think about something. It is hard to do, but it is possible and then try to scale it and if you can do that, it makes the entire company much better than you bottlenecking the entire company.
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01:02:35
I actually don't make a lot of the product decisions that
Spotify
, I have lots of opinions and I sit in these meetings but I feel like I managed to build a team that is at least it's good and often much better than myself at product instincts and I think that's because we've spent so much time trying to understand and talk about how we think about the world instead of just saying like no, my neural network here has a lot of pattern recognition, so I'm going to say what's right?
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01:02:58
Of course great product leaders who have seen lots of product, they're going to make the right decisions because they have pattern recognition, but that doesn't mean that it's impossible to try to figure out why you have that recognition is just much harder and often times you're like, I just know that this is right, just trust me, I don't want to spend the time talking if you were forced to, you could try to walk through the steps of understanding why and I think those lessons are the most valuable part.
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01:03:20
So I want to argue that it is science doesn't mean that science is easy, but I still think it's science, whether you happen to have very good instincts and then you just internalized the signs, it's still science.
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Harry Stebbings
01:03:29
What's your favorite memory of working with Shack the many years with Shack? I have many but I'm intrigued.
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Gustav Söderström
01:03:35
What I think is special about Shack and why he is such a core part of
Spotify
is history.
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01:03:40
Is that as I said,
Spotify
is from one view, a tech company kind of grew up in this era of leveraging new technology and as I said that I think that is our core, trying to always understand new technology but it is also right in between this world of nerds and hardcore tech like myself and rock and roll and that's always been really interesting that
Spotify
when you're sitting and you're writing code and then Kanye West comes and knocks on your shoulder and there are these surreal moments and Shack happens to be responsible for most of the he has this incredible ability.
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01:04:10
I haven't met a person that doesn't like Shack and I think he is the embodiment for me of marrying the technology world with Hollywood and the music world and it's very hard to find that kind of person in a company like this and to get that person to be able to work in a company like this.
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01:04:27