Lenny Rachitsky: belief

Transcript context

…Yeah, yeah. Well, you ask the question, how can we solve... Well, how can we either solve that problem at a much lower cost, so we can always be a sharper price point than them? So, if there are solutions, but they cost 50,000 a user because their costs are 30,000 a user, we can do this for $15 a user, and so we can charge $100 per seat, and absolutely annihilate the competitor by figuring out a less costly way to do it. Or there are other selections, but they make the user do all these things, and it's ponderous, and it takes a long time... We have shortcuts, we use AI to, you just say a few words into it, and they say, oh yeah, I know what you mean, and here it goes in the workflow. Or we're more integrated, like Thomson Reuters, the company I was on the board of, our advantage was we were better integrated into the workflow. You didn't have to get out of your workflow to go use this product, and then you get back in, we just said, what's your workflow? Oh, well, integrated. Is it better integrated into their workflow that makes their life easier? It would be questions, possibilities like that that I would be asking. Essentially, you've got to have a theory there, of how are you going to be better or lower cost. On the lower cost front, I think generally the advice is you don't want to go that route, that's a very difficult route. What's your thinking of just when to go that route that you might actually win at lower costs? That's not advice I give. I think they're both completely legitimate strategies. They have implications. So, if you want to be the cost leader, it is rare that you can be the cost leader without having dominant scale in the territory in which you're operating. So, if you want to be a niche cost leader, good luck to you, that's almost never going to happen. So, Vanguard had to make a race to, we're going to do index mutual funds, and it doesn't exist now, we're going to do it and we're going to get gigantic, and we can't let anybody get close to us in size because we want to have the lowest cost position. And so, they are the world's biggest mutual fund company, and you have to do that, and same with Southwest, to really make that model work, they had to keep expanding and expanding to get bigger. M&M Mars... It takes an enormous amount of commitment to say, we're going to go, and we're just going to keep charging ahead on this. Whereas, in differentiation, I think you can differentiate sometimes at lower scale, and build yourself slowly towards higher scale. But the business world is just getting so much more scale sensitive. When you think about the costs of differentiation, it's often spending on branding, spending on R&D, R&D innovation. Those two are of the most scale sensitive elements of anybody's cost structure. And so, being a niche-y differentiator is getting harder and harder in my view.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.