Sarah Tavel: commitment

Transcript context

…Awesome. Okay, cool. So you've touched on a number of the important elements of this hierarchy, so let's dive in. Okay. There's probably a couple core insights, but the first one that I think about with this hierarchy is that when you're building a marketplace, you actually have to start from the goal and work backwards from there. Now, what's the goal? Marketplaces, I mean, you have so much incredible content on this, they're just incredibly difficult to build. You're basically building two companies at the same time, right? You have the product and go-to-market org for the demand side, the product and go-to-market org for the supply side. And somehow, you have to make these two line up so that they serve each other's needs. It's an incredibly difficult dance. And yeah, it's one of the hardest types of companies in the software world that I think you can build. And you do it because you think about the the full expression of these models and you think about companies like Airbnb or Amazon or eBay or Google, where once you have scale and have very dominant market share, you have a product that just is the best place without question of fulfilling this need. And they end up being very profitable cash-flowing businesses. And you see that, and that's the business that you want to build, that's why you're going through all the hardship of building a marketplace, getting the marketplace off the ground to get to that place. And there's kind of very clear analysis. I published it in the hierarchy. I have this incredible graph that I remember seeing when I board observer for this online classified company called OLX led by Fabrice Grinda. And it kind of shows that the more dominant a marketplace is relative to the number two in its space, the more profitable that business is. And so, it's just like a very clear like you don't want to be... Obviously, when you're building a marketplace, you don't want to be in the middle of the pack, but even being number one but just barely number one doesn't give you any of the benefits of a marketplace model, you're fighting for each incremental point of market share. It's not clear to the supply side or the demand side that you're like the main place to be. And so, it only becomes really clear once you have that dominant market position where you're just so much bigger than the number two And the only way to get to that place, to get to that moment of real dominance where you have this winner take most dynamic is that you have to tip your market, and that's the only scalable way to do that, and that's what level two is. And so, how do you maximize your chance of tipping a market? You have to focus on a really constrained opportunity, and that is level one. So that's kind of like the broad framing, which is like a really important thing of how, when you're building a marketplace, you actually are building towards that point of dominance. And so, it's part of the reason why being really, really, really focused in level one is so important. Awesome. So you walked through this backwards. Just to summarize in case people didn't totally catch it, basically, layer one is focus, layer two, tip the market, layer three, dominate the market.…

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