#40 Ben Thompson: Thriving in a Digital World
Ben Thompson, author of Stratechery, discusses his unique approach to analyzing tech strategy and business, his successful subscription model, and how the internet fundamentally reshapes industries by shifting power from controlling supply to controlling demand. He shares insights on business alignment, avoiding bias, and future economic shifts.
Deep Dive Analysis
20 Topic Outline
Stratechery Pronunciation and Ben's Background
Stratechery's Unique Approach to Tech Analysis
Stratechery's Subscription Business Model and Philosophy
Daily Metrics and Dealing with Content Replication
Ben Thompson's Daily Routine and Writing Process
Admitting Mistakes and Combating Confirmation Bias
Information Consumption and Research Methodology
Facebook's Impact on Media, Politics, and the US Election
Internet Strategy: Shifting Power from Supply to Demand
Core Principles for Internet Strategy in an MBA Class
Disruption of Traditional Industries by Internet Assumptions
Comparing Demand Control of Google, Facebook, and Amazon
How Dominant Companies Fall: Paradigm Shifts and Mindset
Consolidation in Old Media and End of an Era
Bundling, Unbundling, and New Points of Integration
Venture Capital, New Business Models, and the Future of Work
Tech's Influence on Payment Systems
Social Media's Societal Impact and Government Regulation
Lessons Learned from Running Stratechery
Ben Thompson's Knowledge Organization and Retention System
8 Key Concepts
Oregon Trail Generation
A distinct group of people (roughly a five-to-six-year range) who grew up with virtually no internet in their lives and then fully transitioned to having internet-immersed lives, retaining memories of both eras.
Systematic Thinking
A way of thinking where one views things in interconnected systems, understanding how different elements influence each other down the chain, rather than focusing solely on isolated details.
Aggregation Theory
A framework suggesting that in the internet era, power shifts from controlling supply (e.g., owning printing presses) to controlling demand (e.g., owning the customer relationship on a platform), leading to dominant aggregators.
Zero Marginal Costs
A fundamental change brought by the internet where the cost to distribute or transact an additional unit of a digital product or service is effectively zero, allowing for infinite scalability and disrupting traditional business models.
Barbell Effect (Internet Economy)
The phenomenon in the internet economy where significant returns accrue to the largest players (massive platforms) and the smallest, most niche businesses, leaving those in the middle struggling.
Digitized Time (Netflix)
Netflix's innovation of removing the linear, scheduled constraint of traditional TV, allowing users to watch any content at any time, effectively digitizing the concept of time in entertainment consumption.
VC as Financial Equivalent of Software
Venture Capital serves as the financial mechanism for technology businesses, providing massive upfront investment for ventures characterized by high fixed costs, near-zero marginal costs, and uncapped returns.
GDPR (General Data Protection Regulation)
A European regulation that imposes strict rules on data and data retention, requiring customer permission for data usage. While impacting large tech companies, it disproportionately harms smaller, ad-dependent businesses due to higher compliance barriers.
6 Questions Answered
Ben Thompson believes that giving away 25% of his content for free is sufficient to convince potential subscribers. He also finds that a paid commitment, even a small one, acts as a 'sunk cost fallacy' forcing function, encouraging habit building among new subscribers.
He maintains a strong 'view of the world' or mental model through which he filters daily events, making it easier to form opinions. He also keeps an ongoing list of topics, ensuring he always has something to write about.
Facebook fundamentally changed the structure of politics and media by eroding the gatekeeper status of traditional media, which in turn diminished the power of political parties to control nominations, paving the way for candidates like Trump who could bypass traditional structures.
The most important lesson is to consistently and repeatedly start with new assumptions, particularly examining the implications when controlling assumptions in an industry (like physical shelf space or trust) are fundamentally changed or reduced to zero by the internet.
Ben Thompson believes social media is probably not healthy, as it fosters an obsession with the outside world over local communities and exacerbates filter bubbles. However, he notes that the 'genie is not going back in the bottle,' so the focus should be on building healthy structures for the future rather than fighting past battles.
He relies on a combination of fast reading, fast writing, a strong memory, and a systematic capture method using Workflowy to store links and notes, which he then retrieves using robust search functions.
50 Actionable Insights
1. Consistently Question Assumptions
Learn to consistently and repeatedly start with new assumptions, especially when analyzing industries impacted by the internet, to understand how fundamental changes alter business dynamics.
2. Develop a Worldview Mental Model
Combat writer’s block and improve analysis by developing a strong mental model or worldview through which you filter new information, making it easier to form opinions and identify relevant topics.
3. Guard Against Confirmation Bias
Actively guard against confirmation bias by consistently challenging your assumptions and double-checking information, even when it seems to fit your existing worldview, to ensure accuracy.
4. Align All Business Strategies
Ensure your business model, editorial content, customer acquisition, and go-to-market strategies are all aligned and working in concert. This holistic approach is critical for success in a highly competitive internet-driven world.
5. Anticipate Paradigm Shifts
Recognize that dominant companies are tied to current paradigms and often fail to adapt to new ones due to ingrained business models and mindsets. Anticipate and prepare for shifts that fundamentally alter competitive landscapes.
6. Focus on Future, Not Past Battles
Avoid fighting battles already decided by paradigm shifts; instead, focus efforts on building new structures, training for future challenges, and creating conditions for future industries.
7. Master the Details for Credibility
Get every detail right in your analysis and communication, as imprecision can undermine your credibility and prevent your audience from hearing your core message.
8. Prioritize Passion Over Pure Wealth
While aiming for financial stability, prioritize spending your days thinking and writing about subjects you are passionate about, viewing it as a tremendous privilege that offers fulfillment beyond mere wealth accumulation.
9. Align Career with Obsessions
Consider pursuing a career in areas you naturally obsess over and spend your free time researching, as this alignment can lead to fulfilling and successful paths.
10. Recognize Strengths as Weaknesses
Understand that your greatest strengths are often correlated with corresponding weaknesses. Aim to find a career or role where your strengths are rewarded and your weaknesses can be minimized.
11. Learn from Being Wrong
View instances of being wrong as opportunities to modify and expand your mental models and worldview, using them as a spur for deeper analysis and better articulation of your understanding.
12. Admit When You Are Wrong
Cultivate a strong commitment to admitting when you are wrong, as this is the fastest way to correct your understanding and ultimately be right, fostering trust and credibility.
13. Explain Your Mistakes
When admitting an error, explain your thought process and what led to the mistake (e.g., confirmation bias) to provide transparency and deepen understanding for yourself and your audience.
14. Recognize Timing is Critical
Understand that even if your structural analysis is correct, being wrong on the timing of an event or trend is still being wrong, so factor timing carefully into your predictions.
15. Build Trust Through Accuracy
Build long-term trust and reputation by consistently admitting when you are wrong and diligently investing time to get the details right in your analysis.
16. Gain Clarity from External Perspective
Position yourself as an outsider looking in on an industry or topic, as this detachment can provide greater clarity and skepticism, preventing the biases that come with immersion.
17. Seek Original News Sources
When consuming information, start from first principles by reviewing headlines (e.g., Techmeme) and then delve into original news sources as much as possible to form your own opinions.
18. Use Opinion as a “Knife Sharper”
Read opinion and analysis pieces not to adopt their views, but to use them as a “knife sharper” that prompts you to critically think through and refine your own perspective on a topic.
19. Balance Value Creation and Capture
Strive to find the optimal balance between the value you create and the value you capture. Ensure you earn a sustainable living without over-capturing or under-capturing.
20. Reduce Barriers for Internet Businesses
Advocate for and support policies that dramatically reduce barriers for individuals to build new types of internet-enabled businesses, as these “lifestyle businesses” are crucial for future job creation and economic growth.
21. Advocate for Future Small Businesses
When considering policy, advocate for maintaining conditions that enable future small businesses and new internet-native industries to get off the ground, preventing regulations from inadvertently stifling innovation.
22. Advocate Universal Healthcare for Innovation
Support policies like universal healthcare to alleviate personal financial burdens related to health, enabling individuals to take risks and innovate in creating new jobs and industries.
23. Embrace the Barbell Strategy
In the internet economy, recognize the “barbell effect” where returns favor either the biggest or the smallest players; avoid being stuck in the vulnerable middle.
24. Control Experience, Leverage Others’ Infrastructure
Aim to control the user experience and customer relationship, then leverage that power to compel other entities to bear the costs of expensive, low-return infrastructure build-out.
25. Tailor Ads to User Mental State
Tailor advertising strategies to the user’s mental state: use platforms like Google for focused users actively seeking something, and platforms like Facebook/Instagram for users in a “waste time” state, who are more open to discovering new products.
26. Prioritize Ad Platform Integration
When choosing advertising platforms, consider the “investment/effort” alongside the “return.” Leveraging platforms where you already have integrated tools and experience can outweigh marginal reach advantages of a new platform.
27. Disrupt with Massively Better Solutions
When attempting to disrupt entrenched, convenient systems like credit cards, your alternative must be massively better in multiple directions, not just marginally improved, to overcome user inertia.
28. Beware Regulations Entrenching Incumbents
Be aware that well-intentioned regulations, such as data privacy laws, can paradoxically entrench dominant players by disproportionately increasing barriers for smaller competitors.
29. Seek Fair Play on Dominant Platforms
In a future dominated by massive platforms, prioritize seeking stability and a fair playing field on top of these platforms, rather than solely focusing on platform-level competition, to foster innovation in the “undergrowth.”
30. Offer Free Tier, Upsell More
For subscription content, offer a consistent free tier to attract an audience, then provide a paid option for “more” content, fostering a positive feeling of wanting to pay for additional value.
31. Attract Eager Subscribers
Avoid aggressively pushing paywalls; instead, allow eager users to discover the paid content naturally, as these are the individuals most likely to become dedicated subscribers.
32. Measure Demand for More Content
To gauge readiness for a paid offering, track engagement on days you don’t post. Visitors actively seeking new content demonstrate a strong demand for more, indicating potential subscribers.
33. Prioritize Subscriber Happiness
In a subscription model, prioritize making existing subscribers happy, as this reduces churn, ensures consistent revenue, and drives organic growth through word-of-mouth referrals.
34. Leverage Zero-Friction Referrals
For online businesses, leverage the internet’s zero-friction referral capabilities (social media, email) by focusing on subscriber happiness, as this can drive organic growth without traditional marketing.
35. Avoid Free Trials for Habit Building
Consider foregoing free trials for content-heavy subscriptions, relying on a free tier to demonstrate value and leveraging the sunk cost fallacy to encourage paying subscribers to form a reading habit.
36. Offer Accessible Monthly Entry
Offer a monthly subscription option as an accessible entry point, even if many initially cancel auto-renew, as a significant portion may later convert to annual plans once they experience the value.
37. Recognize Vast Niche Market Potential
Understand that the internet enables vast niche markets. Even if you’re successful, there’s always significant room to grow because many potential customers simply haven’t discovered your specialized content or product yet.
38. Delegate Administrative Tasks Early
Delegate administrative tasks to an assistant and schedule them early in the day, especially if time zone differences necessitate it, to clear the way for more focused work later.
39. Review Headlines for Daily Ideas
Start your day by reviewing previous day’s headlines to generate an outline of potential topics, allowing ideas to percolate throughout the day.
40. Plan Content by Responsiveness
Plan weekly, in-depth content several days or weeks in advance, while daily updates should be more responsive to recent events, maintaining a list of evergreen topics for quieter news days.
41. Use Deadlines to Trigger Focus
Use impending deadlines to trigger focused writing periods, leveraging the pressure to “buckle down” and complete tasks within a set timeframe.
42. Organize Notes for Searchability
Maintain an outline (e.g., using Workflowy) where you constantly add links to interesting stories with brief notes, relying heavily on search functions to retrieve information as needed.
43. Focus on Subscriber Growth
For established subscription models, focus primarily on the daily growth of your subscriber base, as keeping existing subscribers happy and growing the list indicates overall health and success.
44. Accept Content Replication
As a content creator, accept that your ideas and content will be replicated or rephrased by others; it’s a natural consequence of publishing online.
45. Acknowledge Context in Success
While hard work is important, acknowledge that success is significantly influenced by context and environmental factors (e.g., “right place, right time”), rather than solely attributing it to individual effort.
46. Choose Clear, Pronounceable Names
When naming a product or business, avoid names that are unclear how to pronounce or spell, as this creates hurdles in building a brand.
47. Maintain an Intellectual Journal
Use a platform or personal space as an intellectual journal to understand the world and how it works, starting from a specific lens (e.g., technology) but allowing it to expand to broader interests.
48. Strategic Use of Education
Approach higher education (like an MBA) as a strategic, shortest route to legitimacy in a desired job market, rather than an end-all-be-all, to potentially gain more benefit from the experience.
49. Dominate Traditional Distribution Channels
For established brands, double down on traditional distribution channels (e.g., B2B selling to restaurants, schools) where scale and existing assets provide a significant advantage, especially as consumer markets become more challenging online.
50. Find a Unique Analytical Lens
Differentiate yourself by analyzing topics from a unique perspective, such as focusing on business models and strategic implications rather than just products, to fill a market void.
6 Key Quotes
I love to be right, which is why I always say when I'm wrong, because that's the fastest and shortest way to be right.
Ben Thompson
You need to learn to consistently and repeatedly start with new assumptions.
Ben Thompson
The brilliant thing about sort of this subscription model is your, all you have to do is keep your existing subscribers happy and everything else is going to take care of itself.
Ben Thompson
If my goal is, is to have a positive change and not to sort of feed my ego and not to be credited, then it's actually a tremendous thing.
Ben Thompson
I always want to be a, I'm going to deliver this product consistently for free. It's going to always be there for free. And then if you want more, you can pay to get more.
Ben Thompson
There are two ways to make money in business. One is to bundle and the other is to unbundle.
Jim Barksdale (quoted by Ben Thompson)
1 Protocols
Ben Thompson's Knowledge Capture System
Ben Thompson- Keep an outline using Workflowy.
- Constantly fill it with links to stories of interest and notes.
- Add a few notes about what the article is about and a link.
- Rely heavily on search functions to retrieve information later.