Episode Transcript
[00:00:06] Speaker A: Hello.
[00:00:06] Speaker B: Welcome back to another episode of Rogue startups. I'm your host, Craig Hewitt. Today I'm joined by the one and only Jason Cohen, founder of WP Engine.
Everyone listening to this podcast knows Jason, and in this episode, he doesn't disappoint. We talk a lot about growth, talk about adjacency and this adjacency matrix that he has of deciding when to go to new features and new markets. Talk about kind of like decision making paradoxes of like being able to make good decisions and the magnitude of those and how that affects our ability and to make a lot of good decisions as a founder. Talk about when to explore, I'll say, like inorganic growth channels, which I think is really interesting. And then we end up talking about how he ended up in his role at WP engine, where he's currently chief innovation officer. So, started as founder, spent a long time as CTO, and now as chief innovation officer.
And I've heard Jason talk about this before, but I had a handful of questions for him around how he makes those decisions. And then for us mere mortals, how we can think about making this in our kind of smaller businesses.
And then we talk about AI, but not about how he's using AI, but a lot more kind of high level and strategically, how he's thinking about it at a company net level, not at how can we stick a chat GPT box into our product here, but at a more holistic level, how he's viewing AI at WP engine and just technology in general.
I hope you enjoy this conversation, Jason. His time is very valuable. He gave us a whole bunch of it, and so I'm really grateful to him and I hope you enjoy this episode with Jason Cohen.
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I think I'm most interested in the when do you know you're failing? From you because you've been so successful. Right. Like two unicorn companies. Like, to a lot of people, everything you do touches is turns to gold. Right? You have the Midas touch. Do you think that's true, or have you had a bunch of failures? How do you view that?
[00:03:17] Speaker A: Yeah, the trouble is, of course, there's lots of things that don't work, but at a macro scale, smartbear worked and WP engine worked. So it's a little disingenuous to say, oh, yeah, I failed a lot, it's true. But it's on tactics or levels that didn't prevent the overall thing from succeeding. Okay.
But that doesn't mean there's not a million projects that did or didn't succeed or did or didn't do what it was supposed to do or was a net negative investment.
[00:03:49] Speaker B: Gotcha. Gotcha. So, so, like, in my mind, I have this, um.
I don't know, I might be trying to convince myself of this, but. But it is. I think that largely, um, there is kind of a container that a business could be, you know, like it has a potential, maybe. Um, and those tactics and strategies can affect, like, how big you grow within that container, but. But the container can't get bigger.
Do you agree with that? That WP engine is a billion dollar company, but it won't ever be a trillion dollar company. Kastos is a million dollar company, but it might not ever be a $10 million company.
Do you think that's largely true in their current forms?
[00:04:31] Speaker A: It's definitely true that a company and a product and a market is of some size.
So the only reason why companies today, some of them are a trillion dollars, is because they have multiple products.
There is no one product, maybe oil or something. But if we're keeping it to the kind of products we're talking about, yeah, there's sort of a natural ecologist would say, carrying capacity of the market and what's available. So. Yes, and that's why companies grow in s curves, because you reach this sort of natural limit. Even the Facebooks and Googles and Amazon of the world do that and need to find ways of increasing what the market even is. Like people coming online, for example, as a way to increase that, although that only happens in a small percentage per year. So that doesn't get them the growth they need or they need to do things. So since they can't do that on the consumer side, they need to either take more of the market that exists for attention, et cetera. So in Facebook's case, let's just get other social media networks. In Amazon's case, let's, let's expand to more products and more areas, more geographic, more geographies and so forth, and obviously also more products and let's charge more for it. So Amazon, you know, very famously, is not the lowest cost and drives other prices down. That's a whole story. Facebook continues to increase prices even though, you know, you don't know very many people who still use it. So they're able to grow for other kinds of reasons. So, but that's why. Because they reach the marketing market capacity. So it depends, like if you have a lot of pricing power, as Amazon and Facebook and Google do, then you can continue to grow in terms of revenue even if some of the underlying metrics are not growing that much because you have pricing power. So this is why it's hard to just answer the question. But in general, sure, if a company is of a certain size, can it grow? Probably. Can it ten x? It depends. Ten x is a lot. So it's going to depend. Sometimes the answer is yes and sometimes no. There isn't another ten x.
Yeah.
[00:06:30] Speaker B: I have two threads I want to pull on there. One is specific to you at WP engine, and being a premium player in a space that's highly commoditized, that's on the surface at least, because we are too.
And the other is, when do you stop the organic conventional growth methods and go after the other? Just make the pie bigger aspects. Let's talk about WP engineering or like cast us first, right? Hey, we're podcast hosting. A whole bunch of people that do podcast hosting. We want to say we're the best and we're premium and we're these things.
But how do you do that? Other than using words like how have you all done that? Because we host a WP engine. We do. Because it's the best, right? Like, we tried a whole bunch of other people. They all were garbage for other reasons. And so we're there now. But like, how does a company think about not just saying we're the best and we can charge twice as much as everyone else, but actually do it?
[00:07:32] Speaker A: Well, you just said it, we're best. Better at what exactly? Our tech support is better. They're more responsive, they're more knowledgeable, they're more friendly, they spend more time. Is it that in our case, WordPress runs faster? Literally, you can see it when you log in. You go, whoa, what the heck? You can see that it's faster even before you use a tool. Or maybe it's something like core web vital score goes up. So there's some kind of objective sense in which your external speed goes up. Is it more secure for reasons you can list in bullet points that other security people agree is a good list of bullet points.
This is not a rhetorical question. This is the answer to the question in the case of WP engine is these kinds of things.
If these are things the customers value, meaning they will pay for it, then if you do them at a higher level, or there's more of them, or whatever it is to be premium in those areas, then that's the answer that you're delivering more, quote unquote value, as they say. But you got to be specific. What does that mean?
[00:08:27] Speaker B: Right.
[00:08:28] Speaker A: And so, yeah, so I think it goes back to like, well, what is the customer, what is the customer happy to pay more for? Because the value that they perceive they're getting. Perceived is a good important word. The value they perceive they're getting is ten times more than that cost, even though it's premium. That's the question to answer. And so for someone who's not technical, the idea that I could move my website to WP engine and instantly double its speed, which means I'll have a lower bounce rate and a higher Google's SEO, that's worth a lot of money to me. In fact, especially if I'm in media, where I make money off of page views, or I'm an ECOM, where I also make money off of, let's say, traffic. I can probably even quantify that, but I don't need to quantify it to know that I'll pay 100 instead of 50 or 30 instead of five. If it's going to dramatically change my revenue curve, it's a pretty easy equation. So that's an example of where that's how you would justify premium price.
[00:09:25] Speaker B: You said perceived, and kind of like zoomed in on that a little bit. Are there instances where there doesn't have to be a tangible kind of feature benefit, but the perception of one for you to be able to justify those prices?
[00:09:40] Speaker A: Yeah, and definitely shouldn't think of it as features only. Features are a way to be different or to be desirable or to have value. There are projects like WordPress that have this amazing community. People want to be a part of it, want to promote WordPress, want to stay in part because of the people in the community. That's not a feature of WordPress, the product. That's a fact of being in the WordPress world when you feel like you're being supported and you want to give that back and you just enjoy that mode of working that I can be a freelancer who would otherwise be by myself, but because I'm a Genesis developer, I'm with literally hundreds of thousands of others on a Facebook group or on Slack, and we support each other genuinely and then we meet up sometimes and we help each other out. That's just a wonderful way to be.
So what feature of Genesis is that? What feature of WordPress is that? It's not a feature. It's not in the development roadmap.
It could also be mission. So there are companies like Patagonia, for example, that are well known for supporting efforts to preserve the climate and ecology. So if you care about that and if the products aren't bad, which of course they're not, then you might buy from them instead of someone else because of what they stand for and what they do. Again, outside of what is the feature of the coat, don't care. Or people who buy sustainable coffee beans because it's a horrible industry that exploits people. And so it probably still does, even in those other channels. But maybe it's worse, maybe it's not as bad, or maybe it actually is. Okay? And so I'm willing to spend ten times as much for coffee beans because I think I'm doing something better in the world. I guess you could call it a feature. It's not really a feature of the bean or the product, though. It's about what's going on around the product. So there's many different ways to create things that really have genuine value for people. That's not like, oh, they're so dumb for thinking that has value. They're not dumb at all. In fact, it totally has value.
[00:11:42] Speaker B: Just not a feature that mean, to me, that's like brand, right? Like Patagonia as a brand. They don't make a better jacket than.
[00:11:51] Speaker A: Brand is the handle that puts a name to it. But no, it's not the brand.
If the brand Patagonia was a different name, then that name would mean it. So it's not the brand, it's not their logo, it's not the colors, it's not the name of the company, it's the mission, which is not the brand. It's their actual genuine human mission and how they run the entire company. For example, at Patagonia, if you get arrested protesting something, the company bails you out of jail.
[00:12:22] Speaker B: I love that.
[00:12:22] Speaker A: That's not brand. That's company culture and policy and genuinely believing in the mission. Genuinely. The brand is simply the mark that that's what this is. It's wrapping that up in a thing so that you can go to the store and find Patagonia. You can tell your friends Patagonia, or you can say, I work for Patagonia. It's how you put a label and a handle, a moniker on it, those things. But the brand isn't it just like with Genesis, it's the community.
Genesis is a brand, that's fine, but it's not the brand, quote unquote, it's the community. The brand is just naming that thing.
[00:12:59] Speaker B: At what point do you think leaning into that becomes really valuable?
I'm just thinking, in the lifecycle of a startup, starting to focus on brand before you have customers and product obviously isn't your most important thing. At a certain point, it probably becomes more important. And then there's an inflection point where to be the things that make up the band or behind the brand become more important than a lot of other things that we do. I don't know, is there a triggering event or a milestone that you would pass to where you're like, oh, okay, now the things that make up Genesis are more important than any feature we can put into it or any development.
[00:13:44] Speaker A: Yeah. So I think brand in the sense, in the traditional sense of like, oh, it really matters where a logo is. And we have to be really consistent with typography. That's later, because early on, you don't even know what's going on. You don't know what you're doing. You don't know who the target customer is. You don't know what the right products are. So what would you obsess over brand for? No one knows who you are, no one's ever seen you, and everyone will forget you. And anyway, that's not the problem right now. The problem is solving those questions I just said and more once those questions are known. In other words, after product market fit, when things start working, it starts to become easy to get. Customers start flooding in. And now your work has changed from scratching and clawing to get every new customer to, oh my gosh, I don't even know where they're coming from. How do I keep up with the bugs, the product features, the scalability, the tech debt that we did up to this point, the deluge of tech support and so on. How do we keep up with that? Okay, then you get on top of that, and now brand starts to become important because now you are making a name for yourself and there are a lot of people that know it. They're starting to get spread now that matters. And so now having that be consistent and with design consistency and other things become really important because you're trying to, in fact, place in people's minds a very specific thing, a feeling, a notion that does mean something to people now and more and more people. So that's the right time to think about that or spend a lot of time on that, I should say kind of exception to that is there's so much of your personal identity wrapped up in the company. So its mark, its name, even the font choice, I understand obsessing over that because its really about you. So I get it. But other than picking that out, then continuing to obsess over brand, its like, no, no, no, youve done it. Thats what you look like. Its fine. Youll pick it back up later to get really mature about it. Right now, the other stuff, I actually dont think you bolted on later because it's who you are. And if it's not who you are, then since it's inauthentic, it almost never works. If you first had a jacket company and then later decided to be like Patagonia, it would be inauthentic, it wouldn't be true. Your customers would not think of you that way, your employees would not think of you that way, and so on. It's just not your culture. So just claiming later you care about the environment, you can, and maybe you even do to some extent, but it's not going to have that power that it has when it's genuine. So think about these communities we were just talking about, WordPress, Genesis.
You can probably think of other ones. When did those start? The answer is day Zero, because it was part of what it is now. Tell me, what is an example of one of those kind of communities where people love to be a part of it? It's vibrant, they meet up. Where first the company was around for ten years, even five years, and then said, let's start a community. Now, maybe you can name one. Like, I'm not saying it's zero, like everything's possible in the world, but I bet it's really hard to name them. You'd be like, well, there's this one time where it worked. Like, okay, cool, one time it worked. But what that tells you is you don't bolt on something that requires being authentic and genuine like that. So, you know, Brian Gardner making genesis and that personality of his and his genuineness you don't bolt that onto a company later. It either is or it isn't now. And in a way, this is good because it means, okay, who are you as a founder?
What is this? What is your style? What is your way? Maybe you love the idea of a community. Maybe you hate it. You're like, community, I'm an introvert, and I hate that idea. Fine, then don't do that. It won't work for you if something else will. That's great.
So it's good that it comes from who you are. It makes your company special. It should leverage something that is already special about you, because then you will be really good at it and better than others who try to bolt it on. Or more likely, don't even try to have that particular angle.
And that's part of why you can be successful and different with it, which is what we want.
[00:17:43] Speaker B: Yeah, yeah, no, it's fine. I mean, I had, like, a tinge of guilt as we were talking about this, but, yeah, it's not me. It's not me. And we've tried community several times at Kastos, and it always fails because it's not important to me. I'm not good at it.
It comes across as inauthentic, even though I don't. Obviously not trying to be inauthentic, but I maybe like you look at. I like product, and I like sales and marketing, and I'm pretty good at those, and I'm just not good at community. And kind of me being active in the community of our customers. And so that's just like, that's the date we brought to the prom, you know, like that. That's just me. And it would be bad. Like you said, inauthentic, ineffective.
And I would hate it probably, if I said, this is the only way we're going to grow castos is if we have a thriving community of podcasters.
That would be bad and for everybody. Yeah, yeah.
[00:18:42] Speaker A: But podcasting is a massive market, and it's growing fast, and it's still really popular. And so there isn't just one way to grow. Right, right. It's not like naked community or you can't grow. That's just false. Right. That's not true. So, okay, so what? That's not one of your tools. There's dozens of other marketing tools or other kinds of things at your disposal. Good, right?
[00:19:05] Speaker B: Yeah. Yeah. Yeah. Okay, so this is a good segue. So I was listening to startups for the rest of us, podcasts. That kind of got a lot of us started or got me started, at least in all this. And Rob was doing his April Fools episode, and it was, I don't know if you listened, but it was hilarious. And he had a bunch of things. He's like, you know, I've thought about this, and you should definitely go b, two c, and you should definitely, like, never raise money. One of them was, you should definitely start a second product because, you know, you just never know. And like, just see what, just see what sticks. And not to disparage, like, the makers who just want to make products. So that's cool.
But to the point of, like, how does, how does a company grow? I think sometimes adding a big feature set onto an existing product, you might call it a separate product, is the way to go. We were talking about making the pie bigger as a growth channel. And frankly, it's something that we're considering. We're a podcast hosting platform. We look at our chances to grow and we say, what if we did this thing that's right next to what we do now? Does that open up our, our tam quite a bit and could we capture some of that? And to me, there's like two ways to think about it. Is it, can we go horizontal or can we go vertical? And for us, the podcast hosting horizontal would be like, can we be a CMS, right? Can we be blogging? Can we be an email service provider? Can we, you know, horizontal. Vertical would be like, can we do podcast recording? Can we do podcast editing? Can we do podcast promotion, social stuff like that?
[00:20:32] Speaker A: Right, right.
[00:20:33] Speaker B: How do you think about, I guess, horizontal versus vertical and just generally, is that ever a good idea? Or do you just stick to your lane and just go deep?
[00:20:43] Speaker A: Yeah, no, I have a very specific way that I think about this and that we've used at WP engine to decide to launch or not to launch certain new products or second products and so forth.
First of all, often we're reaching for that second product or that adjacent, I call it adjacent thing, meaning it's not our current market, but it's not.
Obviously, if it was a completely different business, if you're like, well, we do podcasting, but I was really thinking of starting a roofing business. We already know that's not the right second product, but why not?
Why not? And the answer is because it's completely different and there's absolutely no connection between there. And so one of the core principles of any strategy, and I don't care. I think people use the word strategy to mean weird academic stuff. And I don't know they take something stupid like a swot, which is not very helpful, and they say that's strategy like. So I don't mean that stuff. I mean the few things you need to do to win, the most important things.
So one of the core things about any good strategy is that you leverage the assets that you have. Whatever your strengths are. It could be personal, it could be you've built software as a business. Maybe I've got some existing customers that might buy something from me. That's an asset. I got a brand that's an asset.
Maybe we're the best at this one thing. That's an advantage. It could be cultural like we were just talking about. Those are also good strategy leverages those things because that's what you're good at. Of course, this is almost tautological to say whatever you're really weak at, it's possible that you should do it, but sounds like a bad idea. Status quo is don't do something you're weak at. If so, you'd have to invest a lot and it's a high risk of failing. So you could still do it. Just you're going into it knowing that's a high risk, that's probably not good. There better be some overwhelming reason why to do that anyways. So that's just like status quo, obvious strategy stuff. So when you think about adjacency, you think about, okay, I need to leverage what I've got to the greatest extent I can. So step one is like, should I, like you say, should I continue doing what I'm doing or should I go to some adjacency? So there the question usually people want to go somewhere else too quickly, but if growth is bottleneck for good reason, like, no, really, that's how big the market is. We really like, we've reached 2% penetration in the market.
That's actually a lot, especially as a small company, 2% is actually kind of a lot. And so, yeah, I mean, we're going to continue trying to grow the existing business. Maybe we can get to three, maybe we can get to four over years, but that's where we're at. We're not going to suddenly get to 20%. That's nuts. That would be a reason to go somewhere else. But sometimes people are at 0.001% of the market, then it's like, well, then the current business isn't working yet, or there's so much growth in the current business, what are you doing taking on something harder and newer and with risk when you've got stuff right in front of your face. So that's an example.
Another example, though, that has nothing to do with that. A reason to is diversification. For example, WP engine, you said that we were expensive, but that's only true for half our customers.
For our low end customers, we're expensive relative to Godaddy.
But for our enterprise customers, we are cheap relative to Adobe, we are the cheap but enterprise grade alternative for McDonald's. But we're the expensive but worth it because we're so good for a dentist office.
And the reason this is important to bring up diversification, because we did this on purpose. We weren't always all of that. We expanded into these different market segments. We invested in them in sales and marketing and customer service and account management. I mean, we invested tens of millions of dollars to create hundreds of millions of dollars of revenue in a new segment in stuff like enterprise. That's not an accident. But then what happened is COVID happened, and then small businesses go out of business or need a lot of help. So people canceled, disappeared, or we would suspend their invoices for a year to help them out on the low end.
But on enterprise, we were the ones that were flocking to, they can't buy Adobe anymore. It's too expensive now. We're the right alternative because we're low cost to them. So our enterprise segment grew. So this is what I mean by diversification. This is why it's strong. So when you're early on and your first product still getting legs, it's not the time to diversify. But later on when it's like, okay, you know what? Diversification makes sense at some point of scale so that we can continue to grow and be healthy in different environments. That's another reason. Okay, so I'm just pointing out there's a few reasons.
Why is it that I actually want to go to do something, Jason. Okay, so let's suppose there are other reasons, but, okay, let's suppose it is a good idea. What would you do? And so I use something that I call the adjacency matrix, which is very simple. I should probably not use a word that sounds so complicated. And the idea is that you have a couple of buckets that simply the functional areas of your company, marketing, sales, service, product. If you're a high design company, then design's one. But if you don't do a lot of, if you don't do a lot of that, then it's not. So it just depends on your company what these buckets are. But you get the idea, like this is not competitive right now. For some idea, like you said, let's make a blog, let's do ad placements for podcasts, let's place guests for podcasts. I don't know, whatever you said, we have all these ideas we could do that are of course not roofing companies, but they're possible expansions, possible extensions of the company. What do we do?
You take these buckets and for each of these ideas you say how adjacent that idea is in that bucket, how similar it is. But you only have three choices because I don't like these rubrics and scores and crap. I don't believe in that stuff either. So you only have three choices. Either you can say it's trivial. There's almost no changes required. Like when we launch this, let's say for support, for example, when we launch this, we won't have to do training at all. We'll send an email to the company. That'll be enough. They'll know that's how easy this will be. For support, we'll have one zoom session and they'll know. We'll just add a couple of bullets. If it's sales materials, we'll just add a couple bullets to a slide we already have. That would be an example of a trivial amount. The second one is an adjustment.
We have to manage the change, but with our current processes, the current norms of the company, we can manage it. It's like on the order of a large feature release. Yes, we'll have to train sales, but it'll just be like one more slide and they'll get it in an afternoon.
We might need a SME and support for this, but we already have SME's and support. This will just be one more. That's an adjustment. And then the third one is an overhaul.
And the difference here is like we don't have the right people at the company now we're going to need to hire people. Or either we can't do it or the risk is so high because no one here has done it before or even close to it that it's really dumb. So one way or another, we're going to have to invest a lot. We either have to hire or hire for capacity. Maybe the amount of work needed is so big that we can't just have current people do it. We're going to have to hire more people to just do the work. So maybe specialty or capacity or huge retraining, we're going to need a whole new support team. We're going to need people to go through. And it'll take months for them to get back up to speed on this because it's so different. We're a completely different market segment, like CMS, every competitor. So if you did CMS, then every single competitor of yours changes, all of your marketing changes, all of your sales. You see what I mean? It's like, holy crap. That's not just like, we'll just adjust. Like, no, totally new market, new customers, new arguments, new competitors, new sales, product.
Not to say it's a bad idea, just saying, oh, it's a huge change. Overhaul. So trivial. It's just kind of like nothing. An adjustment or overhaul, those are your only three choices. So you go through each bucket and you just, you predisposition them this way.
And even at the end, there's no score. There's not a Cosmo quiz, you know, like, oh, if you get a four, then you know what you've done is you've, you've simply analyzed this idea in a, in a simple way. That's why a matrix is kind of a complex word. You just analyze it in a simple way to understand what is the impact and risk of us doing this, what areas of the business would be shook up, what would be easy. And so, like, if you think about us going enterprise, okay, well, in terms of sales and marketing, it's totally different. In terms of engineering and product, it didn't change at all. Not at all. We already had customers who had sites way larger than McDonald's. Cause these big sites like IBM, they don't get that much traffic compared to a five person media site that gets like, tons of traffic. Right? So actually, like, technologically, there's like, literally nothing to do at all. It's trivial. But, oh, my gosh, over here on sales, it's a whole new universe. So it's an overall. So you see what I mean? So you can, so you're analyzing it enough that you're like, okay, well, what's our appetite for?
You shouldn't necessarily do the easiest thing.
That's not necessarily the right choice because maybe the easiest thing is also not that valuable or not that interesting or whatever. But now you've got some sort of analysis of this cost and risk and investment side of the question. And some things will be clearly so far afield that you're like, what the hell? Yeah, you know, like, just let's stop talking about that way. You know? So, like, it'll narrow the field to some things and have analyzed it a bit, you know, what kind of trade offs you're getting into. So that's how I work out this adjacency question.
[00:30:23] Speaker B: I love it. I love it. So, I mean, we've, we've thought about it, and I've talked to a whole bunch of people about it. I've talked on this podcast a little bit about it that probably, like you, like we, we see, like, we solve a pretty narrow problem right now.
We think there's one of the biggest opportunities we have to grow, we think, is to solve more problems. I have not thought about it more than just a marketing and a product perspective, because the product is just the first thing that everybody, even me as a non technical founder, says.
We can just build this thing, and the engineers are amazing, and they can just do it from a marketing. I have thought of, how do we leverage our biggest assets now to more easily go into this adjacent market or serve our existing market in a different way?
But I hadn't thought about sales support success.
Yeah. I mean, our team comes to me regularly, and they're like, why don't we just charge $100 a month? And I'm like, oh, cool, let's do that. And then I just get scared.
[00:31:29] Speaker A: Well, now, that's a totally different question. The question of price is a different question than expanding to new things. The one last thing that, to go more enterprise. I mean, well, yeah, the last thing about that is $100 a month is not enterprise, by the way. Enterprise means like millions of dollars a year. But anyway, just because something is an overhaul, they're not equal equivalent. So, for example, a lot of companies are good at product engineering and not very good at sales.
And so if this requires a whole lot of work in product engineering, they're like, okay, we can do that, and you can.
But if this requires, like, a huge investment in sales and a whole new department and hiring people, it's like, we could. But since that's a weakness and we don't know how, we kind of don't want to. That one is just like, maybe that's a deal breaker for us because we don't want to tackle that. So, again, that's why it's not like a scoring system or something like this. You got to judge all these things, have hard things and easy things, which combo of that is good for us?
But you might say, but if we hired a really amazing vp of sales, that would change which things we could say yes to. And then you start realizing, oh, that's why certain kinds of leaders are so important, which early on they weren't. But once you're at scale. Or once you're starting to think about these things, like, okay, there's certain ways in which it would be so, like, if you want to sell ads on behalf of podcasters, selling ads is a whole thing. Yeah, that sounds really hard. That's not something engineers solve.
That's not the hard part. However, if you were to swipe as vp of sales out of some other company who has spent the last seven years selling ads for podcasts, and you're able to swipe them out of there and they can build that whole team, you might be able to do that in a way that your competitors cannot follow because they don't have that person, and all of a sudden, it's, like, freaking incredible. So, okay, so you're just thinking through these different paths. You ultimately have to make this decision, and there's not going to be an equation telling you the answer, but at least you're. At least you're thinking through now, like, okay, what would have to be true? What would we have to do for this to really work out? That's the right kind of questions, because now you're really thinking, like, what am I choosing between here?
[00:33:38] Speaker B: Yeah. As an aside, I found myself, like, just wanting the answer a lot lately, and I think it's because, like, we solve the easy problems first. Right? Like, how do I get a few customers? How do I pay the mortgage? How do I do these kinds of things? And now the. The questions are more complicated, I think, which is probably why I can't answer them or I don't want to answer them myself. Maybe it's the right term. It's just like, gosh, they're so. This is so multivariate. There's so many things going on here that. Yeah, I think I probably have some decision fatigue, but that's just an aside.
[00:34:12] Speaker A: Yeah. And also, making the decision is very expensive, whether it's right or wrong. Yeah, but then you worry, like, is that if it's wrong, what happens? And I know everyone talks about one way and two way doors, yada, yada, but even some things that feel like that sound on paper, maybe they're two way doors, maybe. But that doesn't mean going back through the door isn't really painful and bad. And also, what does it mean? Like, for the whole company, for you to say, we're doing this, and then six months later it failed, now we're doing this. And what if that's fine from, like, a product perspective or a customer perspective or investment perspective because you only burn 200k on it. Yeah, but what about people going, like, does this guy know what he's doing? Like, we keep going back, you know, now that's also manageable. But, like, so the whole two way door thing. I know, but there's two way doors in. We put up a Google Ad and it didn't work. We took it down. That's a two way door. That's easy. A lot of these are not like that. So I don't know what kind of door you want to call it, but let's just say it's really hard, and that makes it hard.
I don't even know if it's decision fatigue, because it's not like you're making these decisions. It's that you're afraid to make the big decisions, and for good reason, because it commits a lot of time and attention and energy and money and expectations by employees and maybe customers, and that's a good reason to be afraid of it.
What do you do? Well, first of all, you say, but it's my job, so I have to do this.
So then it's like, all right, well, then what am I afraid of and what's the deal? Okay. I'm afraid that if it doesn't work out, I'll have to explain it and that it'll look bad. Okay. There's ways of communicating all that to make that less. You can say, we're trying this for six months. You can say a company that doesn't try big, bold things, even though some of those necessarily will fail, that's a company that is going to die, and we're never going to be that kind of company. We're never going to be the kind of company that is so afraid of failure that we never try anything new. We're just never going to be that kind of company. So guess what? We're going to do new things. And when they don't work, it will be to our credit to call that out and say that we'll be proud of ourselves, that we called that out and didn't just go down that road for three years and then call it, we call it after three months or six months so that we can put our attention on something that works and that will prove how smart we are. And if you want to be in a company that never admits it makes a mistake, you should go somewhere else. But if you want to be in an honest company that tries to do new things, which means some of them won't work, and then we're honest about it, then you need to stay and support each other. And when things go well, we'll celebrate. And when they don't, we're going to support each other in having made a good attempt, and then we're going to keep doing the next thing. So that's the kind of things you can say ahead of time to mollify that very real and valid worry. Other frameworks, like the adjacency thing, it doesn't tell you the answer, but it gives you more confidence because you're like, okay, we actually thought through five different options. We had five decent options. We thought it through. We know that if we take option b, it'll have these good things and these challenges, risks, expenses, whatever they are. And we can say what they are because we thought about it.
You're going to get both. You're going to get this good stuff, hopefully. And also we're going to have these challenges. It's going to be hard. And again, that might even drag out because we just said it's risky. So that means it might be late or too expensive. The first person we hire may not work. That's what it means for it to be hard. But we know that we're going in with that in mind, and this is why. So having those things to think through, that gives you not necessarily more confidence. Decision has to be right, but that you've thought it through properly, you'll never know, even in retrospect. Well, what if we had done another thing? Nobody knows. You won't know either, so too bad.
[00:38:06] Speaker B: I feel like we do have a culture of experimentation and transparency. I feel like we have done a lot of this quite well. We experiment pricing around the end of the year. We've done a lot of these things. And I'm really transparent with the team. We're going to try this, we're going to see how it works, like a hypothesis and a measurement like goal and that sometimes time and sometimes that's events or revenue or something like that. But, yeah, I think we do this pretty well. And a whole bunch, like, to the very beginning, a whole bunch of them haven't worked. Some of them have.
But, yeah, we definitely approach it and set it up the right way to where it's not just it's Thursday, so I want to do this thing and I'm the founder.
[00:38:47] Speaker A: Yeah, but you also said that you're. You also said that you're not sure about making these decisions. And so that's contradictory to saying, oh, yeah, we do this all the time. I think the difference is when you start getting at some scale and when these decisions start getting bigger and the consequences start getting bigger.
Even though everything you said is right, they're different in kind, and it isn't the same. So, for example, what bet have you placed that didn't go well? And so you laid off 30 people?
[00:39:17] Speaker B: Oh, yeah.
[00:39:19] Speaker A: It hasn't happened yet, I'm guessing. Yeah, that's my point. The decisions at scale start becoming different in kind. So. Oh, we experiment. This is people's lives and we all know it and we all feel it, because we're good people and we're not trying to play with people's lives. Right. Like, so, because we're good people and because of all that. Therefore, when the stakes are higher and the consequences are bigger, they're not the same. So the attitude is still correct directionally, which is if you don't innovate, yes, it's a magnificent, but it's not the same meaning at scale or even at small scale than it is when there's three people or even 20 people.
It's not the same thing as running a pricing test for a month, and it's just what it is.
[00:40:09] Speaker B: Yeah, yeah. No, that's a fair point.
I want to shift gears a little bit and talk about what I sent you a message and said, alternative exit paths. I saw a message from Ben Ornstein at Tuple.
I think it's just like staying with the company but not working in anymore. And I don't know, a more eloquent way to put that and reminds me maybe of you, and you could probably shed some light on your position and how it came about, but you're the founder of WP Engine, chairman of the board or something like that now, but not day to day in the weeds, all that kind of stuff. Maybe start by sharing what your official role and title is at this point.
[00:40:51] Speaker A: Up until pretty recently, I was the CTO, chief technology officer. Okay, recently we have a new CTO. I mean, a person was at the company, but is now the CTO. And I moved into a role that gives me a little more flexibility on what it is that I'm responsible for. So we call it chief innovation officer, which is sort of a silly word, but you'll notice other founders do that. It's not uncommon to sort of indicate, like, well, there's different things. And so for the last couple of years, I've worked a lot on corporate strategy and then helping teams with their strategy, integrating into that. And most recently, for the last year, I've been helping with corporate data. So in particular, our data teams, of which we have a few. Some of which is moving bytes around and some of which is stuff like machine learning models on data and stuff like that. So sort of going where needed. In other words, in the last few years, but for twelve of the 14 years, or I guess I was the CEO for four years, and then until two years ago, I was a CTO.
There's no being aloof. That's not what's happening.
[00:41:53] Speaker B: Yeah, sorry, I didn't mean to imply that.
I've heard you talk about this framework of, like, joy, skill, and the needs of the company when it comes to what your role is, I guess, is what we're talking about.
[00:42:07] Speaker A: And I continue to use that in these new roles. I continue to use, and so do other people at the company.
[00:42:12] Speaker B: Yeah, yeah. And so that probably was what took you from kind of CEO to CTO and now to CIO.
[00:42:21] Speaker A: Right.
[00:42:22] Speaker B: Okay. And the framework, I've heard you talk about this on other podcasts is you kind of say, like, hey, I'm always evaluating what I like to do, what I'm good at, and what the company needs. And if all those things line up in my current role, then that's great. If they don't and I'm getting pulled in another direction in either three of those data points, then you need to evaluate whether you're the right person in the right seat. Is that kind of it?
[00:42:47] Speaker A: Yeah, exactly. If you're missing the reason, those three, I mean, there's a lot of things you can use for this. Right? Ikigai is another really good one. Right? So it's not like there's only one way. This is just a way that I used about ten years ago when I made the decision, like, hey, I don't want to be the CEO anymore, which is a very big decision for a founder to make.
So I found that this particular way of thinking about it worked for me. And the reason is that these three things, joy, skill, and need, I found that I realized, thinking back on past lives, if I missed one of those, there was a very specific trap that I fell into.
And also, I notice other people do, too. It definitely is me. I've had these failures, but I saw it in others, too. So I felt like maybe this is a fairly common way to think of it. And so if you're missing the joy, then you burn out.
You're doing something you're good at, and the company needs it done, so it makes sense. But when you don't love it, then you come to resent it. And I burned out at Smartbear, the previous company.
And I didn't realize it because I wasn't being introspective and thoughtful enough, and I didn't understand that. I didn't want that to happen again.
If you're missing the skill, this is something that founders do a lot. So you like it and the company needs it done, but you suck at it. But who's to tell you no, you're the founder and you want to mess with Adwords even though you've never done it before. So you mess around for three months. Of course it doesn't work very well. You conclude Adwords sucks. But actually the conclusion is you suck and you've wasted. And even if your conclusion is I need to hire an expert, you wasted three months thinking that you're now an expert because you screwed around for three months. It just doesn't work right. And who's going to tell you no, you can use your time the way you want. So missing the skill when the company needs it doesn't work, especially again, once you're at a little, even a little bit of scale, we don't have time for people to just be messing about.
We need to be good at whatever the thing is the company needs done. We need to be actually good at it. And then finally, if you're missing the what the company needs, that, again, should be obvious to say, if you just like it and you're good at it. The thing is, you get into flow and you love it. And this is the common thing that indie hackers do, is they're like, I'm good at making stuff and I love it, so I do it. You're right. Both those things are right. However, that's not what the company needs. It needs you to find customers that actually want this crap, and you're just not doing that. And again, no one except people on Twitter are telling you otherwise. And so you just kind of sit there in your flow. That's also a thing. So that's why these three things, obviously, they may be, if you're missing one, it's a, it is actually a real issue, but it can feel good. Like, it feels good to be in flow. It's not, it's not necessarily obvious unless you're paying attention that you're making a mistake. So obviously it's also an ideal state. You're not always in the middle all day, you know, every day. That's right. But you can tell, like, if you're drifting too long too often, right? Oh, I'm just not in the right role.
[00:45:46] Speaker B: The second one being good. The skill really hit home to me because I'm not a developer. I think I'm a pretty decent sales marketing person, but I'm definitely not the best. And I think this is the messy middle, the challenging part of you get it off the ground and you're to a point, and then you're 500,000 to a couple million dollars maybe, and you just don't have enough money to bring in super talented people to replace you. And I think that's where a lot of founders, and I'm just talking about myself, just get stuck in this place where like, well, it's gotta be me. Cause like, it can't be in my, in my current situation, it just can't be anyone else. Like, we can't hire someone way better than me. That would be worth that investment. I probably have some self limiting beliefs there, but, but I think that's.
[00:46:35] Speaker A: Yeah. Kind of situation.
[00:46:37] Speaker B: Yeah.
[00:46:37] Speaker A: If that person did their job really well, you absolutely could afford them.
[00:46:41] Speaker B: Sure.
[00:46:42] Speaker A: So there's something about that equation that's not adding up. Exactly.
[00:46:48] Speaker B: Yeah, I guess that's, yeah, it kind of, to me that goes back to like, the gun, the gun shyness of making those big decisions. It's all kind of related. Yeah.
[00:46:59] Speaker A: You have to hire someone better than you. And that is hard because how do you do that? How do you, how do you interview them to know that now you might be right, that you just simply can't afford someone who's a ten x, that's multiple levels. But if you had someone who's ahead of you, but also in terms of their ability and energy, but maybe earlier in their career, so it's not as expensive, then it could be that they're already ahead and their trajectory has really got a high slope and this is a way for them to just absolutely crush it and be excited about that and also bring that energy in. And so, sure, it would be nice to have, I don't know, something else with a whole lot more experience than everything. Okay. But that doesn't mean there's no one out there who is better than you. In both point and slope.
Bring energy and power to it so that the company grew. I mean, if you hire this person and the growth doesn't change, of course they can't stay. Yeah, but if they change the trajectory of that, then of course you can afford it. So it's like, well, you can't afford to hire someone who doesn't succeed. Well, yeah, I agree with that. That's probably true of every position. So. No kidding, that's not what's happening.
[00:48:18] Speaker B: No. Fair. Fair. And for some context, we've done that several times. We've hired several people and our growth has been like this for years. And it's amazing. We've grown kind of the absolute same amount for seven years now. And that's really cool. I think some of the challenges, we've raised money and had investment and had more people and less people and done more things, and none of that's affected.
[00:48:39] Speaker A: That curve, which shows that those people are not effective.
[00:48:43] Speaker B: Yeah. And that's challenging, even as a sales and marketing person to say, I'm going to give you this time or to give you these assets from these resources.
[00:48:53] Speaker A: You have to really figure out, is that because all of those people were not good? Could be.
[00:49:00] Speaker B: Yeah.
[00:49:01] Speaker A: Is that because that's not how this company will grow? It's just not, that's not, those are not the channels like, at all. Now that's hard to, that's hard to know because how do you prove a negative or something? Right. Like, it's really hard. You could try to look at things like, all right, so our competitors grow how? Well, maybe they're all growing at a same rate. Okay, well, if no one's got it figured out ever, maybe there's nothing to figure out. Maybe that's just not how that works.
[00:49:24] Speaker B: Yeah.
[00:49:25] Speaker A: On the other hand. Oh, yeah, they grew a lot and we didn't. Okay, well, it's not necessarily true that just copying them works, but on the other hand, maybe there's something to look at of like, well, what are they doing? Is there, is it partners versus advertisement versus, you know, what the hell is it?
It's an interesting challenge to whoever you interview.
They need an answer to that. Now they're not going to know everything about your whole company, so they won't know it in great detail. But if the whole point of hiring someone is to solve this riddle of the company that grows consistently because the product must be useful or that wouldn't be true. And yet predecessors of theirs have not changed the growth rate.
Why not? What is it about this market or their work? And how specifically does this person know it'll be different next time?
[00:50:15] Speaker B: Yeah.
[00:50:16] Speaker A: If they can't answer that, then, yeah, that doesn't sound so good. If you do have an answer, you'll still have to evaluate what you think about it, but at least you've got something to go on.
[00:50:25] Speaker B: Yeah. And I mean, just transparently, we've taken the largely, we've taken the like. There's not a thing to figure out, like, it kind of is what it is.
I am not giving up, but I'm taking the. For right now, we need to kind of maintain the status quo and execute on what we're doing because it's working to a degree. Can we just do a little bit better at it?
So that doesn't seem totally wrong? I don't know if it's totally right, but it doesn't seem super wrong.
[00:50:55] Speaker A: Yeah, it's really hard to tell without all the details of what is happening. So it's very hard to say from the outside.
It could be that you say getting new customers is just too hard.
So therefore, growth has to come from existing customers. Therefore, the adjacent products or whatever has to result in existing customers giving us more money. In other words, Arpu going up, not end going and not end accelerating. Yeah, that's great. Like, if that's the case, that is a great strategic statement. Hey, of course acquisition is important, but we can't affect it. We can model it. So that's good. It'll put in our models of what's going to happen, but that's not where growth will accelerate because we tried and failed, and that's not how it works.
Okay. Where can it come from?
There's only one other place.
Existing customers giving more money. Why would they do that? Well, that's where you get into details again. Can you segment your customers, like you said, into different groups? Is there different kinds of value to give? Would they already give you more money? Are you already underpriced? I mean, there's a million things you could ask. Should you be building different products? Should you acquire something else somehow and feed it into the customer? There's many things that could occur, right?
[00:52:12] Speaker B: Yeah, yeah, yeah, yeah.
I want to spend like, five minutes talking about AI because, like, we've talked with a lot of folks about AI. I think your perspective value maybe more than anybody, like, from a business perspective, how are you thinking about AI within WP engine these days?
[00:52:33] Speaker A: Well, we have a couple of ways. There are operational ways, like how does it work in support or sales or something. And we don't have that in front of customers, but we have it for ourselves. We actually have our own internal work. And so that's been interesting.
We will probably put stuff in front of customers, but we'd want to know that that's when and why and how good is it before we do that. So there's operational stuff, and then, of course, there's product. And so, well, I should say there's also developers. Everyone's using copilot now, et cetera. So there's also the development side, which is very interesting. And then there's product. What kind of AI product would we make and sell to our customers? The challenge there is of course, there's a billion AI products and there's going to be a billion AI products and some will win and most will not. And whatever, that's all going to happen. And so us having a team or two building a product is not going to overtake some 30 other startups, 100 other startups of various forms that are trying to do the same thing. That's a silly strategy.
But we do have some products like our search, which we already have customers for, people already like it. It makes a whole lot of sense to put AI in there. So for example, if you're e commerce and you're selling shoes, for someone to be able to type a shoe, that's good for people with plantar fasciitis, and then it understands that and shows you stuff, which, by the way, we do this. This is a real example.
[00:53:56] Speaker B: That's amazing.
[00:53:57] Speaker A: That's pretty freaking cool.
Also in e commerce, fun fact, people that hit the search bar are three times more likely to convert.
[00:54:07] Speaker B: Oh, wow. Okay.
[00:54:08] Speaker A: Now it's not too surprising. It's like, oh, they're showing some kind of intent, they're looking for something. Okay.
But it's interesting to put a number on it that's curious, right? So I bring that up just to say so. Therefore, when someone hits that search bar and starts typing, it's very, very valuable to do well there. In other words, technologically, if you invest in that experience, that's pretty smart because that's your golden opportunity. So make that amazing. That's smart. I'm just emphasizing why, because otherwise it might sound like AI search and it sounds okay. Actually, for some people, this could make a lot of money.
Clearly that's just the beginning. But I'm just explaining where some of our, you know, initial forays are, where it's like, okay, again, going back to adjacency, this is a product we already have. It makes sense why it would make that product much better. So that's a nice place to begin, you know, and then, and then from there, try to figure it out. I would say there's zero people who know what AI looks like in five years. What does that mean for content creators? What does that mean for SEO? What does that mean for anything? Like, there's a lot of theories, but I don't think anyone can say with any kind of confidence, what that's gonna be like. So for us, it's like, all right, there's places where we know it is valuable for our customers and products we already have and understand and things adjacent to that. Fine, we could have theories about the future, but we're not going to nail those down. That's silly. But we need to be playing here so that as the future unfolds, we're there and we can see and react to it.
That's what you do when it's extreme uncertainty. What do you do? You don't make five year financial plans in extreme uncertainty. You say, oh, you. You need to play, you need to explore, you need to act, and then you need to see how that goes. Like, those are the kinds of behaviors one does in a zone of uncertainty, whereas they say in, like, knife and chaos, which is what AI is right now. Right. It's the chaos realm in the Knefen framework. And what you do is you act and see what happens. That's the correct response when it's that sort of situation.
[00:56:09] Speaker B: Yeah. No, I love it. I mean, we think similarly of, like, internally, we have team pink and team purple at Casto. So team pink thinks things internally, team purple externally, customers, things like that product.
Yeah. And we've definitely similarly got adopted more internally and are thinking about things externally or features building into the product, but kind of question the ultimate value of that.
And certainly people's willingness to pay, I think, is a big question.
[00:56:39] Speaker A: Yeah, I agree. Again, we can draw a line to certain customers where it equals more money, and it's like, all right, there you go.
[00:56:47] Speaker B: Yeah, yours is.
[00:56:48] Speaker A: But what does that mean broadly? Oh, it's not. It's a lot less clear. Right. Exactly. To your point. Yeah. What is the willingness to pay? What are you really doing? I think one of the good ways to think about it is, I think the wrong way to think about it is we're going to put AI in because customers, what customers don't wake up in the morning and think is, I wish this product had more AI.
Right. The customers have the problems or the opportunities and the value that they want that they always had.
If I'm a media company, for example, I want people to come. I want more people to show up. And you demand gen somehow. Then I want them to stay longer and click more so I can show them more ads. I want them to sign up for my newsletter or social media so I can continue bringing them back. That's what I want. I want to sell more ads and for more money per ad for whatever reason. That's what I want. I still want that. Now, if you're telling me sprinkling AI and some piece here improves that, I'm listening. But not because AI, but because I wanted that thing. And if AI transforms that thing, great. Wonderful. Like we were stuck on that thing. If AI can unstick us, I'm. It's great. So it should always, AI is always, should be thought of as the potential solution or a potential execution, possibly. Potential execution, possibility that makes us be able to deliver this thingy that we always wanted to, that the customer always wanted to. But now, in a way that we couldn't before, or whatever it was, that's how to think of it. It's in the solution space and not the problem space. But I think too often people think of it as the problem space. I need AI or something, and it's like, no, no, no, they don't need AI. They need what they need.
Can you apply AI to the problem in a way that they couldn't before, to give them what they need in a new way? That's the question.
[00:58:37] Speaker B: Yeah. No, and I think a way we did this is we implemented transcripts for free in our product because the cost of doing that is now so much lower. So. Yeah, exactly. Yeah, they wanted a thing.
[00:58:48] Speaker A: Transcripts because I wanted a transcript. Yes, of course you did. Now it's free and better.
[00:58:53] Speaker B: You want a transcript?
[00:58:54] Speaker A: Good. I wanted a good transcript. Of course I did.
[00:58:57] Speaker B: Something crazy. Yeah, yeah, yeah, yeah, yeah. Neat, neat. Jason, this is amazing. Thank you so much for sharing so much valuable time with us today. We'll link up where people can find you online and Twitter and everything in the show notes. Anything else you'd like to share with everyone today?
[00:59:13] Speaker A: No, it's just online. It's asmartbear. Like the animal. So asmartbear on Twitter and asmartbear.com is where all the articles are I've been writing for the last 17 years, which I cannot believe, but I'm an old school blogger, I guess.
[00:59:27] Speaker B: I love it. I love it. Well, thanks so much for coming on today. I really appreciate it. And I will chat soon.
[00:59:32] Speaker A: This was fun. Thanks.
[00:59:33] Speaker B: Okay, thank you.
