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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Founders' Felgate. Founders Field Guide is a series of conversations with founders, CEOs and operators building great businesses. I believe we are all builders in our own way and this series is dedicated to stories and lessons from builders of all types. You can find more episodes at Investor Field Guide dot com.
Patrick O'Shaughnessy is the CEO of O'Shannassy Asset Management, all opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shannassy asset management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shannassy Asset Management may maintain positions in the securities discussed in this podcast.
My guest today is Matt Mullenweg, co-founder and CEO of Automatic, the company on top of the Open Source Project, WordPress that Matt helped start today. WordPress powers 40 percent of all websites in the world are wide ranging. Conversation covers the state of the Internet. When Matt first started WordPress, the symbiotic relationship between open source and proprietary projects and how the most successful companies are really master world builders. I hope you enjoyed this great conversation with Matt Mullenweg. So, Matt, I always try to name these episodes in my head before having the conversation as a sort of frame for what ground we can cover, one of the ones that me and my team toyed with for this one is the past, present and future of the Internet.
Given what a integral role you and WordPress and Automatic have played in the development of the Internet, I thought it would be fun to start by asking you what the Internet felt like in early two thousands when you first started building WordPress and ultimately automatic, what did it feel like to be a participant back then?
It felt like I missed the wave because everything that happened in the 90s around Netscape, the Internet boom, I was in high school. The dotcom crash was just something I observed as a teenager when I got to San Francisco in 2003 or 2004 at a little bit, but not a ghost town. But it was like people were trying to reinvent things. I think the catch phrase at the time was Web 2.0 and Web 2.0 was trying to correct the excesses of Web 1.0.
So everything was open, it was connected. There were open standards. Services would interact with each other so they could integrate with the listeners, would integrate with technology, would integrate with the blogging systems. And in my particular area, which was webcams and blogging, is really how we got started. We just weren't blogging. It felt done. There were either huge things like live journal Zenga blogger had already sold to Google. Google had its blogging system, all the other Internet giants that at the time.
So the big companies feel so old saying this is like AOL, Yahoo, Google, Microsoft for tech giants. At the time, each one had its own blogging system. So Microsoft had one called Space's AOL had journals, Yahoo! Had 360, and then Google had blogger. And that was kind of the environment where WordPress was starting.
It felt very saturated, knowing now, obviously, that that impression was very wrong. What do you most attribute that to? It turns out to have been very early in development at the time, which now is allowed for this explosion, basically ever since then in a very consistent way. What was that there that you had wrong in that impression?
I definitely had ever since have like looking for areas that feel like people are writing them off. Blogging was being written off at the time because it was finished a few years before a search had been written off. And what could be better than Lycos and excited.
And as was Alfred Jeeves, it was done. There wasn't anything left to solve. But one thing I like about that, San Francisco to me was total Mecca because it was all the true believers, carpetbaggers, folks who were just there to make a quick buck had kind of moved on to something else. I don't know, maybe subprime mortgages. And the folks who were left really cared about the web and they were passionate about it. It's actually fun to see some of those characters like Stuart and Katerine at the time were doing such a little.
Stewart does stock that just over twenty nine billion is a big exit at the time was like twenty nine if Yahoo! But your company for twenty or twenty five, that was like a lottery. That was actually part of the path I thought that we were going to be on. I was very lucky that one of the first people I met was the journalist Ormoc and he became a very good friend, still my best friend. He was like, Yeah, it's easy.
You just start the company, put my parents on the board, has on the board of Yahoo!
Both written, and they'll pick you up in a couple of years, rinse, repeat. And I kind of thought that was a good idea, to be honest.
I was like, well, maybe I'm just kind of doing this blogging thing. I like it.
Have you continued to be a connoisseur of things overlooked? Is that something that either within the business or your activities or. I don't know if you're an investor as well. Is that a common theme that's continued?
Yeah, investing for me is very much on the side. I think of it like a way to pay it forward to other entrepreneurs. I've done over one hundred angel investments through this vehicle, Audur Capital, and the most successful ones have been things that had a little bit more trouble getting. This is calm and I think it's 2012. I was really into hardware for a while, so it was in August rain. But at the time when I was meeting those entrepreneurs wasn't Mango's Daubert and it was having trouble getting funding.
One hundred is a lot of reps. It makes me think the number you saw was some multiple of that. Was this idea of written off or neglected? I'm just really intrigued by the areas that have been written off. It's like the classic value strategy or thinking applied to angel investing in my heart.
I'm an engineer. I work with a lot of really, really super smart engineers. What are we excited about? There was a funny history. WordPress dot com was the first major Internet service. That's a Bitcoin. And the article about it for Bitcoin magazine was written by hypertonic who obviously would like to do with your Bitcoins. Twelve dollars at the time. And we thought, oh, maybe if we buy some before a good idea. But it was just what people are doing in their spare time.
And we kind of, I guess, always with automatic. So WordPress is the product and open source automatic is my company, this is my full time job being a CEO there, which I bring in that what is the thing that we're really passionate about after hours? And how do we bring that to the work as well? Because that was kind of the idea of the company was created was could I make a full time salary working on open source?
Can you describe how this idea of permission was publishing has so shaped what we think of as the modern Internet and maybe describe why, whether it had to be this way? Like, was there another path that had we gone down, the Internet would look very different? I'm just really intrigued by open source and permission, less innovation and publishing tools.
One is everyone has a boss, right? But who you are, there's someone, a partner of parent. There's a provision somewhere in the stack. Even if you're running like a tor hidden service, it's running somewhere, maybe Internet provider, maybe to Comcast, who knows? But there's some path on and off the information superhighway in terms of more open systems, or could the Internet have gone differently? I think that there is a very natural cycle that happens between open and closed systems or proprietary and open source is another good way to think about it as a modern incitation of open and closed.
People think that one is going to currently win over the other. But actually the success of one creates the conditions for the other to fight almost like symbiotic species. One gets overpopulated and that allows something else to come in. So typically what happens when something super open becomes extraordinarily successful? Actors who maybe don't buy into the philosophy of keeping things open can go in and then was a parasitic form and capture more value from that ecosystem than they put it otherwise.
And that everyone likes this Gmail. It's built on a completely open email infrastructure, SMTP, something different. And of course, today has essentially forked email to where certain emails go into certain sections that they decide on how they do spam, how they allow rate limiting, etc. has essentially closed what was a completely open format. Some of the downside of open systems also comes from abuse. So spammers and I think of spam as a much bigger issue than hate speech and other things, because spam, it's like a super bloom of algae.
It can kill off all the other life and a system you can probably think of if you remember what it was like to expand on MySpace or something like that, I think it's actually unappreciated. Part of the story. How much of the success of the systems are one like Facebook as a result of them having really amazing spam control? And Gmail is another good example of that. Then the close thing gets too big, too successful. The rest of the market says, let's work together to create something open and essentially teams up against the closed proprietary thing.
And then that creates the supercycle the other way. It's kind of happening with us where everyone got together for communities that are going to make this open standards. Now, Amazon's pretty smart, so they compare it with that. It's not always in a straight line the cycle happening, but you can basically zoom out to societies, to democracies, to governments, to everything and see versions of the cycle happening over time. You can look at it with a Gutenberg Bible.
Martin Luther nailed to the wall to flesh that out a bit more.
I try to make sure I follow that example. Sure. If you consider the Catholic Church at the time as essentially a proprietary implementation of how to operate in the life and what happens in the afterlife, a mediator of the relationship to the divine, Martin Luther wanted to dis intermediate that he was the open source, the idea that the Bible used to not be translated. So even the idea that the Bible is available in a language that people could read was revolutionary for its time.
It was, I think, just until Vatican to the masses are still a modern expert in this area. There's so many versions of this that happen and you just kind of have to put that lens on and you start to see it everywhere. You can see with Encyclopedia Britannica, Wikipedia, you can see it with centralized finance versus decentralized finance or cryptocurrency. Bitcoin, the most interesting is like a great example of the success of the system is creating the need for the alternative.
Where do you think we are generally in that pendulum swinging or cycle right now, recognizing that we may be at different points in the cycle for different parts of the ecosystem? But if you had to just summarize the zeitgeist as you feel it as an engineer, where do you think we are in the balance between centralization and decentralization?
I think the nadir was probably twenty thirteen, which is roughly a 20 year cycle. Let's use a heuristic to test what are people putting on billboards in the nineties. People will put a little keywords on billboards. And of course, that was kind of a preparatory early type in the keyword. And you could pay AOL to come up first and have special listing is equivalent of the racket. That's Google AdWords. Now, 20 years later, people find Twitter and Facebook addresses.
Billboards that has started to shift the success contain the seeds of its own demise. Facebook started to pull the rug off. People who built up followings on the pages said, OK, you don't actually have a direct relationship them you're going have to pay us to reach them, except in very rare cases you're paid to get the followers. And I had to pay to talk to the followers. But it's nice work if you get it. Like a lot of people for whom that happened to said I had to move to networks where I own this or I need to have a much more direct relationship.
That was around the time I think Ben Thompson started Chickory 2013, 2014. He wanted a direct relationship. And of course, Kevin Kelly's thousand true fans was ten thousand. And then Legion, that amazing updates of where she took it down by an order of magnitude. It's much more valuable to have, I think, a thousand people who follow your blog or subscribe to your newsletter than it is to have one hundred thousand followers on Twitter. This 20 30 is an interesting point.
I just love this idea. I never thought about this way. So part of it, too, seems like the direct to consumer relationship versus the intermediated relationship is also on this same cycle. Am I right in thinking that we accept intermediation because it serves as like a quality filter? The open standards create such a large N of anything. The search costs actually start going up. We're like, God, I don't even know where to begin now. So I'm going to trust some centralized player to be the curation filter of the spam filter, the whatever it might be, the bundler.
It's the same bundling, unbundling thing, I guess that you're Gervasio always talk about am I on to something there? I love that. That was just the offhand comment. So I didn't know that until recently. They just kind of like fire that off off hand. When investors ask the question, it is isn't I mean, consumers do have fatigue now. I think some of that is used as a fig leaf by the bundlers and bundlers to justify their business model.
Turns out consumers can handle I don't know if you ever look at your screen time stats. Apparently I get like five hundred notifications per day. I'm trying to bring that down. But it turns out I can handle I wasn't even aware that I was getting that many notifications. We have a good capacity to handle a lot as consumers and perhaps increasing. Now, how valuable does that make? Paying attention and silence and the people who invest the time to write longer form things.
One of the little things we have an automatic as a publication called Atavist, which publishes once a month typically more than ten thousand words and then Long reads, which is a more of a curation site for pointing to long form text. A small editorial team, Melmac, which is actually something I think every company should have an editor. It's amazing to me the demand for that content. I think I would have assumed and in fact it was a very common prediction.
When phones started coming out, I was like, no one's going to read anything longer that it's all about the short bites. I guess it's kind of the idea of Clippy. You wanna watch longer videos? They need these super short ones. I think that when we underestimate people, it's usually to the detriment. And it turned out that not only would people read really long things on the phone, what was shocking to me is they were right. They long things that are fun.
This is when phones are quite bad. People write thousands and thousands of words. I think a lot of the photography thing, like the best camera is the one you have on you at the time. The best computer is the one that's on you at the time.
And you can do all the things that you would normally do on your computer to varying degrees of friction or not thinking of the twenty, twenty one Internet, what are the most interesting, relatively new features of the Internet that you think represent opportunity? And then maybe on the other end of the spectrum, might it represent challenges for innovators, creators, builders, whatever word you want to use for them? So what about today is notable? That's a rate of change of some sort.
And what are the pros and cons of it today?
I say the biggest threat right now is Apple feeling like an underdog. They have this mentality where everything is getting more and more closed and the centralization of access to applications in the app stores on the most prominent devices, things like this, billions of smartphones is challenging. I say the other thing that's really challenging is the open Internet is not old Internet nationalism. So the idea that every country should have its ability, sovereignty to say what is allowed or not allowed in that country, and some try to extend that to apply the rules either explicitly through legal means or implicitly through economic means internationally as well.
Examples of this could be economic ones, could be China and Disney and different movies or China, the NBA, you know, and I think they're more for the Houston Rockets said something about Hong Kong. The hammer came down Saudi Arabia and the dissident film, which is a documentary about Jamal Khashoggi. And it's just been blocked from all the major studios and all these sorts of things. That appears to be economic flexing of a major player in the space, essentially applying its own rules to trying to send them to the rest of the world.
That, I think, is a pretty big challenge if Apple and closing ecosystem and. Nationalism, which is kind of interesting, similar version of that is on maybe the negative side or challenges to the open web. Are there things that counteract that on the other side that are more interesting or exciting or ripe with opportunity today than five, seven, 10 years ago? Everything so good, encryption, photography, decentralized protocols, block change, open source, WordPress, all of these things are both making the Internet more open for its direct users and forcing the competitors to open up to compete.
It seems as though cryptocurrency, as you mentioned, WordPress, one of the first to accept Bitcoin way back when, are surging. Certainly someone that's tracked them very closely was really excited in twenty sixteen. I guess I just look like the price of Bitcoin in terms of my excitement, which is silly, but it does seem like the on ramps for real consumer use cases are ramping in NFTE is basically things where like crypto is the rails. It's the means, not the end.
It makes something possible on the Internet that wasn't possible before. What's it looked like from your seat? You sounds like you're familiar with it really early on. How would you describe your personal view of the potential of cryptocurrency to enable good things on the Internet?
We're still in the Nokia and BlackBerry age of it. There's obviously a lot of cool stuff happening, changing a lot of people's lives. But the price can be a real distraction.
By the way, WordPress no longer accepts because all the people who have spent 30 Bitcoins to buy a business plan in 2012, everybody else is the pizza.
Right. But what's nice about the price is it does draw more people into learning about and holding crypto, which at some point leads to it being used unless there's entirely a new generation of buy and hold forever investors, which doesn't have the history of the stock market and everything else would appear. That is not true. Getting more people involved with it, getting more users of the companies that Coinbase that are creating kind of SAFET on ramps to interact with these things I think is ultimately really, really positive for what is going to be the truly disruptive users, which is the more daily use.
It's we had a poll the other day and said automatic who wants to receive their salary and USD, which is a staple coin tied to the dollar a people currently receiving dollar salaries, whether they want some, a percentage, all of it. Are they interested in other crypto like what is is good gimmicks?
Like I said, we have a lot of early adopters in the company. A lot of people are on the bleeding edge. That starts to get interesting to me as a company. When I look at the things we deal with forex and reserves and stuff that could be we employ people in 77 countries. Sometimes it's hard to pay people in certain countries. Sometimes bank accounts get frozen. Sometimes countries go through hyperinflation. One interesting thing about having colleagues in seventy seven countries is there is something happening in one of those countries all the time.
There's revolutions, coups, there's hyperinflation. One covid was happening. It was hitting different places at different times. Just being empathetic, connected to your colleagues because you a lot of the early indicator of things that can or will happen elsewhere. I mentioned this idea of past, present, future of the Internet. We've talked a little bit about the first two. When you think about the future of the Internet, I think work distributed work is a really interesting angle on that future.
As I said, you've described in a couple of places especially, I'd recommend people check out Sam Harris's conversation with you on this topic. I thought the detail is just awesome. We won't replicate that here, but I was like going to the extreme. So now everyone's got a data point here, like everyone's doing zooms and has some rough sense for this. You've thought this through to its logical conclusion, which is I'll call it like utopian distributed work.
I'd love you to describe that state, which we may never reach in as much detail as possible, because I just think when I've heard you talk about it, it's very mind-expanding and illuminating for what's possible, even when just think about who you can recruit as an example and the talent pool available to you. Can you describe level five in as much detail as you can, the fifth level of the Sturbridge at a time?
This is where you and your team are doing better work than any team in an office could or you ever could if you were going to an office every day. That seems impossible. Like how could people working from home or working from anywhere be more effective? So just imagine this world every day when you go to do your work, you're in an environment which is perfectly tailored for you personally. If you're allergic to dogs, there's no doubt that you love dogs.
There's a litter, there's the smells you like, maybe candles. It's a temperature you like. It's not like put at some freezing temperature just to keep the office sanitary. You can eat when you like. The music is fine. You are connected to the people whom you want to be connected with, not who your job is. It's ticking next to your day. Is your measure by the results, not how you're doing the work. If you want to design your day to go skiing from nine to 11 and then work from eleven thirty six to eight.
Sure. Or if you find yourself a very productive from 11:00 p.m. to two a.m., you can design a day around that. You can. Be with your loved ones whenever you like, while bringing that energy to your collaboration with colleagues and the work you're doing in the work realm, you are working people who are all also similarly fulfilled. Each one of them is doing the very best work of their career and has the most balance between their life in the work.
Able to give the best of both your working with the global best. Your company say they hire the best, but they then add this geographic filter of people who are in a removed amount of you or some arbitrary geographic location, which by definition excludes ninety nine percent of the population of the world. There's probably over six and a half billion people that you're excluding from that. Either you believe those people are valuable or you believe that talent and intelligence is equally distributed.
An opportunity is not. And if you were to open that opportunity up to those billions of more people, those could be as valuable or maybe more valuable contributors than the folks who happen to be when the ovarian lottery to be born in the place where they could could have access to your office job.
There's one detail which I found interesting when you talked about it, which was almost the potential advantages of different locations and time zones. Most specifically say that about what you've learned with the seventy seven countries where you employ people and the role that time zones play in productivity and collaboration.
Level five work is asynchronous wherever possible, meaning that the collaboration between folks working together on something could be real time. But it does need to be. So if I'm sending you something, that quantum of information has everything you need to move that puck forward. What if the reality is that we want to use get to the next iteration of the product? There's no night shift in a distributed company necessarily. When you have people all over the world, they can work their normal hours of the hours.
They feel most productive and you can have 24/7 coverage. We had a particularly good version of this early on automatic where we were 10, 12 people. Our competitors were two hundred plus people, but we had three shifts of coding going on so we would get 15 days of work done in a five day workweek. It was small enough at the time as well. We could kind of pass the baton between the different time zones and some of that was also probably some over work.
And the fact that we were young, I was probably on the computer 14 hours a day. I knew around midnight I could pass the baton to my colleague Donica in Ireland to be kind of like waking up, starting his day. And then I could go to sleep. And by the time I came back, he will have fixed those bugs, iterating on that code and the things. And as he was ending his day, I could pick it back up.
Some version of that is possible. And the Nevada state, I would say that's extremely difficult to achieve, as I always worked with remote teams or other folks has probably experienced. But it is entirely possible you can do versions of this within the company for larger things as well, if you imagine. And one of the genius of any of us and Andy and Jeff like creating the same, that every service must be decouples. You can have no private communication.
It must all be over product protocol, and it must be designed to be externally consumable as a way to stop that coordination tax. When companies get larger, that happens to be too many teams blocking too many other things. You can imagine a distributed world version of that. In fact, I believe me, large tech companies effectively have this inside of them that is really, really powerful.
Can you say a bit more about what you've learned from that famous Amazon letter detailing this requirement of how teams interface and work together? We'll link to it as well. But from an engineer's perspective, I'd love to just hear your interpretation of the power of that way of doing business in especially in the digital world.
Well, famously, Amazon made a call center into our profit center. It saw that the problems that we're solving for itself and some of this is mythology, Adelaide, their peak demand and everything like that, the capacity they developed a lot of learning. The hyperscale companies were doing things that other companies should have adopted. By the way, I thought this was either going to be Yahoo! Or Google that did this. I would have not predicted that Amazon would be the winner in this space, as nothing else than Yahoo!
And Google are so much more acquisitive and be so much easier to acquire companies if they were already on your infrastructure. There is a fact that when you make something externally consumable, many others are going to be able to use the API and interact with it. You clean it up, make it better, you document it better. The same asset that they've forgotten sakova like when guests were coming over to your house.
You're a tidy up a lot more than maybe you would for your own personal, whatever your tolerance was for messiness or tightness in the house. There's that guest effect, publicity effect that is actually really, really powerful, particularly for engineering teams. The external consumer becomes a real customer when you have a customer centric culture. That is probably the most valuable thing I like to say. Usage is oxygen for ideas. Without it, you don't really know whether the idea is valid or what is.
I can't truly live and thrive and iterate. And too often inside these larger companies, there would be internal products that everyone was forced to use that never really had the crucibles that usage applied to the. And it becomes particularly acute when an external alternative is a possibility for a team as the internal alternative. So if your internal resources, like, let's say, your version of your internal cloud or community's infrastructure has to compete, any team could use that or they could use the external thing to get really interesting for what are the true advantages of it.
I also think what's interesting about this is that we're still so early. It is shocking the trillions of dollars of the economy that is not yet digitized and of the things that are digitized, that is still like a Dell box in a closet somewhere or an office somewhere. It is almost an unbounded opportunity ahead of us.
I love this idea that hand in hand with remote distributed work is the concept of more formal async interaction between services and teams and that make everything very clean. What makes distributed work, not work, would have been the things. I know you've done this for as long as anybody you know. I'm one of them considering a much more distributed team and almost have that be the standard. What are the landmines that you think are easiest to avoid?
It's still important to develop relationships and trust with people. You need to figure out how to do that in a distributed fashion. By the way, one of the ways we used to do it was get people together. So we'd say the whole company will come together once a year. Teams will get together a few times a year. We too have been navigating how to build that trust, that camaraderie, that connection, while not being physically proximate with each other, because there is something at the very base like lizard brain that when we sit across the table and break bread or share a beverage, there's just something that gets activated, by the way, that's just human evolution, like something you can.
So just be aware of it, figure out a way to invest in those relationships. I think that when work is completely asynchronous and you're managing more by the results than by saying if someone's in the desk every day, you can have a higher lifetime or latency to knowing when there's someone having trouble. So I say for managers, it's figure out the cadence of checking in and figure out what might be early indicators of someone stuff that could be a work issue.
It can also be something else going on in their life that you just want to be aware of so you can support them. It feels weird to send a sack down that says my partner has cancer. How do you do that? And if the next one on one is not until for two weeks or a month away or whatever it is, how do you bring that up? How do you state your needs? How do you stay where you are in life and as a manager, then how do you stay attuned to how you can best support your people?
If someone has missing a deadline in that context versus a different context, you're going to deal with at a very, very different way.
So going back to the beginning of the story, you thought you had missed the wave when you started WordPress. Now, I don't know what the status today. It powers some insane percentage you can share with us of the Internet itself in terms of Web pages, more than third. What are the most interesting business lessons that you've learned building automatic WordPress, the products that your team has put out, just kind of as a retrospective? In addition to what we've talked about, you've been a very unique builder.
You know, most people I have on this Founders series are tech venture backed or traditionally backed companies. They kind of have this similar trajectory in whatever way. You've had a very interesting journey. Given the interesting journey. What are the major business lessons that you think back on?
One thing I love about great creators, you can imagine like a General Tolkien or something doesn't just write a book creates a world. There's an Elvis script that he wrote poetry. There's like a whole thing around it. And then the best creators and creative works also then create worlds that happen after them on Tumblr. We have so many fandoms and fan fiction, people who like take the canon work in and expand it. They create new art, new stories.
You can do that with companies. And my favorite companies do that we take for granted because we look at when we talk about Salesforce, we talk about the acquisitions or Marc Benioff and Brett Taylor, these sorts of things. But you miss that they created a world, the Trailblazer series, that they train people their events, they share information, their interactions with the communities for their name on the tallest building of a city. Like all of these things are part of the universe, the mythology, the world of something like a sales force.
That's also what we try to do with WordPress is we said it's not just product. It's a movement. It's an ecosystem. It's a philosophy. It's a worldview. It is something that people can have ownership of your own WordPress just as much as I do. You can define a future of WordPress as much or more than I can. You can you can contribute to it. No one company makes more than probably five percent of the revenue in the ecosystem.
So the fact that open source is a hack for getting competitors work together and that there are multiple hundred million dollar error companies built in the WordPress space like that is to me far more rewarding and far better for the launch. That's another thing with it being a movement is I want it to both outlive me and outlive everyone currently working. What is going to make it work over decades? Geoffrey West has an amazing book where he talks about how companies tend to die, but cities tend to live.
They survive even nuclear explosions. The cities are still around. Still people living in them still have economy still growing. What makes that happen? Where companies, very large organisms also follow this. They typically max out. And so he also talks about megafauna, giant, whatever, famous lizards, woolly mammoths and things versus insects. There's species of ants that have been warring for thousands of years.
And then if you zoom out and to humanity, look at the planet, that iconic picture, the pale blue dot that Carl Sagan talks about, are we in a pile? Are we an organism like what are we and what when we're at our best, do we do? What I get most excited about humanity is when we work together to create something that's bigger than the sum of its parts. Wikipedia is a great example there. This is the best source of the best knowledge ever collected in humanity that was done through essentially someone who's created an environment and a set of rules and then allowed iteration and a community to evolve it.
I absolutely adore this idea that I've never heard before of company building as world building. What else have you done personally or seen Salesforce as a great example? Such a good example. What other companies have done this effectively that one could go study to study this concept and maybe examples from WordPress and automatic specifically that you found to be effective at building that world?
It's hard to find a ultra successful company that doesn't have a version of this. It might not be in our consciousness. Actually, Microsoft is one of the companies I've studied the most because they created a true platform with windows in a way that actually no platform since then has matched. And the way they did it, I think is really, really fascinating, as particularly fun to read, like the books in the nineties written about Bill Gates biographies of things, because then you have the advantage of like knowing what happens next in the story.
The book ends on the eve of the launch of Windows ninety five. And you're like, oh, what will happen next? That the possibilities are endless.
What did you most learn studying Microsoft about effective platform building? Was it Gates that had the line about the definition of a platform of more value created on top than captured by CAMBA of those gates or somebody else that said that? What have you learned about studying Microsoft for would be platform builders out there?
He did say that it's funny because he actually said that in the context of, I think the Facebook platform saying it wasn't a true platform, which obviously we have seen that play out. It was not a true platform.
I found this rule, as you're probably turn it into a law like third law or something that every truly successful platform there tends to be a ratio of the platform creator capturing about five percent of the ecosystem. So that kind of one to nineteen won. The twenty ratio is very, very consistent. And I started to see it. You could see it in the old eighty six infrastructures. And so the ecosystem on Intel and on the eve of the launch of Windows, Microsoft was saying that for every dollar sold for Windows.
And also to put this in context for the youngins, it was like a new iPhone launch. People were lined up and camping out outside the stores to buy this box. The Rolling Stones did a song for it. It was the biggest cultural events of that year was everyone is sorry about this release windows in their press. They would say, you know, for every dollar we make for windows. Twenty dollars made an ecosystem around Windows. I have kept that in mind with automatic and WordPress.
Automatic is obviously a company I lead. I have the fiduciary responsibility of my investors and my families, of my fourteen hundred colleagues and things like that. So it is a real business. I also keep in mind how do we grow the overall pie where we can keep our portion of the WordPress ecosystem around five percent? Because if we got too far beyond that, we'd start to take the oxygen out of the room. And when we get too far below that, you end up getting a tragedy of the commons.
Effectively, you can have talked about sometimes open source as parasitic parts or people who take more from it and they put in automatic through its culture puts a lot back into the corps. Not all of the companies, no press ecosystem do or any open source ecosystem. So they start taking all the revenue. It starts corps as well. So that's part of why I say that we need access to it, not just for ourselves, but actually because we are defining the possibility of both our business model, distributer work, open source and the future of WordPress.
We have a big influence on.
Is there an example of a time that you made a decision that maybe in the moment an outsider might say that you're doing something against your own interest or suppressing your own interest to with that five percent concept in mind, where you're thinking more about growing the overall pie than the share of it that automatic or WordPress is capturing from like a monetary standpoint, never. If you think long term, where I find there is context, there are differences of opinion. It is a difference of thinking short term versus long term.
I mean, I'm sure any CEO could list 30 things that they could do to boost revenue this year, but at the cost of some longer term customer loyalty, partner relationships, anything. So all the best leaders I follow in my are very long term thinkers.
The concept, again, just to close the loop on this notion of world building. Do you think that it requires some sort of North Star or everyone talks about mission and vision?
How do you continue to build a cohesive, effective world? Is there a key ingredient in that that you've observed in your own experience or in others?
I think that the best learnings here come from studying things outside of companies and business. So you asked me for like companies and business examples, but study religious on the dark side of study cults and where things go wrong, because, by the way, sometimes startups turn and exhibit some of those negative behaviors, study the evolution of politics, particularly democracy, study cities. Geoffrey West, sociologist. I think a lot of economics and incentives, both behavioral economics, that's where the macro level, the macro economics for what are the long term incentives in a system?
What's the timeline on the closure, on incentives? Show me the incentives and I'll show you the outcomes or something like that. Yeah, I mean, show me a place where that doesn't happen. Worldviews, if there are short things anyone listening to this would say, I would say that it's more fun to be the pirates than the Navy like have something is different about you. To me, when I read visions or missions, there's nothing that another company wouldn't agree with.
That's probably some of our biggest concern internally is like we want to as an intermission. We're like, well, what's the thing? We could say that not every other company would say, we have agreed. And one of the lines it is open source is the most powerful idea of my generation. And I'm all motivated by impact. But those are two fairly controversial ideas. I don't think everyone would agree with it. And that's great, because I don't want to employ everyone as unemployed, only the people who are excited when they hear that sentence.
We actually put the creed on the offer letter. So after all the legalese, there's then the greed and then you sign your name. I was actually inspired as well by Dan Ariely, who did like a study around Sign Your Name Next to something, makes you take it much more seriously. That's where I think about it. Then are you capturing all the value your ecosystem works? Shopify are both amazing businesses, which probably captures ninety eight percent of the value ecosystem.
Shopify is probably capturing high single digits between 10 and 50 percent. They're not a platform, but they're not not a platform either and they've done a good job.
Navigating the Wick's Shopify comparison is one I haven't really thought about before. What is it about how Wex is run as a business that dictates that ninety eight percent capture? What's the denominator in that ratio? And same thing for Shopify. Just want to make sure I understand the lesson between those two deeply. So let's say which revenue is about a billion dollars. They are making most of the revenue in their ecosystem. There's not that many businesses built on top of that.
And I would say part of that is incredibly aggressive, by the way, not a bad thing. It's good to have that in the market. But to just give one quick example, which literally doesn't let you export your content. There's a sports page says there's no way to do it. Even Facebook lets you push your cost.
I know. I'm amazed they get away with it.
There's not an antitrust thing or something or user advocacy like everyone else lets you put your content in. So that's just maybe an example of how aggressive this company is in trying to capture every bit of value and really locking every single customer. Other companies that do this. I saw they you could think of companies that bring in really cheap and then upset you or make it difficult to cancel that can be profitable in the short term. It can capture a lot of revenue in the short term.
I think that long term that creates the seeds of your own demise.
How have you thought about what to do next through the history of automatic and WordPress? So you had some initial thing you did and that thing now powers some huge percent of the Internet. There's a lot of things that you've built over the years, and I'm thinking again of this world building concept which now want to be obsessed with. What have you learned about good decision making for resource or capital allocation within your business?
Obsess about capital allocation? I think it's partly because we ran the business so long and very little outside capital. That's not true anymore. Like now raised over a billion dollars. I still have a capital it the first two thousand five 2014 was on a total of eleven million dollars of outside capital. And so we went from like zero percent of the Internet to I think twenty five or something that time on very little outside capital. So we just got very frugal and a lot of really good ways and we debate a lot internally.
Are we working on the right things? Do you have people in the right areas? I hope to do WordPress the rest of my life. I really want to build an operating system for the web. So my goal is not that I'm. Two or three in the market, it's the 85 or 90 percent natural monopoly that can happen in technology when a truly open system becomes the de facto and de jure standard for everything built on top of it. Linux kernel maybe being a really good example.
We don't think about it anymore, but that's kind of why it's one you really have to justify if you're going to create a different kernel run running a cloud service on something other Linux. I would like for the Web to be like that in the future where even very, very rich, different applications you can build on top of WordPress. Part of what keeps me excited about automatic as well. And this isn't as well known, but we're structured internally somewhat the hybrid child of like our Brookshaw and I see an alphabet.
If they got together, we try to make automatic effecta organization so that as you zoom in and out on the organization, a 20 person team inside automatically looks and operates a lot like when the entire company was twenty people. How we looked and operate. If you zoom out to a division, which might be two hundred people, it has some version of that where it has a CEO and it has an executive team and it has constraints in some ways and boundaries in some ways.
And then boundaries and others usually do is we as the CEOs of these businesses manage the power, they really just manage. They don't manage to P&L. We try to get them as much resources as possible to grow in a smart way, the same way an investor would. If you're a fast growing company, you're a clubhouse or something, or investors aren't saying to you, like, I think you should really trim those costs if you're riding a rocket ship, if you've captured the opportunity, if you're lucky enough to find one of those, you get it as many resources as it can smartly consume.
And so the question is about how much resources is about is it smart? Is there a positive r.i on each incremental dollar we're putting into it. And those conversations, I mean one of my favorite things about our executive team is we'll actually have GMs of businesses say, hey, I think this thing in another division is more important. Why don't we take one of the teams on my division and put it over there. And the traditional culture, if you lose headcount, you're less important.
Even the fact that we call it headcount, I think is so callous and we try never to use that word inside the company. But if you're really thinking of the holistic, you're an automatic member of the company. First, you're incentivized for long term health and growth of that company. It makes perfect sense to say allocate people away from something that is not having as much growth or as much promise, something that is we do that. A lot of that's about a lot.
And where it gets really hard is, I would say, choosing to invest in something that hasn't kicked off our enterprise business is doing really well, is a big part of why Salesforce invested a million dollars, which I believe was the largest investment, might not be true anymore. There is a point five years ago when the board was talking about shutting that business down, I kind of thought to keep it going. Sometimes I write about those things. Those are the stories I tell.
Sometimes I'm wrong about this. You can tell those stories, too. There's definitely things we've kept going that we probably should have shut down or that we went for too long on. But that's where it gets really tough. And that's also where when I kind of pay for it, I got so much help when I was an entrepreneur in Silicon Valley. I try to invest and work with other folks. The hardest thing is when to say, like, you're on the right path or misunderstood and you should be comfortable being misunderstood for a very long period of time versus you're being stubborn.
And the market and the customers and everything are very clearly giving you the signs that this is the wrong path. And if you change something, any closing advice for people that are building something where there's this platform concept, that's five percent concept, where the ecosystem that spins up around their efforts will just create growth for lots of different people. And how you engage with those other participants that aren't under your umbrella but are key to the success of your ecosystem.
Anything you've learned there in closing about your past, your relationship with those stakeholders, look at every decision you're doing and saying if I iterated on this decision, repeated it for ten years, for 50 years, what would be the outcome? Let's say you're open source project to give a real example. If you hire every single contributor and you now employed 90 percent of the contributions, OK, what's the problem with you forever? My when it's sold for a billion dollars.
Ninety eight percent of the contributions are coming from employees. MySQL. What if instead you had a few of the smart people and you got the other ones jobs at other companies where they would then get those companies contributing to WordPress and benefiting from WordPress, or you're going to be using WordPress example. Now, play that out over 10 years or 20 years. Is are you having to provide ninety seven percent of the new code or is there maybe a different percentage?
Typically, I said we have sixty five people working full time work press corps. A typical release will have six or seven hundred contributors. We've managed to be like ten percent of the contributions of the people contributing. How do you maintain that? Over time, how welcoming do make it for new people? What are the incentives around folks getting involved? Is it fun? The fun questions, such a good one. Is it fun? And how can I make this 10 percent more fun or really valuable?
Because, again, no one wants to be in a world.
You're creating a world no one wants to be in the world that's boring or a pain or drains or energy or is exciting. They want to be part of the world that is inspiring. Elon Musk, an incredible example of this, not about the car it the batteries as a means to an end.
The world is literally know there's various versions are going to make our world a lot better, both to, like, try to save that one. And then we're going to become multi planetary just as a backup in case we mess this one up.
OK, that seems like a big deal. WordPress, we're trying to democratize publishing ecommerce. If we succeed at that, the world is a much fairer and freer place. If we set a good example as a distributed company of saying, like, you can be incredibly successful doing that. Guess what? And this has happened, other companies will start to do that. And the economic opportunity that unlocks to other countries, how that raises the global minimum wage, how that increases people's quality of life, have to commute an average of twenty nine minutes per day in America each way, like all of those things, unlocks so much good stuff that we're working for more than just the paycheck.
That's inspiring. It gets me excited. You can probably tell I'm pretty excited right now and I'm a pretty laid back like. But I feel like when you're able to articulate and set up those things, and particularly when you're able to connect the near-term business goals with the long term goals of humanity, that can be really, really powerful.
What has you most excited about the future of the Internet connection? Everything we've talked about are versions of humanity becoming more connected. If you look at every communication revolution, it's funny to read the resistance to newspapers, everyone spending all their time on newspapers. There's drawings of people on the subway in New York. They're not talking to each other more than their heads buried in the newspaper and how that was seen as the end of humanity. And we can now have this version with like people looking at their phones for every step, function and communication speed.
We essentially are like increasing the clock speed of humanity's intelligence, interacting with each other and getting better. I'm excited about the cross discipline approach that we've taken to tackling covid team and the fact that scientists have never worked together and now working together. And we got so much of humanity working on a single problem and we are addressing it with an incredible speed. If you look at every type of challenge like this we've ever had in history, our communication networks weren't fast enough and a way of sharing knowledge and like everything, the basis wasn't there.
And the Internet feels like it might be the natural conclusion of that. So we've reached the epoch of connecting potentially every single human, and Starlink is going to change that and 5G and like all the things we're iterating on it. But fundamentally, we have the bones of the system that could connect every single human. You could imagine effectively all seven billion humans on the planet connecting with each other. When that happens, they'll start to work together on things.
They'll start to collaborate and start to share information. We can essentially increase the speed of evolution in ways that I'm optimistically excited about. Guy see this? People who think we're going to create the A.I. Monster, whatever like that, can we mess things up along the way? Absolutely. Every technology typically has a stronger capacity for offense than defense, literally every technology. So that's why. And computer security, we can attack a lot better than we can defend even the US government, which is the most sophisticated cyber attack on the world.
So its own you can think of weaponry. We can create a nuclear bomb. We can't protect ourselves. One, as we create these new technologies, we do create new threats for ourselves. But on the whole, I'm an optimist about humanity. I believe humans are fundamentally good, and even our ability to resist the outliers is increased when we become more connected. We have a system called Kismet, which is a antispam system. And basically what would happen is I used to have a antispam for your blog and it would work for your blog.
But then the spammers got smart and they started using millions of IP addresses are given different spambot, so you might only see something once. The way to address it was great. The SAS service use machine learning to act really quickly. All the kids on the playground teamed up against the bully. The bully who is the outlier ultimately is not more powerful than all the people with positive motivations who are members of the social contract working together. Wonderful.
I mean, what a cool closing thought on connectivity and collaboration and the way that the tools that you're involved with and so many others are allowing that progress to happen. It's such a cool closing thought. I have the same question that I ask everybody at the end of these conversations will ask you as well. What is the kindest thing that anyone's ever done for you?
I remember I was driving on this highway in Houston. Is that interesting? A highway to eighty and six, 10, 20 lane wide things, I was in the left lane because so the teenager driving too fast, one of my tires exploded. I had just come from watching a James Bond movie.
So my first thought was sniper because there's this huge boom in my car started flying around, but I end up in the left lane.
It was a connection. So it's even wider than normal highway. This 12 lane thing stuck. I'm kind of shook my girlfriend's hands in the car over like what's going to happen, by the way, versions of this happen in Texas all the time. I love the friendliness of Texans. That's why I'm going back to Texas. A guy in a pickup truck essentially who's near the front. People start, like, going really slowly past. But there is obviously huge traffic going, by the way, also really unsafe.
He gets out of his truck. He's like, hey, can your car drive at all? Is a yeah. And he was like, OK, just kind of waves. And he starts stopping traffic across this 12 lane highway so that my car can limp to the right side, onto the shoulder. Or by the way, it's safer for me and everyone else. I turn to, like, thank him. And he just kind of gives me a thumbs up house back in his pickup.
And I was like, wow, that was incredible. This complete stranger just getting out to help someone who they would never meet. I will never know who that person is. If you're listening, please get in touch. But we're never going to connect again. I just appreciate that so much. It felt very tight, maybe a very extreme example of kindness. I love it that I've had such an interesting time talk to you today. I've learned a lot.
I love the way you think about the world and the principles with which you attack the problem that you've been working on for a long time. Thanks for all the time today.
I'm a dedicated listener, so it's a real honor to be on. Thank. To find more episodes or sign up for our weekly summary, visit, Investor Field Guide dot com. Thanks for listening to Founders Field Felgate.