Abstract Uniqueness for Understanding

By editor on February 20, 2018 — 2 mins read

Here’s the problem with working on things that are unique:

If nobody else understands it, most people will not be interested in supporting you. Not because they dislike you, not because they want you to fail, but because it’s very hard for them to understand. And so you have to find a way of building products to solve this problem in an abstracted way. What does that mean?

In a way where you create leverage in your product. In a way where there are simple ways for the customers that you have, or the users that use your product, to help you make that product better. Because these abstractions give you the ability to get hundreds, and thousands, and hundreds of thousands of people helping you. Because otherwise it’s only you and your employees, which is a very difficult proposition.

So let’s take this example: What’s amazing about Winamp, again, this is in 1997 through 2000, until it got acquired for $100 million by AOL. This was a very very good product, used by 100 million people every month. But there were only nine of us.

And the reason is because, when we were building this product, people would tell us, “This makes no sense. Nobody needs this. Why would anybody use it?” And so as a result, nobody wanted to work with us, and no one would give us money. So what did we do? We came up with two very clever abstractions.

The first abstraction was getting our community to help us develop this product. And so even though we were nine people, we created some very well-documented interfaces, so that third party developers can come and build anything. And they made our product excellent. We made our product pretty good, but they made it excellent. Because by using our community or company, even though it was nine people, it now became like a 250 person company, a 500 person company, a 1,000 person company. And now we could compete. Against Microsoft, against AOL. Eventually, AOL had to buy us.

The second abstraction was in our business model. We needed to make money. We didn’t know how to make money. There was no advertising ecosystem back then. So what did we do? We asked our users to donate money if they wanted to. And so they would send us a cheque, in the mail. And once a month we would collect these cheques, and we would go to the bank, and we would cash them.

And we were making millions of dollars a year. In fact, funny story: after we were acquired by AOL, they said to us, tell your users to stop sending these cheques in. And even years later, the cheques just keep coming. Because people had a very emotional attachment to our product, and so they wanted to see us succeed.

https://www.youtube.com/watch?v=6H37iyvEZJ8 (24:40)

Posted in: Entrepreneurship

Editor's Note

These are Chamath Palihapitiya's words. They are probably some of the best thoughts on VC, business, and life, but were scattered around the Internet. They live now in this archive.