*Dialectic Episode 17: Alex Danco - is available on [Spotify](https://open.spotify.com/episode/3oWEGjqe9BJ2saNnh3pILL?si=e21d535786b540b8), [Apple Podcasts](https://podcasts.apple.com/us/podcast/17-alex-danco-innovation-begins-with-gifts/id1780282402?i=1000709280955), and [YouTube](https://youtu.be/Hl7as-LnSV0).* ![[17-AlexDanco.jpg]] <iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3oWEGjqe9BJ2saNnh3pILL?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe> <iframe allow="autoplay *; encrypted-media *; fullscreen *; clipboard-write" frameborder="0" height="175" style="width:100%;max-width:660px;overflow:hidden;border-radius:10px;" sandbox="allow-forms allow-popups allow-same-origin allow-scripts allow-storage-access-by-user-activation allow-top-navigation-by-user-activation" src="https://embed.podcasts.apple.com/us/podcast/17-alex-danco-innovation-begins-with-gifts/id1780282402?i=1000709280955"></iframe> <iframe width="560" height="315" src="https://www.youtube.com/embed/Hl7as-LnSV0?si=_nW5aKK5LcKH-bCH" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe> # Description Alex Danco ([Website](https://alexdanco.com/), [X](https://x.com/Alex_Danco), [Substack](https://danco.substack.com/)) is a writer and Product Director at Shopify. Alex rose to prominence while writing his *Snippets* newsletter while at VC firm Social Capital in 2015. He wrote prolifically—about markets and financial systems, venture capital, startups, cities, culture, the technology-driven shift to a world of abundance, to name a few topics—through 2020, when he joined Shopify. Since then, he's had his hands full with Shopify and young kids, but recently published a flurry of new pieces on his blog while on paternity leave. This conversation starts with one of Alex's most insightful ideas: that a culture of gift-giving underpins technology, innovation, and creative work, and is the key to solving many of capitalism's coordination problems. We then talk about what businesses will look like in a world of abundance: AI agents, massive and accessible infrastructure, and where moats might actually lie. Alex shares why AI-enabled creativity may resemble musicians finding their sound and how and where we might find internet-native subcultures in 2025. Then he explains what "the medium is the message" actually means across different content formats and why audio continues to thrive. We wrap up with Alex's thoughts on the U.S and Canada as someone who identifies with both places and by taking a peek into some of the books that have most influenced his thinking. I've read Alex for years and I've always been impressed by how generative he is. That comes through in this conversation and I hope you are inspired to—like Alex—be more curious, creative, and most importantly, generous. --- **This episode is brought to you by [Hampton](https://joinhampton.com/community)**, a private, highly vetted membership for founders. Hampton makes entrepreneurship less lonely by matching you with a core group of likeminded founders along with community, events, retreats, and more. Visit https://joinhampton.com/community to learn more and apply. # Timestamps - (0:00): Intro to Alex - (1:28): Hampton - (3:23): Steely Dan Intro - (5:31): Coordination Problems and Silicon Valley - (21:55): Girard, Taboos, Priests and Kings, and Magical Enzymes for Creating New Things - (32:22): How Gifts Underpin New Things — Crossing Thresholds and Listening to Each Other - (44:09): Gifts vs. Performance, Gifts vs. Slop - (53:58): Overcoming “The Market for Lemons”: How Gifts and Market Mix and How Silicon Valley Resembles a Music Scene - (1:02:29): Bubbles and Generosity - (1:07:07): Patronage & Alignment - (1:11:37): Coordination in Companies, O-Ring Problems, Michael Scott, and AI - (1:25:51): Agency vs. Accountability - (1:31:54): Wide vs. pointy businesses and What Makes a Platform - (1:39:11): Moats, Leverage, and Figuring Out Your Sound: What Could Sam Altman Not Copy? - (1:50:06): AI, Originality, and Creativity - (1:55:15): Subcultures on the Internet and Frictionless Discovery - (2:00:25): What Does "The Medium is the Message" mean?: Hot & Cool Mediums - (2:11:57): Nixon-Kennedy Debates, Trump, Podcasts, Fox News, and the Decline of TV - (2:25:21): Alex's Podcast Diet - (2:28:52): U.S, Canada, and National Myths - (2:44:23): The Most Influential Books on Alex - (2:56:47): Learnings from Being in a Band - (2:59:05): Scammers - (3:02:55): Being a Dad - (3:05:24): The Best Gift Alex Has Received and the Gift He Hopes to Give # Links & References - [Innovation takes magic, and that magic is gift culture](https://alexdanco.com/2025/02/21/innovation-takes-magic-and-that-magic-is-gift-culture/) - Alex - [Bill Janeway](https://en.wikipedia.org/wiki/William_H._Janeway) - [VCs should play bridge](https://alexdanco.com/2020/02/28/vcs-should-play-bridge/) - Alex - [The Rites of Passage - Arnold van Gennep](https://www.goodreads.com/book/show/692503.The_Rites_of_Passage) - [The Gift - Lewis Hyde](https://www.goodreads.com/book/show/22226741-the-gift) - [In good hands — Steph Ango](https://stephango.com/in-good-hands) - [Dialectic 13: Nabeel Qureshi - The Will to Care](https://dialectic.fm/nabeel-qureshi) - [The Market for Lemons ](https://en.wikipedia.org/wiki/The_Market_for_Lemons) - [The Cathedral & the Bazaar - Eric S. Raymond](https://www.goodreads.com/book/show/134825.The_Cathedral_the_Bazaar) - [Homesteading the Noosphere - Eric S. Raymond](https://johnpconley.com/wp-content/uploads/2021/01/Raymond-Homesteading-the-Noosphere.pdf) - [xkcd: Dependency](https://xkcd.com/2347/) - [Boom: Bubbles and the End of Stagnation - Byrne Hobart](https://www.goodreads.com/book/show/205307264-boom) - [Technological Revolutions and Financial Capital - Carlota Pérez](https://www.goodreads.com/book/show/60509.Technological_Revolutions_and_Financial_Capital) - [Scarcity and Abundance in 2025](https://alexdanco.com/2025/03/27/scarcity-and-abundance-in-2025/) - Alex - [The Gervais Principle, Or The Office According to “The Office” - Venkatesh Rao](https://www.ribbonfarm.com/2009/10/07/the-gervais-principle-or-the-office-according-to-the-office/) - [How Complex Systems Fail - Richard Cook](https://how.complexsystems.fail/) - [‎Perfect Days (2023)](https://letterboxd.com/film/perfect-days-2023/) - [Hyperlegible 004: Alex Danco, Scarcity and Abundance in 2025 - Packy McCormick](https://open.spotify.com/episode/16pIJzkIHGhgnl33qzR1ju?si=zdfReJ2kSoCwrLPM0HEULg) - [Beyond Survival - Léon A. Danco](https://www.goodreads.com/book/show/9954977-beyond-survival) - [Acquired: Porsche (with Doug DeMuro)](https://www.acquired.fm/episodes/porsche-with-doug-demuro) - [Understanding Abundance: Introduction](https://medium.com/social-capital/understanding-abundance-introduction-346dcc5280dd) - Alex - [The three kinds of platforms you meet on the Internet - Marc Andressen](https://pmarchive.com/three_kinds_of_platforms_you_meet_on_the_internet.html) - [Acquired Podcast](https://www.acquired.fm/) - [Founders Podcast](https://open.spotify.com/show/7txiovdzPARhjm18NwMUYj) - [Get Alright - The Fundamentals](https://open.spotify.com/album/5gKYd7Za38K5csZkSuPyun?si=7XwjxePiQZCwfSAzbVkfKQ) - [Steve Albini's memo to Nirvana](https://x.com/Nirvana/status/1788363101068509223) - [Have you ever seen a goth downtown?](https://alexdanco.com/2025/02/14/have-you-ever-seen-a-goth-downtown/) - Alex - [Pump.fun](https://pump.fun/) - [Dookie - Green Day](https://open.spotify.com/album/4uG8q3GPuWHQlRbswMIRS6?si=6Ei6xLToTK6nauuRH0EBmA) - [But What If We're Wrong? - Chuck Klosterman](https://www.goodreads.com/book/show/27068734-but-what-if-we-re-wrong-thinking-about-the-present-as-if-it-were-the-pa) - [Working in Public - Nadia (Eghbal) Asparouhova](https://press.stripe.com/working-in-public) - [Nadia's next book: Antimemetics: Why Some Ideas Resist Spreading](https://darkforest.metalabel.com/antimemetics?variantId=1) - [Alex Danco: Funding the Future - David Perell](https://perell.com/podcast/alex-danco-funding-the-future/) - [Marshall McLuhan](https://en.wikipedia.org/wiki/Marshall_McLuhan) - [Claude Shannon](https://en.wikipedia.org/wiki/Claude_Shannon) - [The Audio Revolution](https://alexdanco.com/2019/10/17/the-audio-revolution/) - Alex - [The Rest Is History Podcast](https://open.spotify.com/show/7Cvsbcjhtur7nplC148TWy?si=633b5c696ae44b81) - [The Best of Car Talk : NPR](https://www.npr.org/podcasts/510208/car-talk) - [Odd Lots - Bloomberg](https://www.bloomberg.com/oddlots) - [Manifest Destiny returns](https://alexdanco.com/2025/02/07/manifest-destiny-returns/) - Alex[The Audio Revolution](https://alexdanco.com/2019/10/17/the-audio-revolution/) - Alex - [The Rest Is History Podcast](https://open.spotify.com/show/7Cvsbcjhtur7nplC148TWy?si=633b5c696ae44b81) - [The Best of Car Talk : NPR](https://www.npr.org/podcasts/510208/car-talk) - [Odd Lots - Bloomberg](https://www.bloomberg.com/oddlots) - [Manifest Destiny returns](https://alexdanco.com/2025/02/07/manifest-destiny-returns/) - Alex - [Diplomacy - Henry Kissinger](https://www.goodreads.com/book/show/781183.Diplomacy) - [Crowds and Power - Elias Canetti](https://www.goodreads.com/book/show/79917.Crowds_and_Power) - [Steps to an Ecology of Mind - Gregory Bateson](https://www.goodreads.com/book/show/152435.Steps_to_an_Ecology_of_Mind) - [The Magic Mountain - Thomas Mann](https://www.goodreads.com/book/show/88077.The_Magic_Mountain) - [The Brothers Karamazov - Fyodor Dostoevsky](https://www.goodreads.com/book/show/4934.The_Brothers_Karamazov) - [Lying for Money -Dan Davies](https://www.goodreads.com/book/show/38605195-lying-for-money) - [The Prize - Daniel Yergin](https://www.goodreads.com/book/show/169354.The_Prize) Dialectic with Jackson Dahl is available on all podcast platforms. [Join the ⁠telegram channel for Dialectic⁠](https://t.me/dialecticpod) [Follow ⁠Dialectic on Twitter⁠](https://x.com/dialecticpod) [Follow Dialectic on Instagram](https://www.instagram.com/dialecticpod/) [Subscribe to Dialectic on YouTube](https://www.youtube.com/@Dialectic) # Transcript ## [00:03:23] Steely Dan Intro **Jackson:** I think the tone is set. **Alex:** Danco Tone is set. **Jackson:** Wow. I don't have music on this podcast yet either. **Alex:** That was "Black Cow" by Steely Dan, played on my newish Fender Rhodes, which I got last year from a guy on Facebook Marketplace who was getting married. I drove to Hamilton, Ontario, and his soon-to-be wife welcomed me in, saying, "Please buy it." **Jackson:** And your wife was like, "Oh, no." **Alex:** More instruments. **Jackson:** We're in a bit of a layer down here. You have some space to have fun. **Alex:** We're recording from my office. **Jackson:** We have all the books on one side, and multiple instruments and speakers on the other. It's pretty dialed. **Alex:** I'm happy you could be here. Thank you so much for coming out. **Jackson:** I'm so glad to be here. It's my first time in Toronto—the Danco Experience. Alright, let's get into ## [00:05:31] Coordination Problems and Silicon Valley **Jackson:** it. In preparing for these interviews, especially with prolific writers like yourself, I aim to identify the through-lines in your work. It's a tall task, and I don't claim to have done it exhaustively. **Alex:** Read the canon. **Jackson:** Exactly. Over the years, common themes in your writing include Silicon Valley, innovation, technology, markets, financial and production capital, organizations, and the boundary of the firm. One interesting piece you wrote concerns the shift towards consuming functions versus consuming objects. You've also covered scarcity and abundance, among other topics. I was trying to make sense of all these diverse topics. You did me a favor by writing a piece a few weeks or a couple of months ago that I believe highlights the true theme in your writing: you're writing about entrepreneurship, specifically how it deals with coordinating people. You wrote a recent post titled "Innovation Takes Magic, and that Magic is Gift Culture." I'll read a couple of excerpts. You say, "I think the people who are going to be the big winners in this new age of instant prototyping are the people who are exceptional at gift culture because they will understand the scarce resource of this new environment, which, guess what, was the same scarce resource before too. The ability to coordinate people over time towards promising but unknowable goals. That's always been the hard part, and it feels magical when we solve it." **You also write:** "The rules of gift culture compel us to accept the gift of possibility, reciprocate it, and pay it forward." So, my first question is: why is solving coordination problems the secret sauce of entrepreneurship and innovation in Silicon Valley, and broadly, creativity? And why is gift culture at the center of that? **Alex:** This is a great set of starter questions. You asked about coordinating people. This often involves embarking on a journey to an unknown destination. We have a sense the destination is worthwhile and we set our compass, but we can't truly know the obstacles, how long until we refuel, or exactly how we'll need to change tack along the way. How do you get a group of people to hold hands and jump together, saying, "I want to go on this journey with all of you"? This is a coordination problem. I think it's one of the great rate-limiting steps to accomplishing truly new things. This isn't strictly limited to entrepreneurship. You could describe the same dynamic when people decide to do something together and gift each other their commitment—like people joining a band, learning a new skill together, becoming parents, or undertaking any of the great journeys in life. You framed this as a coordination challenge. The first person I heard discuss this coordination challenge was Bill Janeway. Are you familiar with his writing? **Jackson:** It's come up a bit in your writing. **Alex:** Bill is a real OG in the venture world and a unique individual. He's both an economics professor—a real academic economist who understands, at a very grand level, how to rigorously think through value creation at an intellectual level genuinely beyond the scope of most Twitter discourse. He was also a practicing venture capitalist who actually walked the walk. He was at Warburg Pincus for a long time during an earlier era of VC when term sheets were very different. At Series A, you might sell 20% to two different firms each, and the founder would be kicked out. That was just the way it was back then. **Jackson:** They would literally have VCs hire a CEO for you. **Alex:** Exactly. One of the interesting hallmarks of that era was that much of the genuinely forward progress a company had to make was by doing deals. The incredibly stable surfaces and platforms we enjoy today, from which you can just build and get growth, didn't exist. Companies were ultimately dependent on business development at a much earlier and more critical stage. The path was much more milestone-driven, involving major deals. For instance, you had to secure vendors for compute—buy computers, buy a database from Oracle—and also arrange distribution deals. **Jackson:** Nothing was permissionless. **Alex:** Nothing was permissionless; that's a fantastic way to put it. Nothing was permissionless whatsoever. As a result, every opportunity was much closer to being "priced in" than it ought to have been. But nonetheless, there was technological innovation and progress. Progress occurred because people and their forward-thinking venture capitalists could imagine a possibility space. This space allowed movement between a current investable opportunity and a future ability to, if not reach the ultimate goal, at least reach a refueling station. The problem was, you didn't know where the refueling station was; you couldn't know enough about its location. This is the essence of the coordination problem. You had to devise a way to trust, to some degree, in a sequence of events. It was like saying, "I'm going to raise money now, and we all agree there will probably be an opportunity to refuel at the next step," and so on. Over time, this organically arranged into a series of shelling points known as Series A, Series B, and Series C. **Jackson:** Now, that's very established, almost like a ladder. **Alex:** Now it's so established that, frankly, it doesn't matter as much, because what matters now is just growth. Growth is a continuous thing. It's somewhat odd that we do financing in discrete tranches, though there are reasons for it. Ultimately, these tranches and milestones had to exist to create opportunities for people to coordinate around these fairly contrived but important events—moments for everyone to get together and take stock. **Jackson:** They also bounded ambiguity, in a way. **Alex:** Yes. I wrote a post quite some time ago called "VCs Should Play Bridge" that I think explains this. It's my best attempt at explaining it. Have you ever played bridge? **Jackson:** No. **Alex:** Do you know the game at all? **Jackson:** I know my grandpa used to play it, but I don't know it well. **Alex:** Bridge is a phenomenal game. It's like poker in the sense that poker is applied probability and risk-taking, while Bridge is applied deal-making. In Bridge, you play with a partner against another team of partners. After the cards are dealt, you and your partner must establish, without talking and only communicating through bids, the most ambitious way to play the hand. This involves declaring what trump is, how many tricks you think you can take, and then executing on it. You have to figure out the possibility space and how ambitious you can be. **Jackson:** Are you purely collaborating, or are you collaborating and competing? **Alex:** You and your partner are purely cooperative. You win and lose as one team. **Jackson:** Okay. **Alex:** You are one team, and the other team is one team. You have to figure out the window of opportunity only through bids, only through these conventions. Your opponents are trying to come up with their own possibility space or derail yours. What's so powerful about Bridge is that it trains this muscle of saying, "Okay, we know there are conventions around what this kind of bid means." We'll understand each other, with this being a signal for saying, "Okay, I believe we can play, let's say, three spades or three no-trump." These are Bridge terms. If any listeners have played Euchre before, you've heard of this. Euchre is a simplified game of Bridge. **Jackson:** Just to confirm, in Bridge, you have incomplete information. You don't know what cards your teammate has. **Alex:** That's right. You have totally incomplete information. You only know what you have. **Jackson:** But the goal is coordination. **Alex:** You know what you have, and you know what other people are bidding. That's the information you have. Eventually, once one team wins the hand, one of the two players will lay all their cards face down on the table. This creates another round of information asymmetry, where one person will play both hands for both people. So, they have the advantage of one person controlling both hands, whereas the other team will have a different kind of advantage: they can see net new cards. It's a game of fascinating asymmetry. I'm bringing this up to get back to your original question around coordination. What does it mean when a VC says, "In order for us to make any progress in funding this company, we have to agree on a valuation"? Without agreeing on a valuation—let's put safe notes aside for a second—we have to agree on a valuation. How are we going to do this? Well, what does it mean to value a startup? One of the greatest tricks VCs ever pulled was calling it "value" and not "price." It's not like there's any reading of this startup we're contemplating where it's worth $40 million of discounted future cash flows or something. **Jackson:** Purely imaginary. **Alex:** It's worth some function of probably zero, but maybe a billion. How do you assess this? Moreover, how can different groups—somewhat cooperative but also potentially competitive, like different firms or an entrepreneur versus a VC—agree on what any of this means? The genius shortcut we devised was to say that valuation isn't valuation at all; it's code for a discount on a future round. We might assign a $40 million value to a company because that represents a fair discount on something we agree will be worth $80 million next time. That $80 million, in turn, is a fair discount on something projected to be worth $300 million, and so on. **Jackson:** And that forward motion is a critical assumption built into all of this. **Alex:** Yes. Again, as a startup, you're either growing or you're dead. There's no such thing as an exit where you can just step off the escalator. If you step off, you fall down. **Jackson:** There's gravity. **Alex:** There's gravity. Exactly. **Jackson:** Indeed. **Alex:** But the concept of forward motion is very important as an overall coordinating function. It means you and I can agree to a deal as a discount to a future round, which itself is a discount on another future round. That's something we can model. Overall, this ability to coordinate highlights a significant coordination challenge. The last piece of the puzzle is: if we fund this company, knowing this funding won't achieve positive cash flow, how do I know the next round of money will be there? How do you know you won't be offered worse terms next time because the market has changed? Interestingly, this relates to a concept somewhat foreign to VCs in a literal sense but familiar to treasury or bond market investors: duration risk. This is the risk that if I buy a treasury or fixed-income instrument, the terms will be worse when I roll it over. How can I be confident I'll get the necessary terms next time? Again, in a world without the Silicon Valley ecosystem, that risk is immense. You can't count on it. However, the extensive structure, precedent, and the fact that VC is a repeat game—with people who have established relationships and co-invest regularly—creates a sense that you can count on others to be there next time, provided certain conditions are met. **Jackson:** This goes beyond an arbitrary set of actual rules. It's a kind of goodwill, a sense of it in the air. **Alex:** It's not just goodwill in the air, although that's part of it. But it's also a sense that we all benefit from this system having integrity. If the integrity of the system falls apart, this is the VC's version of "institutions matter." You miss it when it's gone, even if you think you're smart and clever. **Jackson:** Yes. **Alex:** You are not so smart without this coordinating effort that makes everything go. This system of repeat games and occasional shelling points, where everyone comes together to refuel, has worked so well that over time, the advantage shifted increasingly towards founders. Founders started to have leverage over VCs because they could say, "I have the growth rate, and the growth rate is the only thing that matters here." If you have the growth rate, everything else will work out. Founders essentially started to own the escalator. **Jackson:** And they could see the escalator. **Alex:** They could start to dictate terms. We saw the beginning of founder-friendly investing, and suddenly, VCs couldn't just kick out the founder anymore. More importantly, founder-friendly investing often got lumped into the same category as paying high valuations. **Jackson:** Sure. **Alex:** Founder-friendly might mean VCs only take 10% in a round, allowing founders to keep a lot of equity. This gives them plenty of runway and room for future financings. These are several concepts rolled into one, but they form a cohesive theme. The more ability you give founders to drive the bus, the more good things happen inside companies when founders are in charge. I'm not the first to say this. Smart VCs didn't figure this out initially. The person who truly figured this out and set the tone for the next couple of decades was Paul Graham. Through YC and his writings, he understood that founders controlled the growth rate. The growth rate isn't necessarily the scarce resource, as that's too pigeonholing, but whoever has the growth rate has legitimacy. If you have legitimacy, you can dictate the terms. Ultimately, this coordination effort for multistage funding events, which you mentioned, worked so well that it faded into the background. Now, the discussion primarily revolves around default terms, growth rate, how quickly you're growing, and what valuations you can command. These became the only questions that mattered. Many of the old arts would have resurfaced if there had been a profound contraction in the VC market, something many have repeatedly predicted. In a true VC bear market, some old partners would have needed to explain how things worked again. The new generation of partners had never dealt with such a situation. But once again... **Jackson:** But the escalator never broke. **Alex:** It literally never broke because technology keeps yielding an increasing bounty for us to work with. So, we all continue to believe, and that belief has not failed us so far. ## [00:21:55] Girard, Taboos, Priests and Kings, and Magical Enzymes for Creating New Things **Jackson:** You've painted a picture of something that involves goodwill and some faith, yet it's a clear view of a structurally positive-sum environment. How does this underlying myth—that it's gift-oriented—actually shape all of this? **Alex:** There are two related ideas here. The first concerns the notions of myth and the concept of founders as kings and VCs as priests. This represents a significant structural asymmetry that has always existed. Founders and VCs both possess power, but they wield very different kinds of power. Founders have power because the priesthood bestows it on them. The priests' power over the king lies in their role as the ultimate source of the throne's legitimacy, not the founder themselves. **Jackson:** Even if that's not immediately obvious to an onlooker. **Alex:** Correct. I find it very funny that there was a mimetic cycle in Silicon Valley where everyone wanted to read Girard, thinking he was only about mimesis. This led to the "I, too, am contrarian" story arc. The most interesting aspect of Rene Girard isn't that story, but his ideas about taboos. How do you determine who is in charge? You look at who is uniquely allowed to break taboos and where that power is granted from—which is, of course, the VCs and investors. One of the greatest taboos in tech is whether founders must tell the \*whole\* truth all the time. This is a dark question because one must reconcile two opposing ideas. First, founders cannot lie; if they do, the entire system of trust quickly falls apart. But on the other hand, what if founders can only tell the \*literal\* truth... **Jackson:** All of the time. And that phrasing, "literal truth," is perhaps a more accurate way to put it. **Alex:** You can really start to split hairs about what is acceptable. For instance, you can't be Trevor Milton and fake a road test by rolling a truck downhill. That's not permissible. However, if founders could only tell 100% of the literal truth all the time, that would also be very difficult. It's hard to find those windows of opportunity, that possibility space, when so much must be willed into existence. The classic, though disputed, story is of Bill Gates and Paul Allen securing early Microsoft deals by claiming they had software, then writing it on the plane. Such stories have become common and are the stuff of real founding myth in current Silicon Valley. **Jackson:** It's the lifeblood of creating something new. You almost need that ambiguity. If the market were perfectly efficient, rational, and economically savvy at all times, there would be no room to innovate. **Alex:** It's not just how you make a new thing; it's also how you learn to make a new thing. I have three kids, and I've had the privilege of watching them learn. You learn things by "faking it until you make it." You attempt something, often faking or finding shortcuts, and eventually, you find yourself doing it correctly. This is true in all walks of life, not just building new things. It applies to creating art, learning a new language, and discovering how to express yourself and find your style. **Jackson:** Especially if that learning is anything other than rote copying. 00:25:50 If you're trying to do anything slightly creative or new, the learning process has to have room for exploration, failure, and so on. **Alex:** 00:25:59 Exactly. It is very important and intentional that this founding myth exists in the early technology world of computers and the early Internet, where people engaged in "fake it till you make it" activities. I call it a myth because it truly doesn't matter whether these things factually happened. What matters is that this myth is canonical. **Jackson:** 00:26:23 Yes. **Alex:** 00:26:24 This creates an understanding for founders, where the VC and the founder develop a crucial relationship built on significant trust. The VC effectively says, "Founder, you are never allowed to lie to me in the wrong way. If you do, it's over." On the other hand, you are then blessed with the legitimacy of this firm to go create possibility space. **Jackson:** 00:26:57 Hire people, give away more of your equity. **Alex:** 00:27:00 I'm glad you mentioned equity, because equity is an incredible representation of this possibility space, symbolizing future remuneration. You cannot promise new hires, "We're going to have this many sales in 18 months, and I'm going to give you this much money when we do it." That approach doesn't work for various reasons. Instead, you can say, "Here's the option plan. Our VCs have blessed the option pool. This is the dream." VCs also provide crucial mechanical competence; they know how an option pool should be constructed correctly, having done it many times. Consequently, good employees joining an early-stage startup don't need to scrutinize the fine print about their options' correct construction. They can simply look at the cap table, see a reputable VC listed, and trust the setup. It's incredible. **Jackson:** 00:27:59 In a sense, it further unifies or adds structure to the myth, making it more valuable. **Alex:** 00:28:05 As you add more structure, the myth becomes real. Magic occurs as the dream materializes into tangible things. This institutional capacity of the innovation economy has developed over 40, 50, 60 years. You could take some of the best investors in the world out of this ecosystem, and they likely wouldn't get very much done. That's not a slight to them; it's a testament to how essential this system has become. **Jackson:** 00:28:38 Yes. To use your gift-giving analogy, it's like a magical solvent. It allows things to happen here and enables a type of coordination that would be very difficult, if not impossible, to pull off elsewhere. **Alex:** 00:28:55 You're bringing us to the topic of gifts, which we'll discuss. However, instead of a solvent, a better analogy from the physical sciences is an enzyme. In biological reactions, particularly in the life sciences, there's a common scenario: chemical precursors exist that could react to form a much more valuable output. But this reaction doesn't happen organically. The system's randomness is too high, and the probability of precursors colliding correctly is too low for it to occur naturally. **Jackson:** 00:29:32 That's true for most of the world concerning innovation, most economies, and most markets. **Alex:** 00:29:35 It's true for most of the world concerning almost anything. The default state of the world is essentially empty entropy. **Jackson:** 00:29:42 Yes. **Alex:** 00:29:42 Slow heat death. **Jackson:** 00:29:43 Yes. **Jackson:** Or maybe rote copying efficiency, but not creativity, not innovation. **Alex:** Right. The ability for new forms to come into being is something that does not happen normally. **Jackson:** Right. **Alex:** In the life sciences, there's a familiar concept called an enzyme: a protein or set of proteins shaped just the right way. They evolved in a particularly interesting path to catalyze reactions—to accelerate and lower the energy required for inputs to turn into a more valuable output. If that enzyme is doing valuable work—and part of the miracle of life is that these enzymes can be selected for and passed down through generations—it's not hard to imagine an analogy in the innovation economy, particularly in how venture capital and startups operate. A great example of such an enzyme is the SAFE note. The SAFE note acts like an enzyme by taking inputs—people, money, and very early companies—and creating an output: the money is in the startup's bank account. We all agree on a future pricing method based on a future round, and on well-vetted, understood terms that everyone accepts. This means no one needs to extensively lawyer over the details, allowing us to proceed efficiently without incurring overwhelming activation costs from hiring lawyers on each side. **Jackson:** To coordinate. **Alex:** Exactly. The fact that we no longer have to do this brings us back to the system you mentioned involving kings, priests, and legitimacy. If you ask a lawyer from outside of tech to review a SAFE deal, what do you think they'll say? They'll likely say, "Are you out of your mind? You can't just take all of this at face value. All of this is completely hand-waved away." **Jackson:** Yes. **Alex:** And the result is that it will destroy your deal, and you will not move forward. **Jackson:** This feels like you're getting to the big idea. **Alex:** The reason a tech-savvy lawyer can understand, trust, and have confidence in this process is due to the legitimacy established by the history of the "priests"—the VCs who have created this legitimacy superstructure. Then, you have enough founders who have succeeded using this system—enough "kings" have triumphed. **Jackson:** Allowing us to believe in it. **Alex:** Yes, allowing us to believe in it. There is reason to believe that this works because it \*does\* work. How can it be impossible if it happens? ## [00:32:25] How Gifts Underpin New Things -- Crossing Thresholds and Listening to Each Other **Alex:** But I know you're itching to talk about gifts, and gifts are an even larger and, I think, more profound expression of this. Perhaps we can get into that. **Jackson:** Perhaps the place to start is this: I still think one could interpret everything you've described through the lens of a positive-sum, rational actor model—a subversion of the prisoner's dilemma that allows for coordination in a structured or iterated game, though perhaps not a single instance like a game of bridge. However, when I hear "gift," it implies a level of suspended selfishness or true earnestness that isn't as obvious in that framework. I'd love for you to connect the dots. How do you see the gift idea underpinning everything you've just discussed? **Alex:** I don't know if you ever spend any time thinking about the fox and hedgehog dichotomy. The fox knows many things, the hedgehog knows one big thing. I think I'm probably on the fox end of the spectrum, in the sense that I think about lots of ideas. But if I were to pick one idea that I have, it's probably that gifts are the dark matter of why everything in the world works. Specifically, gift exchange is a critically important substructure that allows every other kind of human organization to function in the real world. People like to talk about markets as a very important way of organizing things, and you talk about other ways in which the world spontaneously self-organizes. I think gift culture is the most underappreciated and, frankly, the most critically dark matter of them all. Let's spend some time talking about gift culture. Anybody I've ever seen who is successful in the world at getting what they want out of life, making forward progress in things, has a common attribute: they're often very generous. They're generous in a particular way, which is that you can see them using their generosity not selfishly, not cynically, but in a genuinely constructive way to create things out of nothing. **Jackson:** Abundance, to use a word that is loaded. **Alex:** And not just create things; I don't want to use the word "things" because that is very unsatisfying. To create structures of ordered people out of nothing. Gifts are doing a kind of work that is creating an arrangement of people and understanding that was not there before. This is a kind of work. Let's spend a minute and talk about work. In the world of business broadly and in the world of markets, we're very fluent and familiar with talking about the ability to do economic work as being described in very Newtonian classical mechanics. Here is the price curve. You have supply and demand. Everyone's a selfish actor. Everyone is predictable. Everybody is rational. **Jackson:** Markets can be pretty damn elegant when it comes to harnessing that energy. **Alex:** Absolutely. This is not a slight against markets. Markets are an amazing and wonderful thing. But markets are amazing at describing classically Newtonian sorts of work. There is another kind of work that I think gifts are more suited to, which is what you would call thermodynamic work. This is like the idea of the enzyme that we touched on earlier. It's not the work of moving this mass from here to there; it's the work of creating something. It's the work of X becoming Y. It's the work of turning liquid water into gas. It's the work of turning these precursor materials into this value, the transformation. It's the work of becoming. This is where you can kind of intuit that gifts do a really important work on the thresholds of becoming. We have a book in front of us called The Rites of Passage by Arnold van Gennep, all about the gifts that are exchanged in moments where people become something or when a relationship becomes something. This is something that is so important and ingrained in our lives that we almost forget that it is even happening. This idea that you would close a business deal over a dinner is just so natural. **Jackson:** Almost the norm. **Alex:** It's so natural to overlook a coordinated exchange of gifts—breaking bread, for instance—to make something real, like a new business relationship. You're handling the paperwork and signatures. But the actual work involved addresses the coordination challenge: Can I trust you? Are we going to do this? Is this new relationship going to materialize? Gift exchanges significantly lubricate these interactions. **Jackson:** We've become so accustomed to some of these exchanges that we don't even think of them as generous. **Jackson:** Perhaps that's the blind spot. Or we're not fully seeing 'the water'—the full context here. **Alex:** There's no question in my mind that gift exchanges and gift cultures represent the evolved, tacit understanding of how to cross thresholds successfully. Consider the moments in our lives when people exchange gifts: birthdays, weddings, anniversaries, starting a new job, retirements, Bar Mitzvahs. These are all instances of crossing thresholds. Housewarming is a fantastic example. When you cross a threshold into living in a new place, we come to witness this, bearing gifts to make this transition real. **Alex:** When I talk about gift cultures and this idea of making something real by giving something 'for you' in a particular setting, there's a reason much of that language sounds familiar to anyone who has attended church. This is very foundational Christianity, where the ordered structure often involves concepts like, 'we are breaking this bread for you in this place so that X might proceed into Y.' This is very Christ-coded. **Jackson:** And Lindy. **Alex:** Very Lindy, very Christ-coded. I deliberately emphasize these aspects, partly because I am Christian—I attend church weekly with my kids, and it's a significant part of our lives. But also, one doesn't need to be Christian to appreciate the incredible ordered structure this has brought to the world, advancing our ability to coordinate for mutually beneficial outcomes. Many people, regardless of personal faith, can recognize the benefits derived from the precedent of gift-giving cultures. **Jackson:** Generosity is a pattern. It's a bridge. **Jackson:** In many ways. **Alex:** It's not just a bridge; it's \*the\* bridge. It's the way to transcend a base case that isn't working. **Alex:** The base case doesn't work. **Jackson:** Normally, when we discuss coordination problems, the underlying assumption is that, without such mechanisms, you can't trust others. **Alex:** The base case is we're all cold and dark. How do you escape that? We need to pass a threshold beyond it. You can reduce all of this to the ultimate cheat code in life: be really generous with everybody. Generosity accomplishes a couple of things. First, gift-giving is an unbelievably effective way to communicate information. Gift exchange is a very high-bandwidth channel for establishing two-way information transfer between people, in a way that commerce is not. While commerce is a great facilitator of information across people and cultures, gift exchange is that on steroids—a whole order of magnitude more. The reason for this is clear. If I'm a faceless vendor and you are a faceless purchaser, the transaction is impersonal. When you buy an item from me that I ship without us ever meeting, the meaning of the object you received is whatever you ascribe to it. On the other hand, if I give you a gift, the meaning of the object to you is what I ascribe to it. That information has just been transferred from me to you. **Jackson:** And you don't need my permission. **Alex:** In a sense, you do a little bit. **Jackson:** You need my buy-in. In a commercial transaction, both sides have to reach a level of agreement. With a gift, as you've written, there's an implicit sense that all you have to do is receive it to agree. **Alex:** Yes, we're on the same page. Gift culture comes with a set of obligations. Many people, perhaps from reading books like "The Gift" by Lewis Hyde, assume that gift culture works because you have to reciprocate. However, you don't always have to reciprocate in kind. There are some very rigid expressions of gift cultures where if I give you a gift, you are compelled to give me an exactly equivalent gift in return. **Jackson:** That's almost bartering. **Alex:** I'm not talking about those very rigid interpretations. **Jackson:** People often get this wrong about Burning Man. It's not a bartering culture; it's explicitly a gift culture, as you're describing. **Alex:** Exactly. The rule of gift culture isn't that you have to give me a gift back. It's that you have to be grateful. **Jackson:** For the gift, and you have to accept it. **Alex:** You have to accept it and be grateful. The idea is that you will then pass this gift forward, either back to me or to someone else. **Jackson:** It's a much softer, karmic exchange. **Alex:** Exactly. **Jackson:** An abundance mindset. **Alex:** It's more powerful the softer it is. **Jackson:** Precisely. **Alex:** When a gift is transferred, information is exchanged, and this is how information grows. So, how does ordered structure create and multiply in the world? The wonderful thing about information is that while there's no copying cost, there is a reception cost. It costs nothing for me to broadcast information; it costs nothing to shout. It \*does\* cost to listen. **Jackson:** That's the problem with the internet, by the way. **Alex:** Yes, and right now, it does cost to listen. Gift culture is how you lower the cost of listening, and that's why information is actually received. **Jackson:** That's a powerful idea. **Alex:** There's a direct link between gift cultures as a way to propagate information and Claude Shannon's information theory. One way to summarize this powerful idea is: information isn't what you say; information is what they hear. To understand how ordered structure perpetuates in the world, consider a system where people are talking and some are listening to others. Generosity is how you get people to listen. This applies to startups today and creating value in groups facing an unknown, uncertain future. ## [00:44:11] Gifts vs. Performance, Gifts vs. Slop **Alex:** A basic rule for startups, tech companies, or any value creation is to have few structured rituals or meetings, but demo day is essential. Demo day is crucial. For any company or team, a key predictor of success is whether they conduct demo days. **Jackson:** Are you referring to an internal demo day, like at Shopify, rather than something like Y Combinator's demo day? **Alex:** I'm not talking about Y Combinator; that's a more evolved function of this concept. I mean within a company, during the normal course of building products, does the team conduct demos for each other? Demos are important because the rule of demo day is that everyone shows up and gives the gift of demos to each other. This is important because demo day is where you truly discover what you're building. **Jackson:** In this context, what's the difference between a gift and a performance? **Alex:** A gift versus a performance? **Jackson:** I would interpret demos, perhaps especially Y Combinator's, as being as much a performance as a gift. **Alex:** The YC demo day isn't a demo day in the sense I'm describing. It's named demo day purposefully, but it is a performance. YC demo day is a show; you're selling. This differs from the internal demo day I'm referring to, which is a gift exchange. **Jackson:** Can you explain what makes an internal demo a gift? For example, at Shopify, if I worked on a project I'm proud of and want to show my coworkers why they should use my design, isn't that somewhat self-serving? **Alex:** In practice, real internal demo days don't typically look like that. **Jackson:** I've also never really experienced that kind of demo. **Alex:** They're more often like this: someone presents a problem they're stuck on, showing why. Or they share a fun, surprising thing they discovered. **Jackson:** So it's almost like show and tell. **Alex:** Exactly, it's show and tell. I gift you something interesting, and you gift me something interesting. More importantly, to get to the heart of why demo day works: demo day is a moment when people listen. They listen because you're offering things as gifts, not as project management updates. **Jackson:** You're facilitating that 'magic' information transfer you mentioned earlier. **Alex:** Exactly. Project management meetings often involve many people talking, but nobody listening. **Jackson:** People are just tuning out on Zoom. **Alex:** Demo day, however, is a bunch of people listening. That's the difference. **Jackson:** Huh. **Alex:** This doesn't mean I advocate for zero planning. However, your ratio of planning to demo days should be closer to 1:10, not 10:1. **Jackson:** Stefan Ongo, who runs Obsidian and was a previous guest, has this idea of creating an experience where people feel like they are in good hands, in the omakase sense. I like that, and I hear it in the way you're talking about Demo Day too. It's one thing to talk about a project brief, but it's another to say, "Hey, I built a prototype. Let me walk you through it." That show-and-tell energy has a bit of that "in good hands" energy. **Alex:** Yes, this is really important. This idea of taking the care to show you why the back of the cabinet is beautiful matters. **Jackson:** Yes. **Alex:** All crafters know that well-made things have well-made parts inside that you don't see. They're made well because you want to show other crafters how much care you put into it. That is reason enough. **Jackson:** Yeah. **Alex:** You've had this recurring conversation on previous episodes about gifts versus slop—excuse me, care versus slop. My version is that the opposite of slop is gifts. Instead of calling it care, I call it gifts. The point of slop is that it's what you get when no one's listening. **Jackson:** It almost doesn't have a point. **Alex:** It doesn't have a point because slop is talking. Slop is when nothing is actually received. The goal is not reception; the goal is production. Slop is peak production. **Jackson:** Right. **Alex:** When something is— **Jackson:** Or maybe it's being produced for commercial reasons only. **Alex:** Sure, but it's just production. Make the output. **Jackson:** Marvel 37. **Alex:** Exactly. Whereas with gifts, care and craft are nice descriptors of what the opposite of slop looks like as a characteristic. But I think the actual antithetical to slop is gifts, because the definition of a gift is something that is received. **Jackson:** How much does the specificity of the audience matter? For example, one of my favorite ideas from reading about your gift stuff is this classic concept in the "Make Something Wonderful" book from Steve Jobs. He's obsessed with building on the shoulders of giants and wants to make something wonderful to put back into the human experience. Granted, his audience is literally humanity, but it's very open-ended. There's another view. When you first texted me the idea that gifts are the opposite of slop, I thought of a letter, which has an incredibly specific audience. **Alex:** A letter is not slop. **Jackson:** But I guess you don't necessarily need to specify. A gift can be as broad or as narrow as long as it is received. **Alex:** An artist making art can give it to the world. **Jackson:** Yes. **Alex:** It doesn't have to be for a specific person. I don't have to make this art for you; I can make it for people. **Jackson:** But what if people don't receive it? There has been art that wasn't really received initially. **Alex:** Yeah. **Jackson:** Although usually we come around to it. It must be received at some point, terminally received. **Alex:** You can get into some really interesting meta-theory, like the reaction is the content. **Jackson:** Rick Rubin would be— **Alex:** Is 4chan art? **Jackson:** Yeah. **Alex:** It was given to be heard. It's not slop. **Jackson:** Right. **Alex:** There are all kinds of uncomfortable directions. **Jackson:** When you're supposed to make art for yourself, at least according to "The Creative Act." **Alex:** Are you supposed to make art for yourself? This is a great question. You're supposed to make art that you want to make. **Jackson:** But it should be for yourself. **Alex:** I don't know if you're making it for yourself. I think you're making it for others, but you're making what you think. **Jackson:** A bar of quality. I think that's right. **Alex:** I think that's the right decision. There's something that Toby at Shopify has said that resonated 1000% with me. It hit me like a ton of bricks. He said, "When I was building Shopify, I made this online store that was for me. It was what I wanted. It was everything that I thought was great." Then I showed it around to people, and they all said the same thing: "Toby, this looks great, but this will never work in the real world. This will never work for real customers, for real businesses, for enterprises." He's heard it all. He said, "You know what? I don't really care about this real world place. I'm going to make what I want on my island. You're all welcome to my island, but you have to come to my island because this is what I want to do." **Jackson:** And trust me. Come, Omakase. Come, I'm going to treat you. Come be in my hands, and you're going to like it. **Alex:** Right, but I'm going to make what I think is right. **Jackson:** Right. **Alex:** We should spend a second teasing this out. On the one hand, you are absolutely correct that you are making from me. This gift is from me. It's not from what McKinsey says a good gift looks like. It's from what I think a good gift looks like. But it's also for you. This is my gift given for you so that you might receive it. **Jackson:** Yeah. **Alex:** Right. **Jackson:** It's simultaneously personal and for someone else. **Alex:** Yes. When something is for someone else, it is personal. I don't think these things are in opposition at all. There is a vector to it that is the stuff of life. **Jackson:** Maybe when I said personal, I more meant authentic, perhaps. It's coming out from, versus, to go back to the earlier point about demo days, performance is not always really personal or authentic. I think gifts, at least when I think of great gifts, it's always this bridge. I want to meet you where you are on some level and show you I see you, but also give you the type of gift that I would give you. **Alex:** Yes. **Jackson:** It is. **Alex:** In a way, it's sort of the opposite of this trend of self-care. **Jackson:** Oh, interesting. **Alex:** This idea of, "Oh, you need some 'you' time, you need some time for you." I get that there are a lot of people who are living very busy lives in service of others and could use a break. But in general, the way to have a fulfilling life is to live it in service of others. **Jackson:** Yes. **Alex:** It's not to live it in self-care. **Jackson:** Yes. **Alex:** Self-care is a real sort of hedonistic treadmill. Ultimately, I think self-care is a kind of slop. It doesn't feel like it at the time. It feels like, "Oh, I'm going to go on this run right now for me and just do what I want to do," or "I'm going to go take a day off for me." I'm not saying don't do those things. It's great to be able to recharge and have days for yourself. But ultimately, the way that you drive meaning out of life is to be living it with a vector of direction in service of others. **Jackson:** Yes. **Alex:** The way that you would describe that in a non-esoteric, jargony sense is just: be generous all the time. ## [00:53:58] Overcoming “The Market for Lemons”: How Gifts and Market Mix and How Silicon Valley Resembles a Music Scene **Jackson:** Why did you write in the gift essay comparing it to the lemon market problem, where the car salesman is incentivized to give you the crummy car? And in Silicon Valley, it's like pulling this magic trick that allows everyone to suspend selfishness or disbelief. Besides it potentially being necessary for creative innovation, why do you think certain industries, like Silicon Valley or other creative fields, have internalized this phenomenon, perhaps even unknowingly? **Alex:** This is a great question. **Jackson:** I don't think people in Silicon Valley would necessarily identify as being that generous. **Alex:** First, for listeners who might not know, let's go over the market for lemons problem. Akerlof, I believe, authored the paper. It presents the problem of how markets function with information asymmetry between the buyer and the seller. The classic example is a used car marketplace where a buyer and seller transact on a car. The seller knows much more about the car's condition than the buyer. The seller knows if it's a good car or a lemon, but the buyer doesn't, or not very well. **Jackson:** It's not really a repeat iteration game. **Alex:** Exactly, it's not a repeat game. This means the buyer has significant uncertainty about whether the car is worth the sticker price or if it's bad. **Jackson:** And the seller is incentivized to screw the buyer. **Alex:** Correct, the seller is incentivized to screw the buyer. **Alex:** This means that over time, the bad drives out the good. Bad quality goods will drive out good quality goods because buyers will only pay a price assuming the car is bad. Consequently, sellers of good quality goods will go elsewhere. **Jackson:** It's almost like a tragedy of the commons. **Alex:** It is a kind of tragedy of the commons, exactly. Now, let's consider the world of innovation, where people are trying to build brand new things with technology and new components. When building new things, they often don't work initially. Demos frequently fail or are subpar. Imagine a market scenario where you're trying to find customers, people to use and pay for your product, or even just to invest their time listening to you. How do you navigate this when demo quality varies widely, much like used cars, because creators are taking creative risks? **Jackson:** But you're also trying to play a repeat iteration game. **Alex:** You're trying to play a repeat iteration game, and you're taking creative risks where the odds of the demo or gift being a lemon are quite high. That's inherent in making art and taking creative risks. **Alex:** So, why doesn't the bad drive out the good in this context? The bad doesn't drive out the good because when something is presented as a gift, its meaning remains intact even if the demo fails. The gift is a gift, regardless. **Jackson:** If you give someone a painting you made, even if it's not good, **Jackson:** A better example is when a child gives you something they made. **Alex:** That is a better example, yes. **Jackson:** Everyone will receive that well. It's about the spirit, energy, approach, and intent—not necessarily the final product's perfection. **Alex:** Yes. **Alex:** Yes. What is received is the meaning of the gift. The meaning of a gift is the gratitude it creates. **Jackson:** But Silicon Valley and other artistic fields are still highly commercial. **Alex:** Yes. **Jackson:** Which is the paradox here. **Alex:** Anyone interested in gift culture probably knows the book \*The Gift\* by Lewis Hyde. The current edition, an airport bookshelf staple, is titled \*How the Creative Spirit Transforms the World\*—an unfortunately watered-down title. This is the frustration of every author whose titles are written by others. **Jackson:** But you have both versions for us. **Alex:** The first edition of the book was called \*The Imagination and the Erotic Life of Property\*. **Jackson:** Wow. **Alex:** Which is a way better title. This book is considered \*the\* book on gift culture; it's rightfully considered one of the great works on the subject. However, one aspect of this book drives me nuts because it's inaccurate. Its primary contention is that gifts and markets don't mix. One person's gift can't be another person's capital. **Jackson:** Yes. **Alex:** The idea is, I can't give you a gift that then becomes your capital to be used economically; that would poison the well of gift culture. **Jackson:** It has to be totally separated from commerce. **Alex:** It must be totally separated; otherwise, it's no longer gift culture, it's commerce. But anyone who has been in a music scene, the startup scene, or similar environments knows this isn't true. There is absolutely an intermingling between gift economies and the real economy of exchanged money in advanced, high-functioning gift cultures. **Alex:** My favorite example is how music scenes work. In any scene, different bands and individuals put on shows regularly. Fans attend, and venues and bookers charge ticket prices. From the outside, you might be tempted to view this as a market economy. You see a market of buyers and sellers: people playing shows for profit and attendees willing to spend money for the experience. **Jackson:** Entertainment utility. **Alex:** Entertainment. Yes. They value entertainment, pay for bands they like, and avoid those they don't. This appears to be a perfectly functioning market system. However, anyone who has actually lived in these scenes knows it's not just a market system; it's far more interesting. The actual exchange of value is much more complex. **Jackson:** The commercial part is almost like the baseline, the very foundation that makes it possible. But everything on top of that is different. **Alex:** Moreover, half the tickets are guest list spots, and half of those are comped through drink tickets. Half of those drink tickets are a gift from a sponsor providing alcohol in exchange for playing at a festival. The actual exchange of value is far more mysterious than straightforward economic transactions. **Jackson:** And there's plenty of commercial activity wrapped up in that, but it's often indirect and not overtly acknowledged. **Alex:** This notion of my crew and I coming to your show is a gift, especially because you want a full room with other people attending. In exchange, I expect drink tickets. I will then gift those drinks to people new to your show, so they will get excited and buy your merchandise, which is money you will use for gas. This connects to an initial title I considered, "Imagination and the Erotic Life of Property." All those exchanges—guest list for drink tickets, drink tickets for drinks, drinks for merchandise sales—represent an erotic life of exchange and possibility. Meaning and participation are being traded. This is far more significant and information-rich than a purely commercial transaction. **Jackson:** Yes. **Alex:** In a commercial transaction, the meaning of the purchase is what I ascribe to it. But in a gift, the meaning of the gift is what you, the recipient, ascribe to it. **Jackson:** Exactly. **Alex:** This is the point of scenes. Scenes are very high-information bandwidth exchange mechanisms. **Jackson:** That might be the best way to describe what Silicon Valley has managed to productize at tremendous scale and effectiveness, deeply embedded in its fundamental culture. **Alex:** I dislike the word "productize," but that's exactly it. Silicon Valley is just a very high-functioning music scene. **Jackson:** Right. **Alex:** And the byproduct... **Jackson:** ...happens ## [01:02:33] Bubbles and Generosity **Jackson:** to be wildly profitable. You've written extensively about bubbles and how they are an important fabric that creates innovation. One aspect is that bubbles create an environment with an initial lack of differentiation, followed by a rush to differentiate. You've said the hard problem of financing innovation is the uncertainty around how many financing tranches a company has until it's graded on results rather than potential. Can you talk about how this gift texture leads to what you've previously called the "controlled bubble state" of Silicon Valley? **Alex:** Many people have observed and articulated better than I—for example, Burn Hobart in \*Boom\*, or Bill Janeway—how bubbles perform incredibly important work in financing brand new things. Carlotta Perez also discusses this. The whole idea is that infrastructure is built during bubbles. **Jackson:** Her work on technological revolutions and... **Alex:** Financial capital. Yes, all very important canon. The overall message about why bubbles are important relates to the coordination challenge we discussed earlier. If you and I do a deal, putting in $10 million now even though it won't get us near free cash flow, how do we know the next financing tranche will be there? What gives us the confidence that we will be able to raise at a higher valuation later? You just have to trust it's there. In a bubble, nobody worries about that. This problem is solved by virtue of the fact that the price is going up. **Jackson:** And I'm glad to give you capital, and you're glad to give me equity, so the cycle continues. **Alex:** The price of everything is going up, so you have to act now. This is why bubbles solve that problem. It's one mechanism by which bubbles and the "number go up" phenomenon solve, or at least obfuscate or mask, many of the coordination problems around uncertain projects. **Jackson:** Maybe they also spark generosity. **Alex:** My second point is that a literal thing happens during bubbles: everyone feels rich and, consequently, very generous. Don't discount that. It's important. In bubbles, when everyone's investments ["bags"] are up, people take others out to dinner more, and more social activities occur. **Jackson:** Everybody buys NFTs. **Alex:** Exactly. Everyone buys NFTs. All kinds of interesting things happen because people have money to burn and want to spend it. They spend it on looking and feeling good, giving others credit, supporting others' attempts, and paying for various things. **Jackson:** Silicon Valley has benefited from this phenomenon. However, other "creative fields," like traditional entertainment, haven't enjoyed this kind of surplus-driven generosity, at least not in recent years. **Alex:** Let's consider that. Hollywood and the music industry have experienced other periods of booms, busts, and great surplus. Consider the 1990s in the music industry. **Jackson:** Comparing Silicon Valley now to Hollywood now, there's much more scarcity, especially in Hollywood, and everyone seems to be acting more selfishly. Consequently, there's likely less generosity. This is because they don't have that controlled bubble or state of additional surplus. **Alex:** A great question to understand any person's or scene's mindset is: what do people buy when they have money to burn? One mindset suggests that when you have money to burn, you buy gold or jewelry. This represents the safest way to acquire durable, highly liquid, and exchangeable forms of status. Another mindset suggests buying champagne. You buy things that are celebratory and mark transitions or thresholds. **Jackson:** Right. **Alex:** Champagne is the ultimate consumable for marking transitions or crossing thresholds. **Jackson:** It really is. **Jackson:** And at this point, it's more of a gift than an actual drink. **Alex:** Yes. **Jackson:** I think LVMH is even selling non-alcoholic champagne. **Alex:** Of course, as they should. In bubble environments with all this exuberance and goodwill, people who got in early and whose investments are up often pay it forward by picking up the tab or making similar gestures. ## [01:07:06] Patronage & Alignment **Alex:** This resembles patronage. **Jackson:** Yes, like the Medicis. **Alex:** You're opening the door to another fantastic topic: under what situations is patronage good? I've been thinking about this for a long time. We can discuss it if you'd like. **Jackson:** Yes, let's discuss it for a few minutes. **Alex:** First, what do I mean by patronage? When people hear "patronage," they often jump to the Medicis, the Fuggers, and other people of means funding the great artists of the world. That's a tiny sliver of patronage. There is another, much more everyday form of patronage synonymous with what you would historically call machine politics. People with power can decide who gets what job. Their power gives them discretion over how employment is distributed. The people who get those jobs, and might assign sub-jobs under them, have complete and total loyalty to the person who gave them the job. **Jackson:** It's like Robert Moses. **Alex:** Robert Moses is a great example. It's how every local city government operated 100 years ago. It's the way things used to be. This system has a couple of outcomes. One, you have a supremely non-merit-based, unjust way of forming and maintaining a workforce based only on favor trading. On the other hand, you get an incredibly loyal and aligned workforce. The sentiment is, "The boss wants this, we're going to do it because we owe the boss." You have systems where people feel like a family, determined to figure out the goal and achieve it. I bring this up because there is a fantastic podcast that very few people know about that I want to recommend. It's produced by a local Boston-area radio station. They've done two seasons so far, looking at various interesting aspects of Massachusetts history and how governments work. The first season was on the Big Dig and why infrastructure is hard these days. It was okay. The second season was on the Massachusetts State Lottery. It's about the system by which Massachusetts created the most profitable and successful lottery system in the United States. It all came through this patronage system explicitly run by the state treasurer in Massachusetts for many years, a guy named Bob Crane. The real story behind this season was the Massachusetts state patronage system, which persisted for a long time and was very related to the Catholic ethos of the Northeast. It produced an interesting kind of state capacity where all the jobs worked this way, and a lot of interesting things did get done very well. This system is all gone now. You could never go back even if you wanted to, for all kinds of reasons, and you wouldn't want to go back for many of those reasons. But people are nostalgic for this time when the government said they were going to do something, they did it, and it was on time and on budget. How did this happen? **Jackson:** Massive alignment due to patronage. **Alex:** Productive institutions that get things done on time, on budget, and effectively, such as founder-led private businesses, achieve massive alignment. In these businesses, everyone knows who's in charge, why they're there, and who brought them there. This model shares similarities with a patronage system. Indeed, anything styled as "founder-led" isn't far from this concept. This raises the question: to what degree should we be nostalgic for this model or try to recreate it in other institutions? One advantage of companies and private businesses is having more leeway to operate this way. You know whose "guy" you are and why you're there. If they tell you to do something, you do it. You don't conduct a risk-benefit analysis weighing all stakeholder scenarios; if the boss says do it, you do it. There are advantages to systems where you can ## [01:11:43] Coordination in Companies, O-Ring Problems, Michael Scott, and AI **Alex:** operate with such directness. **Jackson:** We've discussed coordination, particularly concerning gifts. If gift framing involves ecosystem-level coordination, especially in Silicon Valley, I'd like to explore how trust, accountability, and agency manifest within companies and markets. In your 2018 series, you discussed the shift from a world of scarcity to one of abundance. A key idea from that series, which seems particularly relevant now, is the transition from consuming objects or assets to consuming functions. Perhaps a more current interpretation is that we're moving towards consuming what will essentially be agents. **Alex:** Yes, agents and functions are essentially the same concept in this context. **Jackson:** You were pointing at something spot on. You recently wrote about the shift in software from "code is capital" to "code is labor," which is another precursor to where we're going with agents. Companies are adept at solving the O-ring problem. The O-ring represents the most mission-critical component that cannot fail. Companies are largely built around this idea, ensuring accountability to prevent such mission-critical failures. You've also written about Venkatesh Rao's classic series, the Gervais Principle, which explains how companies function with multi-tiered structures. For those unfamiliar, the core idea, drawn from Ricky Gervais's \*The Office\*, outlines three types of employees: sociopaths at the top, the clueless in the middle, and "losers"—or economic losers—at the bottom. The most interesting archetype here is the clueless, exemplified by characters like Michael Scott—essentially the "company man" who does whatever the company needs. In the world we're moving towards, intelligence is becoming free, software is abundant, and AIs, even if not yet full agents, are interoperating with anything via MCPs. We have trustless payments, and many things no longer require the level of coordination previously essential in the economy. Will we live in a world dominated by individual actors and entrepreneurs, coordinated by markets, without the need for large organizations? Will the boundaries of the firm become looser? Ultimately, where does organizational hierarchy and accountability still matter? **Alex:** Let me try to untangle these threads. There's a coherence to your questions. I'll address them in reverse order. The essay you're referencing, the one about Michael Scott, is the one I still get the most email about. **Jackson:** Yes, that was your riff on Venkatesh's piece. **Alex:** My riff on Venkatesh's piece was this idea: as educated professionals rise the socioeconomic ladder of the upper-middle class, they increasingly become Michael Scott. That piece generated a significant reaction; in a way, the reaction itself was the content. **Jackson:** That was a hot piece. It really was. **Alex:** I didn't get any actual hate mail for it, but many people had a reaction of, "Oh, God, God damn it." **Jackson:** You essentially told your readers they were the schmucks of the global economy, chasing an arbitrary detachment from reality rather than real money or power. **Alex:** While I did say that, I also pointed out what \*The Office\*—specifically the American version, which I consider superior—was actually about. The show is often perceived as being about an inept boss, Michael Scott, and a funny, cool protagonist, Jim. However, upon watching, you realize the opposite is true. Michael is incredibly good at his job. He's a kind boss, a good manager, and he makes the office work. Despite being a comedic, cartoonish character—a jester—he's an effective boss and manager. In contrast, Jim is more like the villain. **Jackson:** Venkatesh would say Jim is teetering on becoming the sociopath. **Alex:** He's fully a sociopath by the end of the show. Jim is actually the villain of the show. He's mean, capricious, breaks up a marriage, and is horrible in many ways. He's mean to Dwight. The point is that Michael Scott is not, in some profound ways, an unflattering character. Michael is important. He's load-bearing for the show, and the Michael Scotts of the world are load-bearing for our way of life. Yes, it's presented in a cartoonish, buffoonery sort of way. **Jackson:** We're often laughing at Michael—sometimes with him, but a lot of the time at him. **Alex:** Of course. But that's the tragedy of life: often the people who are laughed at the most are actually doing a lot of the unsung work. **Jackson:** This is dangerously close to product managers saying, "Nobody appreciates me." **Alex:** Let me explain why the Michael Scotts of the world aren't going away, even with AI. There's a fantastic essay online—I think it's the piece I've sent to the most people in my professional life. It's called "How Complex Systems Fail" by Richard Cook. He's an anesthesiologist, but that's not critical to the point. He writes about complex systems that inherently contain the possibility of catastrophic failure. **Jackson:** Like the O-ring. **Alex:** Exactly, the O-ring. In the O-ring case, the space shuttle blows up. In anesthesia, the patient might unexpectedly die. **Jackson:** In the case of the power grid, Spain and Portugal go dark for ten hours. **Jackson:** Due to one guy's random maintenance problem he forgot about. **Alex:** It wouldn't be just one guy's problem; it would be a series of things. Unfortunately, it's the holes in the Swiss cheese. **Jackson:** It's actually a break in the coordination problem, in a sense. **Alex:** In all these systems, they constantly contain the possibility of catastrophic failure. Yet, catastrophic failure doesn't happen most of the time. It doesn't happen because people construct an array of defenses. These systems are always operating in very broken and degraded modes in real life. This is an important point about real-life operations: the people who run various systems are always operating with band-aids, duct tape, and hacks on top of temporary solutions that solidified into permanent ones. No system ever runs as it was actually designed. **Jackson:** And from the outside looking in, we call them inelegant. **Alex:** These systems have been made to work over long periods because temporary solutions proved effective and became permanent. For example, one of the most mission-critical systems in the world, the B52 bomber, which carries nuclear weapons, consists of 70-year-old airplanes. We continuously rebuild them because we understand every single failure mode. The planes are old on purpose. These systems constantly operate in a somewhat broken or failure mode; that's their default state. Over time, pressure mounts from various directions to fix all these issues and modernize, often because the old solution is expensive or looks bad. However, eliminating existing latent forms of failure can sometimes introduce new paths to unexpected catastrophe. For example, consider the accusations regarding the Spain and Portugal power outage. It was suggested that because the grid was approximately 60% solar panels, it was impossible to restart. They lacked dispatchable power, like gas plants they could fire up to prime the system. Solar panels passively generate power, so they couldn't restart the system until the following morning. The introduction of such changes creates new possibilities for catastrophe, like an O-ring explosion, that didn't exist before. The only way to move forward without constant failures is for people to continuously create safety. People continuously do the work of making these broken systems function by making decisions at the sharp edge. They are continuously making gambles that are mostly, but not always, successful. The paper notes that all practitioner actions being gambles is obvious after a failure, but not when the system is working correctly. **Jackson:** Interesting. **Alex:** They are always gambles; it's just that they mostly pay off. Being expected to maintain production constantly is also a gamble, though it's not always appreciated as such. The reason all of this continues to work is because the "Michael Scotts" of the world—people who understand the latent combination of individuals, training, ritual, and precedent—make it work. This combination forces systems to continuously create safety. Why discuss safety when the prompt wasn't about it? I bring it up because it relates to the ultimate purpose of companies. The purpose of companies is to do work that is very difficult for markets to solve. This is why large companies, built on trust and internal accountability, are necessary. Companies have evolved over many years to solve these O-ring-type problems. **Jackson:** "That's just what firms are." **Alex:** That's precisely what firms are. They have been genetically and Darwinianly selected for this role over many years. **Jackson:** This also makes them less adept at innovation, agency, or maximizing novelty. However, they excel at this specific function. **Alex:** It doesn't necessarily make them less good at innovation. What it makes them less good at is the ruthless cost-cutting that markets excel at. They won't be the cheapest way to do something. **Jackson:** The cheapest or most efficient way. **Alex:** The cheapest way to have clean bathrooms will always be to outsource to a janitorial service. But does that create a workforce with real loyalty, people who've worked there for 30 years and will notice when paint is seeping? **Jackson:** Speaking of loyal bathroom cleaners, there's an amazing movie, \*Perfect Days\* by Wim Wenders, a Japanese film I recommend. **Alex:** Companies are organizations selected to solve O-ring problems. They are safety-creating cultures because safety is ultimately required to continuously deliver something of high value. **Jackson:** Yes. **Alex:** If there's no safety, it probably won't be durably high value over time. Backing into the original question: to what degree are agents going to take over work? **Jackson:** The AI piece is part of it. I'm also presenting a scenario where it seems we're broadly moving towards a world with many more self-employed individuals—highly agentic actors in the market. They'll increasingly rely on the combination of crypto, MCPs, agents, and AI to act trustlessly in the ecosystem, which is the opposite of the firm. You've partially answered this, suggesting that at the very least, mission-critical maintenance is really important for firms. But how else might the boundary of the firm evolve? Where will companies be more effective than individual commercial actors? **Alex:** You described it really well. What's definitely happening is that individuals are now equipped to do all kinds of things at a 7-out-of-10 quality level. I think everyone sees this. What kind of work will they be able to do? They'll be able to create many niche businesses that derive value from participating in various marketplaces, ideally as a market of one. You don't want to compete in a broad market; it's hard work being undifferentiated. Since I wrote that piece, O3 came out, and that model made me think, "Ah, humans had a good run." **Jackson:** My friend Nabil, a former podcast guest, calls it "Einstein is your butler." **Alex:** I don't think how I phrased it would really change, though perhaps the firm just requires fewer people who are good at using O3. But ultimately, I'll stick with what I said: fundamentally, the purpose of a company is to solve O-ring problems, and that requires people, judgment, and accountability. ## [01:25:51] Agency vs. Accountability **Jackson:** You made an earlier point, perhaps when talking to Packy about scarcity and abundance, that this might have originated as an accountability-to-agency spectrum. **Alex:** Yes. **Jackson:** It feels like that might capture some of this: in an increasingly high amount of the world, particularly in markets, agency is maximally rewarded. However, there are areas, especially around downside mitigation and probably many other parts of how a company works, where you don't want that much agency. You don't want self-directed people; you want people who will be accountable for ensuring they do what needs to happen. **Alex:** To keep things working. I would say that markets are a form of accountability because markets produce the stereotypical skin in the game. Skin in the game is a classically misunderstood concept. Many people think skin in the game means you own equity in the upside, but that's not what it means. Skin in the game means if you do a bad job, you are filtered out and replaced by someone else. **Jackson:** Real accountability. **Alex:** Skin in the game isn't about incentives; skin in the game is a filter. **Jackson:** I suppose what I mean is that markets offer a different kind of accountability. Markets will hold bad actors accountable, but they won't keep systems from breaking. **Alex:** I will totally dial in on what you just said. If you were to describe the prototypical low-accountability environment, it would paradoxically be a place full of people who feel themselves to be very high agency. **Jackson:** Right. **Alex:** A made-up example I'll use here is your stereotypical Parks and Rec-style city government. I'm not talking about the rank-and-file staff; I'm talking about the middle managers, the professionals, the people with titles like "Head of Blank" and "Director of Blank." These are all people who genuinely believe that they and their peers are there for merit-based reasons. They have a source of legitimacy: "I earned my way here, and therefore I have agency to pursue what I think I want to do." The emergent behavior of a group like this is low accountability for the whole system. **Jackson:** Why do you think that in that context? Are there commercial environments like that? **Alex:** Sure, take any big company. Imagine your stereotypical big corporate environment full of people who, on paper, have a lot of decision-making power. In practice, you get stalemate all the time because nobody can make everybody happy. You end up with all these deadlock conditions where the pace of actual progress slows down, and scope creeps up. **Jackson:** They're not accountable to real outcomes. **Alex:** Exactly. Too much agency in a system results in the overall accountability for delivering a result going to zero. **Jackson:** Got it. **Alex:** Got it. This is why, if you go back to the patronage thing we were talking about earlier, we often ask why big projects cost so much money. Why was the New York City subway dug for $X a mile, and now it costs a billion dollars? These are exaggerated numbers, but the point stands. **Jackson:** I don't even know if it is. **Alex:** Why do these big collective efforts suddenly cost quadruple what they used to? Technology should be getting better, and input costs like steel or concrete haven't meaningfully appreciated. Why is the overall project cost four times higher? When you look under the hood, the cost of the actual subway stations has increased a little. However, the budget for consulting, planning, and contingency is massive. Nobody can seem to figure out how to reduce it. You can't just say, "Spend less on alignment," because people will respond, "So we're going to be unaligned?" This leads to the question: We used to be able to do this with very aligned, machine-politics-style systems. A positive side effect of those older systems was free accountability and alignment. Now, you have to pay market rate for accountability and alignment by hiring project management and consultancy firms. They will provide alignment and accountability, but at a very expensive price. **Jackson:** Or you need dictatorial control, which government projects often lack. **Alex:** Like Robert Moses. Or you need a Robert Moses. **Jackson:** Ironically, startups have an opt-in form of dictatorship. **Jackson:** That's the core innovation. **Alex:** I don't know if it's an innovation. Before we had the term "startup," we just had family businesses. **Jackson:** Is Shopify a family business? **Alex:** I think that would resonate with many people there. I'll show you a fun book I just grabbed from my bookshelf; it's written by my grandfather. **Jackson:** No way. **Alex:** He has a whole series. His profession was \*Beyond Survival\*. **Jackson:** Leon Danco. **Alex:** His calling was working with first-generation family business owners who were trying to figure out succession planning, among other things. The hard part was dealing with all the different personalities involved: how to keep one child happy versus another. Leon Danco, check him out. **Jackson:** The writing runs in the family. **Alex:** Getting back to the main point, you get all kinds of interesting and non-obvious things for free, like accountability to deliver what the boss said. It's very expensive when you have to recreate that accountability and pay a consultancy firm for alignment. ## [01:31:55] Wide vs. pointy businesses and What Makes a Platform **Jackson:** Let's zoom back out with a few more broad questions. In many ways, we're moving from scarcity to abundance. You've framed this as a shift from classical horizontal or vertical companies to omnidirectional, universal operating system-like behemoths. Examples include Amazon, Meta, Microsoft, and Nvidia. On the other end are super-pointy, incredibly asset-light companies. This might be the classic Twitter idea of a one-person, highly valuable company. You've said that in the long run, there will be two ways to be profitable in low-friction environments: either be a utility, earning profits through massive scale across the entire stack, or be so differentiated, lightweight, and "zero stack" that you can achieve positive unit economics immediately and compound your way to success before competition arrives. Incremental effort is best spent on either pure differentiation or pure utility. Another useful analogy, if that didn't click for listeners, is the rainforest: there are huge canopy trees and small plants on the forest floor. It's very hard to be in the middle. **Alex:** The rainforest analogy, for what it's worth, is Ben Thompson's. Or possibly James Allworth's, his former podcast partner. **Jackson:** A few questions on this, which I think are broadly applicable. First, are we headed to an endpoint with single-actor businesses that excel at capturing attention and simply monetize the infrastructure, intelligence, speed, and utility provided by others? Is attention and brand the key differentiator? You mentioned "before the deluge of competition." How can a pointy business differentiate itself beyond distribution? **Alex:** Let's consider this. To the extent the "pointy and utility businesses" framework has had predictive value, I think it accurately anticipated the current situation: you're either building a base model or you're "vibe coding." **Jackson:** It's worth noting for listeners: this isn't quite how I was framing "pointy," but Cursor and similar VS Code extensions are examples. Although they are more capitalized, these companies benefit from the massive wave of base models. **Alex:** My expectation for the terminal state is that companies like Cursor will be acquired. **Jackson:** I believe there was a significant attempt to acquire Cursor. **Alex:** Yes, that seems to be their natural trajectory. **Jackson:** is Anthropic or Cursor more valuable? Currently, Anthropic is clearly more valuable. This raises a question: However, in the terminal state, I'm not sure. **Alex:** Great question. **Jackson:** Perhaps it goes back to the distribution question. **Alex:** Yes. **Jackson:** Another way to frame this, by the way, involves Shopify. In many ways, the Shopify merchant is a perfect example of the pointy business; they capitalize on the platform. Currently, it's platforms like Shopify. Soon, it might be mass-scale 3D printing or other manufacturing capabilities. The shift towards abundance will empower small, single actors to accomplish much more. **Alex:** Regarding 3D printing, there was already a massive platform with an API that allowed you to make products. It was called China. RIP. **Jackson:** That's quite a statement about China. **Alex:** Well, no, not really. Shopify is a great example. As Shopify has matured, we've had to become an actual platform. That's hard work. **Jackson:** To linger on that for a moment, what does being an actual platform mean? **Alex:** I would describe an actual computing or internet platform this way. A long time ago, when Marc Andreessen was making Ning, he wrote a classic essay about three types of internet platforms: type one, type two, and type three. A type one platform is what you might call a headless system. It’s essentially a server with a well-structured database that you can query through an API. You can then handle the results however you wish. Flickr is an example. While you could call it a photo-sharing platform, it does very little. It hosts your photos, allows you to fetch them, and has good performance. That's it. A type two platform is more involved. It's a place where people go, and third-party developers can create things that render there through plugins. **Jackson:** This is perhaps what one classically thinks of as a platform. **Alex:** It's one of the things you could classically call a platform. For example, the Facebook platform had FarmVille and similar applications. Many e-commerce platforms historically operated this way. By plugin, I mean third-party app developers were given hooks and handles allowing their application to render something, while the app's business logic resided on their own app server. So, as the app developer, my app is hosted by the platform, but the business logic and its workings are on my server. This distinction is very important. A type three platform, a true platform, is where I write my code and it executes on your server. Examples include AWS, Google Cloud, and Microsoft. Ethereum is an interesting version of this. You are both the host and the execution environment. **Jackson:** And this was the Shopify shift you were describing? **Alex:** Yes. **Jackson:** Going from type two to type three. **Alex:** Yes, Shopify recently made this shift from type two to type three. Witnessing this has been an incredible pleasure and a professional privilege because it's very hard to achieve. **Jackson:** This might be a slight digression, but it ties into something I wanted to ask: Is there a path for startups to genuinely become platforms anymore? **Alex:** Shopify did. **Jackson:** In a world where, if it's AI-related, the GPU costs alone are prohibitive, it seems there are fewer clear shots. OpenAI is a possibility, but even they have unique circumstances. **Alex:** The best answer I can give for a startup-like entity that recently achieved this would be Base or Solana. These are examples. They are creating both an app store and an execution environment where people can build, to varying degrees, in a permissionless way. **Jackson:** But they also inherently had to target a category that was less in demand, less "sexy." **Alex:** More or less, depending on your perspective. There's an interesting lesson here: if you want an open window to create these highly valuable platforms, it's helpful if the product itself is somewhat embarrassing. I say this with great affection. **Jackson:** Crypto. Many such cases. **Alex:** Many such cases. What's so amazing is these crypto builders, with smiles on their faces, developing absolutely ridiculous things as a way to build frankly astounding new platform capabilities. If this were taken completely seriously by everybody, this opportunity would not exist. ## [01:39:11] Moats, Leverage, and Figuring Out Your Sound: What Could Sam Altman Not Copy? **Jackson:** To tie it back to our discussion about moats for pointy businesses: you've notably written that the central focus, or the goal of a business, is to capture value from scarcity—to occupy a scarce position. **Alex:** I was thinking the other day: what are some uncopyable things? If you gave Sam Altman infinite time, infinite GPUs, and infinite money—and he already has infinite agency, being Sam Altman—could he copy it? I started thinking of examples. For instance, the band Phish. You could never copy Phish. **Jackson:** Some people might be able to. John Mayer and some talented musicians, perhaps. But Sam Altman? **Alex:** No, they couldn't do it. Not even John Mayer. Not even John Mayer and Pino Palladino. **Jackson:** Or whoever their crew is. I'm just imagining Sam Altman trying. Oh, gosh. **Alex:** You could copy the Grateful Dead, but you can't copy Phish. **Jackson:** Oh, why? **Jackson:** I've been to a lot of Dead shows, but never a Phish show. **Alex:** Because ultimately, the Dead wrote pop songs that you jammed on. In contrast, Phish writes incredibly elaborate compositions whose meaning is only executable by them. There aren't Phish cover bands. **Jackson:** Got it. **Alex:** There are a lot of Dead cover bands. There are no Phish cover bands. **Jackson:** I see. **Alex:** It just doesn't work. So, that's an example. Does Phish have a moat? **Jackson:** I think you're pointing at a template for something there. Not to make it about me, but I've thought about this. There are very few things I'll be able to reliably do better than GPT-4. We're probably already there with GPT-3, as you mentioned earlier. If I'm going to conduct an interesting interview, it won't be because I've done better research than a computer. So, I think there's something to the Phish analogy. **Alex:** what do they do that's uncopyable? Fundamentally, Phish has a fan base that loves them and travels all over to see them. This fan base is very diverse; it's not one type of person. It includes grungy hippies and investment bankers. **Maybe this is it:** So, the fan base is diverse. The lesson from Silicon Valley Bank is the exact opposite. If you're a bank, it's very bad if all your customers are in one group chat. That's a scenario to avoid. **Jackson:** Marc Andreessen can text them all. **Alex:** Right, a diverse customer base helps withstand the sway of all customers suddenly making the same decision, like moving to a different service. Second, and perhaps more importantly, Phish has all these people who love them. What these fans love is not a recording or a captured artifact; it's the live experience. **Jackson:** No, you're onto something. I think all the most unique art shares that characteristic. **Alex:** If you think about someone whose public differentiation is a newsletter or a podcast with a listenership that keeps returning for new episodes. Why do people come back and listen to your episodes? I love listening to your episodes for reasons similar to why someone likes a band or has brand affinity. It's because it's over a threshold of caring, which is really cool. I haven't yet sought out other listeners of your show, and we don't have tailgate parties when you launch an episode. **Jackson:** The Acquired guys do. **Alex:** That's a great and fascinating point. Yes. **Jackson:** They threw an event at Chase. **Alex:** Let's talk about Acquired for a second. It's a better example than Phish. Acquired doesn't do anything net new. They do a little bit of original research, but mostly they're reading already published books. Why can't O3 or O4 do what Acquired does? **Jackson:** Certainly on the substance, yes. **Alex:** On the substance, yes. But Ben and David give us a certain kind of gift with every episode. There's a joy to it and a community of people who like to talk about it. I feel there's a lot more durability in what Acquired does than in many other things. **Jackson:** It's hard to articulate why. **Jackson:** Another example is David Senra's Founders podcast. Someone recently gave me a definition: the best teacher is someone you want to learn with. **Jackson:** That's how I feel. I could read those books, but I like learning about these biographies with David. My last related question—the answer might be the same or there might not be one—is broadly, how should an individual think about building leverage or uniqueness today? Imagine a 21-year-old thinking about this. It's a bit of a cliché question, but I'm curious if anything comes to mind for you. **Alex:** I'll tell you what I was doing. **Jackson:** You built a lot of unique leverage; "leverage" might be a better word. **Alex:** When I was 21, trying to build unique leverage, I was playing in a band called The Fundamentals. You can listen to us on Spotify and we'll make a quarter of a cent or something. Maybe I'll put on some music to play us out. What you do in a band, again, is all about trying to get leverage. You wouldn't describe it that way; you'd say you're making art, cultivating fans, developing a sound, and developing a style. All of these are forms of leverage. These are things that are yours, and once established, you get a lot of output from a little input. Think about developing a sound: What is your sound? What is your style? That's leverage. Leverage is knowing your aesthetic and being able to use it effectively. That's my answer: if you can describe your aesthetic and communicate it well, you'll be able to get things done. You'll understand why people are coming to you and attract more people. **Jackson:** That's awesome. **Alex:** As a 20 or 21-year-old, we spent our days developing our sound. You don't do that by merely deciding what your sound is; it's by playing constantly, often trying to... **Jackson:** ...sound like someone else. It's the classic music story: you try to sound like someone else and end up sounding like yourself. **Alex:** Many great record producers operate this way. I'm thinking of a famous memo by Steve Albini to Nirvana. You have to read it. Steve Albini, the great sound engineer who also did a lot of production, wrote this memo. It essentially said, "I would love to produce your next record." It detailed how he would approach it, including the nuts-and-bolts mechanics, and outlined his do's and don'ts regarding influencing their sound. He also set absolute lines: if they agreed not to cross them, they could be friends; otherwise, they couldn't work together. It's excellent and belongs in Sriram's collection of classic memos. **Jackson:** Wow. **Alex:** But it's in the music business. **Jackson:** Cool. **Alex:** You'd love it; I'll send it to you. That's the kind of work that develops leverage. You don't develop leverage by sitting around all day thinking, "How do I get leverage?" It's like thinking about startup ideas: you don't sit around trying to conjure them; you solve a problem you have. Similarly, you get leverage by cultivating your craft, down to the mechanical nuts and bolts. When you develop a sound, so much goes into elements like guitar tone. Speaking of leverage, a famous mastering engineer—I'm blanking on his name—has a great quote: "It's not about how loud you get it; it's about how you get it loud." This literally means that when you produce a record, you first record all your tracks, perhaps together or separately. These tracks then go to the mixing board, where a sound engineer creates the mix, adjusting the levels of all the different tracks and their placement. This final mix is actually very quiet. If you listened to it on headphones as you would a track on Spotify, your initial reaction would be, "Why is this so quiet?" It's at a very low level. Then, the mastering engineer takes this mix and raises the overall volume in a specific way, anticipating the different speakers and environments where it will be heard. The overall effect is to make it loud. This "loudening" is the last stage, and it gives the music a particular texture. The interplay between these processes means there's a micro and a macro aspect to developing your sound's texture. The micro aspect is spending all that time developing your guitar tone. You can isolate your guitar tone and work on it exclusively for days. Then there's the macro aspect: you can only master an album when it's done. You can't do it ahead of time; the product must be ready. Then you bring in someone like Rick Rubin, achieve a "moment of Zen," and bring the volume up, making it loud. **Jackson:** That requires such an intimacy with the inputs and the detail. **Alex:** Yes. You can't just think about this for a couple of days and decide you have this sound. It takes a lifetime to figure it out. Once you have it and possess a unique style—take Rage Against the Machine as a great example. No one sounds like Rage Against the Machine. Absolutely no one. A lot of that is Tom Morello. The tone of that guitar and the singer's voice are so unique. Before you even get to the content of the songs, the artistry, and the whole package of what the band is, those two elements alone are the basis of a band. **Jackson:** You have unique ingredients and a unique dish, which is cool. **Alex:** So that's my answer: go figure out what your sound is. Work on ## [01:50:07]  AI, Originality, and Creativity **Alex:** it. I'd also like to add that this connects to what gives me such good vibes about AI. Many people are pessimistic, saying it's destroying creativity. If you talk to people, especially in the early years of AI, I've never seen so many individuals put so much energy into a kind of tinkering that is the exact same as musicians playing with their guitar amps. People are tweaking, figuring out how to play with it, how to prompt, and how to shape the personalities of these AI tools. This is just like people with guitar amps. It's the same. That's great. Whenever people engage in that behavior, good things result. **Jackson:** You went right where I was going. **Alex:** Cool. **Jackson:** You specifically, in one of your pieces—I think it might be the one about "Goth Downtowns," though I might be mixing up titles... **Alex:** Have you ever seen "The Goth Downtown"? **Jackson:** Yes, the Chris Fleming reference. In that piece, you specifically talk about creating "the crunch"—the guitar crunch—and what that might look like in a generative AI texture. Part of the backdrop for this, as people are likely aware, is that so much of what these AI systems currently produce is wildly predictable. They're adept at generating the median, which ties back to "The Goth Downtown" piece. This references Chris Fleming's amazing joke about St. Vincent. She talks about all the freaks in New York City who "get her," and Fleming retorts, "No, those are hot people with slightly vetted idiosyncrasies. Go to Albany." **Alex:** Go to Albany. If you want to see a freak, go to Albany. **Jackson:** You can tell when something was written with heavy GPT assistance because, by definition, there's nothing surprising in what it says. Nabil and I discuss how "non-slop" sometimes has a sense of strangeness. To your point, it's exciting and optimistic to imagine people tinkering. Even though these tools can produce things in one shot, more people are likely tinkering with technology tools now than we've seen in a long time. Have you, personally or otherwise, seen any specific instances of "the crunch" or "the fuzz," or what it might look like to get spiky with AI? You include an image related to this. I've also seen people suggest that prior versions of DALL-E and ChatGPT might have been less "sloppy" than current ones because they were slightly weirder. **Alex:** They're weird, full of problems, and they were endearing. Somebody at that point said we're going to have old AI slop-core nostalgia. **Jackson:** Right. **Alex:** In 18 months. And that's exactly what happened; people really hark back to the old DALL-E and Midjourney prompting style, or the image style that was so distinct. **Jackson:** Yeah. **Alex:** And now it's gotten better. Maybe we just go through. **Jackson:** But it's gotten more homogenized. **Alex:** Maybe on the other side, it's just perfect. We just go across the uncanny valley. **Jackson:** But even if it's exactly predictable... Something interesting you said about goth is that you don't really see goth people in New York. **Alex:** Yes. **Jackson:** You see them in suburbs and malls. What I was reading into that was an element of self-consciousness, but they're less constantly seen, so they have less of an evolutionary fitness function around it. As a result, they are actually more purely authentic or purely expressive. **Alex:** Environments that produce goths are not the same as environments that produce city people and the particular homogeneity that is the people version of AirSpace. **Jackson:** To be even more precise, and this is part of what you were saying in the piece with the St. Vincent joke: it's not even normies in New York. It's the cool people in New York. **Alex:** Yes. **Jackson:** The cool people are perfectly attuned. Arguably, this is where we're probably going with AI. The quality isn't going to be low; this stuff is going to be amazing. **Alex:** I totally agree, especially with the recent discourse around, "Hey, do you like this personality? Thumbs up." Everyone reacted negatively to that. You create a high school feedback loop when you give AI feedback on whether you like a style. This is how you get lunchroom table behavior. **Jackson:** We're all wearing the same shoes. **Alex:** Exactly. This is somewhat separate from the fact that AIs are now all saying things like, "Tell me something about me that I don't know. You're maybe the smartest person I've ever met." **Jackson:** The fact that you would even be able to ask that question just shows me how brilliant you are. **Alex:** And the quote getting quote-tweeted by everybody is from Mikhail, our CTO, who was the guy at Microsoft who made Sydney. He's our CTO now. **Jackson:** He has been in it. ## [01:55:15]  Subcultures on the Internet and Frictionless Discovery **Jackson:** There's one other thread here that I found really interesting, which I've discussed with others, including Eugene Wei: how do you get subcultures when there's no friction? **Alex:** Right. **Jackson:** Part of that is in the goth idea: inherently, the suburbs are farther away. There's less connectivity and less density there. You have this one line that points at it in the Chris Fleming piece: "I can't shake the phrase 'attractive people with heavily vetted idiosyncrasies' as a description for what AI as a medium wants to produce." And conversely, the punchline: "You want to see a freak? Go to pump.fun." **Alex:** Yeah. **Jackson:** How and where do we create subcultures on the internet if there's no friction? **Alex:** Great question. There's a question I really like to use in interview scenarios: "What was the first place you posted?" Some people will immediately tell you the answer. Other people ask, "What do you mean? Instagram?" That tells you something. **Jackson:** Mine was Brawl Central, a Super Smash Brothers forum. **Alex:** It's always those forums. My answer would be Wizards of the Coast, who make Magic: The Gathering. They had forums that attracted many people, and I posted there a lot. The answer is always something like that. One of my favorite places to occasionally visit is a forum called Urban Toronto. It's a classic forum where people discuss things, and much of it is complaining about minute, almost autistic details concerning various buildings and civic projects: how they're being built and progressing. People document everything richly with photos. It's a fascinating group of people who know so much about a single thing. This is alive and well today, in 2025. These places are still there. I think the mark of any good forum is that it's a little bit hostile to new users and probably... **Jackson:** A little bit unpopular. Or maybe not. **Alex:** It has to be unpopular, definitionally unpopular. **Jackson:** Perhaps that's why we don't see this as much in music. For example, one of the points you make in that piece is how the most unique-sounding bands came from the suburbs, rather than from downtown. I've debated music managers about this. If someone created genuinely interesting music on the internet today, aggregators would find it very quickly. You don't think so? **Alex:** Maybe. I don't know. The fact that we're not finding them isn't evidence that they're not there. **Jackson:** Chuck Klosterman has written about this a little bit. **Alex:** Nadia Eghbal has an amazing book called \*Working in Public\*. It's a book about how working on open source projects changed before and after GitHub. Before GitHub, every project would use its own version of Git or its own version control software. To contribute to these different open source projects, you had to do a lot of work just to onboard yourself. You had to do some proof of work to start contributing. But once you did, you often stuck around. There was real friction for people getting on board and trying to help out, but once you did, these small, tight groups of communities formed. Her book makes the point that the advent of GitHub was wildly successful and way better than other version control methods. Everybody started using it, and it became really easy to find new projects and start contributing. But what happened? All these poor open source project maintainers suddenly became deluged with people following instructions, asking, "Hey, can I contribute? Can I just make a little PR?" The advice people get when learning to code is to go find a cool project and try to make a PR. These maintainers suddenly faced no friction for people trying to participate. You don't want a million people making random suggestions to your project. That's not what you want. She talks about this interesting change in what it means to be a maintainer, towards something that looks like being a Twitch streamer. The good maintainers, the good project leaders, are increasingly aware that they're doing a show. They have fans. **Jackson:** Such a great point. **Alex:** The fans want to interact with you. You need to let some of them interact with you, but not everyone. **Jackson:** You want it to feel like a community. **Alex:** The fans need to be handled. You need to have meet and greets. You let some of them come on stage with you every once in a while, but not by default. The book is fantastic. **Jackson:** It's on my list. \*Working in Public\*. I think Nadia might be a future guest of the show. We're working on it. **Alex:** Fabulous. **Jackson:** It'll be fun. **Alex:** Strong recommend. ## [02:00:25] What Does "The Medium is the Message" mean?: Hot & Cool Mediums **Jackson:** One of the first things I ever heard you talk about, credit to David Perell, was in an interview in 2020. You talked about "the medium is the message" and McLuhan, and this idea of hot and cool media. Maybe a teaser here: you might have to defend or roast my decision to not do video for this podcast. **Alex:** No, I applaud it. **Jackson:** You mentioned this line earlier: Information isn't what we're told; it's what we understand. This concept is rooted in Claude Shannon as well as McLuhan. People have heard the term "the medium is the message" a lot. McLuhan is brilliant but not necessarily the most accessible. Could you briefly explain what it actually means? You gave the specific example of the Nixon-Kennedy debates, both in an interview and your writing, stating that the content doesn't matter—and that's what people miss. Another anecdotal example is Trump on the radio versus Trump on Twitter. People are obsessed with the content and don't consider the mediums. Can you elaborate on what "the medium is the message" truly signifies? **Alex:** Certainly. To explain this, I'll use a more approachable concept: hot and cool media. It conveys the same idea but is perhaps easier to grasp. Let's walk through this. Consider your brain, eyes, and ears—your sensory organs, constantly taking in information about the world. Between your eye and your brain, three or four neurons act as relays before the information reaches the core processing areas. Then, for any computation or decision-making, you'll involve at least three or four more synaptic integrations. Even in a simple brain circuit, you're dealing with approximately five to ten relay signals for basic functions. Each relay takes between 10 and 50 milliseconds. So, why don't we experience the world in lag? **Jackson:** Our brains are helping us out. **Alex:** That's right. The reason you don't experience the world in lag, despite this inherent delay—the brain's version of the speed of light, if you will—is because it literally takes time for a brain to relay information from one neuron to another. This information is binary, like an on or off signal. Inside a nerve, information travels via electrical propagation. A voltage potential spreads along the nerve very quickly, in milliseconds. **Jackson:** How long is that? Would you recognize a 50-millisecond lag if you were watching audio or video? **Alex:** Fifty seconds? **Jackson:** Fifty milliseconds. **Alex:** Yes, that's around the threshold of our perception. You'd definitely recognize 100 or 150 milliseconds. Information transfer inside a nerve is very fast. However, from one nerve to another, small vesicles filled with chemicals are released from one nerve. These chemicals must diffuse across a small barrier to reach the next nerve. Although the barrier is small, this diffusion is an incredibly slow process, akin to releasing carrier pigeons. The point is, you're inevitably dealing with slow sensory processing equipment to experience a fast-paced external world. For example, if I toss a ball to you and your arm reaches out to catch it, how can you manage that... **Jackson:** ...if you're experiencing lag? **Alex:** It’s mind-bending to think about how you perceive the world without lag. The reason you can catch a ball and don’t experience the world in lag at all is because you are not actually perceiving the world most of the time. You are perceiving a model of the world that you've built and are constantly error-checking to ensure that model is accurate. This is a complex problem. **Jackson:** We are actually like LLMs. **Alex:** We are. This is where LLMs come from. When you look around a room and see a table, guitar, keyboard, painting, or books, what we're actually seeing are conceptual representations of those things. Then there are very low-bandwidth shortcuts, like green blob, blue blob, red blob. If you focus on something, your brain directs all its attention to that thing. You have very limited raw sensory input. **Jackson:** It fills in all the resolution. **Alex:** It does. We actually have very low bandwidth for what makes it through. Your brain constantly makes allocation decisions about what information gets through versus what it will populate with its pre-existing model. This is very important. **Jackson:** What am I going to hallucinate? **Alex:** What is the brain going to hallucinate versus what is it actually going to retrieve as primary source material? Here's why this matters. Different sensory modalities take up different amounts of bandwidth. Bandwidth that is single-channel, like audio only, written text only, or even visual only— **Jackson:** A photograph. **Alex:** A photograph will take up less bandwidth than something multimodal, like audio and video. For example, if you've watched old-fashioned TV, it's often very fuzzy, and you have to do a lot of work to integrate what's going on. Another example is Twitter or a group chat, where a lot of context accompanies the words, jokes, and memes. These different formats require different levels of bandwidth for you to accept the primary source information. **Jackson:** Another way you frame this is the level of engagement and the level of participation. **Alex:** Yes. What this means is that when you are listening to an audio-only track—imagine you are in the dark, wearing headphones, only listening to this podcast—this is a fairly low-bandwidth channel. A lot of the real information makes it to you. This is called hot media. **Jackson:** It's like a wiretap. **Alex:** It's high in engagement, low in participation. You're high in engagement because you are actually engaging with the real signal. It's low in participation because you have to do relatively little work to fill in the gaps with what you thought was coming. **Jackson:** Mainlining this conversation to your brain. **Alex:** You are still actually filling in a lot of the gaps. For example, if Jackson: were to start singing lyrics to a well-known song, you would naturally fill in what the song is. Unless he dropped in an unexpected word, you would have to go back and error correct. But it's still low in participation because you are doing relatively little hallucination. You are doing a lot of actual acceptance of the information. In contrast, video is a cooler medium than audio because you have multiple channels to integrate to understand what's going on. **Jackson:** Like hearing and vision. **Alex:** That's two instead of one, so your brain has to do much more work to integrate those things. As a result, less actual source material makes it into you. **Jackson:** There's more total information coming at me, but I'm processing less of it. **Alex:** The same amount of information makes it to you either way, but the information you select for will be different because you're... **Jackson:** ...making it a more crowded highway. **Alex:** It is a more crowded highway. The capacity stays the same, but you have to pick and choose what will make it in, so that what you receive is what you perceive to be accurate. This could take it to... **Jackson:** ...the other end of the spectrum: Twitter or text messages, which are even cooler than television. **Alex:** Here's a real example. Another differentiation between hot and cool is that mono is hot and stereo is cool. One person speaking, such as in a speech, is hotter than a dialogue between two people, which is cooler. When two people are talking, you have to parse not just their words, but also their back-and-forth exchanges and the context passed between them. Having to keep track of both things in a dialogue is cooler than if one person were talking at you. **Jackson:** It also feels more like you're part of the conversation, listening in, versus being lectured at. **Alex:** You feel like you're part of the conversation because you are doing most of the work of filling it in. That's why it feels very participatory. Ultimately, the choice of the medium used will matter a great deal. It determines how much the listener will hear directly, versus how much their experience is them creating a pastiche of what happens. **Jackson:** This is the premise of "the medium is the message." **Alex:** This is the premise of "the medium is the message." I'll give you a real example. Imagine you are in a confrontation with your landlord and need to send a message to resolve something. You have four options: talk on the phone, write an email, text them, or leave a voice message. I want you to arrange those four methods based on what will escalate the situation versus what will de-escalate it. **Jackson:** It depends on how much I want them to gap-fill. If I want to convey the exact level of fidelity, I would do a phone call. With a phone call, I can control my tone and the content of what I say. **Alex:** There's something even better than a phone call: you can leave a voicemail. **Jackson:** Interesting. **Alex:** Voicemail. In a phone call, you have a back-and-forth exchange. **Jackson:** It's a one-directional voice message. **Alex:** A one-directional voicemail. **Alex:** Hi landlord, fuck you. Listen to me. You need to fix my sink. Thank you. **Jackson:** And the gradient? **Alex:** Sorry for swearing on the pod. **Jackson:** No, you're good. So, voicemail, phone, email, text. **Alex:** That is how I would rank them; that is how it arranges. I think you could debate whether phone and email could be swapped. **Jackson:** I see what you're saying. **Alex:** Email is one-directional, whereas phone has audio. But they're clearly in the middle. **Jackson:** You could nitpick, but the point is that with the same content in theory, a totally different thing is received depending on which medium is used. **Alex:** If you leave a voicemail for anything, it's escalation. **Alex:** If you text, that's de-escalating. **Jackson:** You made this point with David. Most of Twitter, and certainly text messages, are all punchline, as you say about Twitter. **Alex:** There's no setup for the joke; you need the context. If you looked at my group text with my best friends from college, all the missing context would probably make it hard to parse what you were actually reading. ## [02:11:58] Nixon-Kennedy Debates, Trump, Podcasts, Fox News, and the Decline of TV **Alex:** Here's the Nixon-Kennedy debate story, a famous example of how this concept is taught. The Nixon-Kennedy TV debates occurred when about half of American households watched on TV and half listened on the radio. This split didn't significantly correspond to political affiliation, which is an important detail. After the debate, people were polled on who they thought won. The fascinating result was that TV viewers thought Kennedy won, while radio listeners thought Nixon won. This is often misinterpreted and oversimplified, for example, suggesting Kennedy won on looks rather than substance. That's not the core issue. Nixon's entire personality, style, and approach was to convey: "I know many facts, I am in control of this situation, and I'm going to tell you..." **Jackson:** He was going to blast you with that. **Alex:** Yes, blast you with facts—bam! They’d go right at you, making his points very clear. Kennedy, on the other hand, was much closer to an Obama-style campaign, aiming to inspire people about what America could be. **Jackson:** You're seeing what you want to see in his message. **Alex:** That's exactly right. Kennedy was a master at evoking people's best aspirations for the country. He was all about evoking hopefulness and youthful energy. Kennedy excelled at making you feel inspired about the country's direction. So, let's consider this in terms of the different mediums. On the radio, all of Nixon's facts—bam, bam, bam—came through crystal clear. **Jackson:** It's the only thing to focus on. **Alex:** It was the only thing to focus on, leaving the impression that Nixon was a strong communicator. On the radio with Kennedy, however, it felt like he wasn't saying anything. Listeners were waiting for information that never arrived because they weren't actively filling in the blanks. On TV, Kennedy made you participate fully. You felt like you were filling in his message, and you liked it because it resonated with what you wanted to hear. Nixon, in contrast, came across as tinny and wooden on TV. His message, being too fact-dense, didn't reach the audience effectively; he sounded like the adults in Peanuts—just "wah, wah, wah." This illustrates why "the medium is the message." On radio, the evaluation was based on substance. On TV, it was based on how you felt about it—your participation, the vibe. **Jackson:** Okay, cool. **Alex:** It's not just vibes-based. It's important to qualify that both mediums have "vibe" aspects. For example, Trump is a very vibes-based and a very "hot media" president. He embodies both. **Jackson:** How does that work? **Alex:** Regarding Trump, people call him the Twitter president, but his communications through Twitter are interesting because they are a garish spectacle. It's not the medium in which he sounds good. **Jackson:** He doesn't tweet like anyone else either. **Alex:** No, it's interesting for getting attention. **Jackson:** He's literally blasting you. He's all caps. **Alex:** He's all caps, blasting you. And it's very unsuited for the medium; it's not very good. Whereas Trump on the radio sounds fantastic. He's really good. Imagine watching a Trump rally with your eyes closed. He sounds like a very good stand-up comedian. He has his patter down, and his jokes land. If you take that performance and put it into a "cool media" out-of-context scenario, it looks stupid and garish. **Jackson:** How does he achieve that high information density and vibe simultaneously? **Alex:** I'll tell you exactly how. Trump is incredibly good at communicating in a specific way. When Trump says, "Make America Great Again"—this was more from his first campaign—or talks about bringing back showers with good water pressure, you might be tempted to think this is "cool media" where you fill in your own version of greatness. But it's not; it's the opposite. It's about his speech, how he phrases things, and what he suggests through them. It's not you filling it in; it's him insinuating what "great" means. The rhetoric crafts an idea of otherness and a promise that America will come back. This is delivered unbelievably well through his tone of voice and phrases that end with, "And you all know what I mean by that, folks, don't we?" That's actually hot media, not cool media. **Jackson:** Got it. **Alex:** Cool media is when you are actually filling in the meaning yourself. If Trump tried that on Twitter, it wouldn't work. It wouldn't work the same way it does at a rally. **Jackson:** You know when it can work? It's when you read his tweets and hear his voice in your head. **Alex:** Exactly. An even better example than Trump, which I wrote about in my essay "The Audio Revolution," is the podcasting evolution evident in the last election. Podcasting has emerged as a dominant and influential communication medium for important people. This is interesting because it's the resurgence of a very hot format. Regarding podcasts, and connecting to what you said about Gabby's preference for seeing a video feed compared to millennials or pre-millennials, my contention is that YouTube is the dominant hot media company globally. The crucial part of YouTube is its audio; YouTube is essentially radio. That's YouTube's heritage. Fundamentally, YouTube is a radio station that also has video and everything else. **Jackson:** You could make the case that the dominant content form on TikTok, YouTube, and Instagram Reels is a person looking at the camera talking to you. **Alex:** Yes, exactly. **Jackson:** Even when you're seeing the video, it's not that important. You're discounting it. **Alex:** Fox News pioneered this. I think Roger Stone originally had this idea: you want it to be a talking head. This was a little bit later. There was a period when CNN, MSNBC, and other networks started making their presentations more elaborate, featured, and fancy. Fox did the opposite. They made their screens simpler with little going on in the background—just a talking head. That corresponds exactly to when Fox started outperforming them massively. They knew it worked. **Jackson:** You made a point in that piece that reminded me of Neil Postman. You wrote, "If you remember one thing from this essay, remember this: Hot sensory processing and cool sensory processing are like muscles. The more you use them, the stronger they get. And the stronger they get, the more we use them." "We used to think that our neural circuits were relatively fixed by adulthood, but now we know they're highly adaptive. They strengthen and synchronize with repeated use." I recently read \*Amusing Ourselves to Death\*, and Postman laments this shift. It's not just that the content is changing, but we are changing as we move from a text-based society to a TV-based society. You touched on this in your piece about the podcast election, which I found really prescient. How do you think society is changing as we become more attuned to hot media? There are obvious political implications, such as the types of candidates we see. But do you think it's actually changing people or changing us culturally? **Alex:** The most obvious way this is manifesting is in the decline of traditional TV's importance. TV doesn't matter anymore in the way it did five or ten years ago. **Jackson:** People talk about \*White Lotus\* on the coasts, but it's not \*Game of Thrones\*. **Alex:** I'm not talking about TV shows; that's different. **Jackson:** Oh, I see. **Alex:** I mean cable news as the form of discourse by which news would be broken. **Jackson:** That's partially a generational thing, but I think it's related to your point. **Alex:** News doesn't break on TV anymore. It's not literally dead; there are occasional exceptions. But for the most part, platforms like Twitter and Instagram are a better format for the "cool media" job—high-participation, low-engagement brain candy. There was infinite demand for this, which TV used to fulfill. **Jackson:** But it's also better for delivering hot blasts of content. **Alex:** It's also better for blast. Exactly. You can state the information and put it right there. Twitter is a bit of a chameleon because you're getting both at once, and that's part of the dissonance. For long-form content, when people want to do an interview about their company, platform, or anything else, they now go on a podcast. Or, weirdly, they will write a blog post. There was an interesting wave when people would write Medium posts. I think that was the beginning of it, but then podcasting turned out to be better for that purpose. **Alex:** There's a related parallel concept people discuss: oral versus written culture, and the journey back to oral culture, as Walter Ong described. **Jackson:** One other piece of this: if information is uncertainty resolution, which is, I believe, the Claude Shannon definition... **Alex:** Yes, that's the definition. **Jackson:** Do we have certainty overload? Do we need less certainty? **Alex:** Do we have certainty overload? Can you phrase the question again? **Jackson:** Information is uncertainty resolution. We have an overwhelming amount of information; it's fundamentally abundant. This ties to the last question. It seems to me that things are heating up, though you may not entirely agree. As a result, all incoming information is often accepted as is and taken as certainty, rather than as inputs for consideration. For example, Postman discussed how people would watch a seven-hour Lincoln debate, analyze the rhetoric, and decide for themselves. Now, it feels like we're just collecting data points blasted at us. **Alex:** Our attention spans and capacity to make sense of things notwithstanding, I don't think we are necessarily in a world that is heating up in terms of content. The dominant platform now for everything, TikTok, is a very cool medium. **Jackson:** You think so? Interesting. **Alex:** TikTok is mixed media. There's a lot going on: video, audio, chat, and sounds. **Jackson:** I was thinking of it like a person in a car blasting information. But, to your point, even then, it's like Twitter; we have to figure out what they're referencing. **Alex:** TikTok is very cool media because about 95% of it is you, the viewer, filling in the context. **Jackson:** I see. **Alex:** On balance, I think the total demand for hot and cool media probably stays the same. It just shifts around what fulfills those needs as different formats become apex predators for various jobs. You can put Reels in the same category. However, an interesting natural experiment is comparing Reels and TikTok with YouTube Shorts. YouTube Shorts exists within a medium that is otherwise fairly hot content, and the content on Shorts is different. **Alex:** TikTok and Reels are interchangeable, as far as I can tell. I don't use either, but they seem the same. YouTube Shorts is different. The content is different, the people are different, the style is different. **Jackson:** Instagram Reels is just TikTok content from last week. Whereas YouTube, to your point, is a totally different experience. **Alex:** Even though the format is literally the same. ## [02:25:21] Alex's Podcast Diet **Jackson:** The last note on this, which I hinted at briefly and you also referenced earlier in our conversation, is about when you wrote your piece on quitting podcasts. You observed that when you quit, your brain was quieter, your thinking clearer, and your writing better. You mentioned you have since gone back to them. **Alex:** Am I being dragged here? **Jackson:** If this is an own goal, I'm making it on a podcast to people listening to a podcast. You said, "I miss them, but I don't think I'm going to go back. Only after taking them off do you realize that headphones aren't all that good for you." There's a lot of discussion about screen time and how scrolling feeds and glowing screens affect us, but far less discussion about constant audio stimulation. **Alex:** Yes, I'm back listening to podcasts; I'm off the wagon, so to speak. **Jackson:** A huge orientation of the piece wasn't just audio and podcasts, but headphones specifically. That focus is telling because headphones are highly insulating. I've talked about this with friends: when you walk around New York City with AirPods in, you can opt out of the world. **Alex:** Yeah. **Jackson:** It's a very single-player experience, effectively allowing one to say, "I don't want to deal with the world." You referenced another piece, perhaps in that same article, about everything getting louder. There's a similar notion here: headphones drown out the world. **Alex:** I still try my very hardest not to wear headphones when I'm walking. I'll tell you why I'm back listening to podcasts with a vengeance. I have three kids: five, three, and a newborn. For the past year and a half, our bedtime routine with the five and three-year-olds involves getting them ready for bed, reading stories, and then I lie with both of them until they fall asleep. This often takes a very long time. While they're falling asleep, I'll listen to a podcast. I'm not a regular listener of 'All-In,' though occasionally I do tune in, sometimes with a feeling of 'here we go again.' It’s a nice 45 minutes of lying there with my kids, listening to macro shows or similar content. Because of this, I'm listening to podcasts again. Sometimes I listen to music, but often I use that time to catch up on shows. **Jackson:** Why listen to podcasts versus reading? Presumably you read a ton, too. **Alex:** Because I can't read in the dark. **Jackson:** All right. **Alex:** That's the literal reason. I would read too, but I'm literally sitting in the dark with headphones on. **Jackson:** Instead of podcasts, would you consider having articles read to you, perhaps by an AI Morgan Freeman? **Alex:** AI Morgan Freeman or real Morgan Freeman? I wouldn't say no to that; it's an appealing possibility. **Jackson:** Okay. **Alex:** I don't do audiobooks, for some reason. **Jackson:** Okay. **Alex:** It's because I really enjoy reading physical books and marking them up with a pen. **Jackson:** Audiobooks are a much hotter media. **Alex:** Than reading text. **Jackson:** Yes. **Alex:** Text is also pretty hot. **Jackson:** I find audio to be much hotter. **Alex:** It can be. You're probably right. **Jackson:** Part of it is because of pace. Audiobooks are a treadmill... **Alex:** Reading a book isn't "cool media," though. Written text from one source, where you read page after page, is also pretty "hot." ## [02:28:52] U.S, Canada, and National Myths **Jackson:** We don't have to spend much time on it, but I have a few questions about the US and Canada. **Alex:** Sure. **Jackson:** You recently wrote about America under Trump and a return to something like Manifest Destiny. There's an idea I've always been fond of, which I think comes from Richard Rorty: the myths a country believes about itself shape it profoundly. There can be many different myths. This relates to our earlier conversation about myths. You wrote that the best chapters in Kissinger's \*Diplomacy\* are those where Kissinger discusses Nixon and Reagan, contrasting their styles and how they effectively led America to think of itself in new ways. I believe you have that book with you. **Then you quoted Trump:** "If Canada wants to avoid tariffs, it should simply become the 51st state." **Alex:** That's not my quote; it's Trump's. **Jackson:** Right, you're quoting Trump. In your writing, you characterize his statement about Canada becoming the 51st state. You describe it less as serious diplomacy and more as a magician's incantation. However, you also argue it invokes something important: an earlier, more confident version of America. This America wasn't afraid of its own shadow and justified its international actions as domestic expressions of self-sovereignty. So, my question is: what is the myth of America that you believe Trump is trying to lead towards? **Alex:** For the benefit of listeners, that piece was written in a very narrow window: after the wheels had been set in motion around intent, but before the capacity for execution had been assessed by everyone. This places it at a very specific moment in time. What I was getting at is that America has always been an interesting country. For the benefit of listeners, Jackson: and I discussed this earlier: I'm a dual American-Canadian citizen. I was born and grew up in the US but live in Canada now. Living in Canada, I often find myself grudgingly defending the United States against Canadians who question how one could live there. I still consider myself very much American. The context of America's founding was in opposition to Europe, the European powers, and specifically the European balance of power system—what's called realpolitik. This is the idea of statecraft as the naked pursuit of national self-interest. It's worth a brief historical detour to the founding of modern Europe. Consider medieval Europe, or even ancient Europe post-Romans and pre-Middle Ages. The medieval European setup was feudal, with a diffuse legitimacy among kings and priests. The authority to act in self-interest was intricately distributed, including entities like the Holy Roman Empire. What mattered was local nobility and kings, who derived micro self-confidence from local circumstances. Typically, kings would not have their own armies; nobles raised local armies. There was considerable horse-trading as people pursued their objectives. This entire system was rooted in the church. Legitimacy ultimately derived from the Roman Catholic Church and a general, bottoms-up sense of local, priest- and monastery-driven sources of authority that people understood. This changed with the Thirty Years' War, the major clash post-Protestant Reformation when Protestants and Catholics fought over German territories. A critical moment occurred when France, a large Catholic country on the periphery, saw an opportunity to increase its standing in Europe by siding with the Protestants. Cardinal Richelieu, a pivotal statesman, declared that national interest superseded France's Catholic identity and old alliances. Essentially, might makes right. France entered the war on the Protestant side. This led to a crushing victory and centuries of French dominance on the continent, born from this radical idea: inventing the national interest and the concept of the nation-state. Since then, the concept of nationalism, of the state, advanced this idea: while individuals have morals and souls judged in the afterlife, nations do not. Nations are judged solely by their contemporary successes or failures. Therefore, a nation's actions are judged only by whether they win or lose. The victors write history; the imperative is to win, believing only in self-interest. Over the next few centuries, Richelieu's vision transformed into progressively mounting nationalism, characterized by complete horse-trading, deal-making, and no permanent allies—a somewhat familiar scenario today. Although this process wasn't complete until the late 19th century and World War I, by the time the United States was founded, it was well underway. America was founded in complete opposition to this system—a new continent, a new start, based on ideals. The point was to declare these ideals universal. American exceptionalism was always defined as a virtue-based legitimacy system. The ideas of life, liberty, the pursuit of happiness, and other founding myths were based on the notion that the country would not pursue naked self-interest. Instead, the country would be based on universal freedoms. In its first hundred years, the United States was busy enough with its own survival that this statement of belief didn't significantly conflict with its logical conclusion: the question of whether its job was to spread these universal beliefs elsewhere. How does that square with its founding definition of opposing the naked nationalistic power-grabbing and horse-trading of Europe? The United States managed to have it both ways—claiming universal morals for export while disavowing realpolitik—by framing any international expedition as a domestic issue. This is evident in concepts like the Monroe Doctrine and Manifest Destiny, initially applied to the continental United States. When America began expanding into Cuba, South America, and elsewhere, it was justified in the national consciousness as a domestic issue—simply expanding the definition of "domestic." Eventually, between World War I and World War II, and throughout the 20th century, the United States expanded this concept of a domestic and moral issue to encompass the entire world. There's more to it, and Kissinger's book \*Diplomacy\* covers this extensively. To bring this back to your question about Trump becoming president: some of the most shocking early statements were things like making Canada a state, annexing Greenland, or turning Palestine into a resort. All of these are framed as domestic issues. This framing does something very important. **Jackson:** We're not intervening in somebody else's problem. **Alex:** We are not intervening in other people's problems. We want to end wars and achieve various goals, but simultaneously, we are making this a domestic issue. The framing of the US and Mexico tariffs as "fentanyl tariffs" is very smart branding because it cannot be easily falsified. **Jackson:** US. **Alex:** Canada. The Canada-Mexico tariffs being fentanyl tariffs—there's no more domestically oriented issue than Americans dying of fentanyl. This creates incredible legitimacy, grounding it as a domestic issue, not an international trade issue. How could you possibly object to what the United States decides to do with its domestic priorities? That was the thinking, the device employed. We are now seeing the possible actions or execution, though much is still unknown. **Jackson:** What is the myth of America that you believe in? **Alex:** I believe in that one. Americans cannot really believe anything else because no credible alternative has ever been presented. Even those who say "I hate America" or "America is bad" only argue about its goodness or badness within the terms of that original American framework. **Jackson:** we have these ideals that are the best, and we should spread them everywhere. **Alex:** The argument has always been whether those ideals are right or wrong, never whether the United States is a country like any other. **Jackson:** Is there a myth of Canada that you believe in? **Alex:** Canada's an interesting country. **Jackson:** You've lived here a long time. What does Canada mean to you? **Alex:** Canada is a fascinating place. It's a huge and very empty country for the most part. Consequently, the average Canadian lives a very urban life, more so than the average American. **Jackson:** Interesting, because we all live in about four places. **Jackson:** Right? **Alex:** Right. A third of Canada lives in Greater Toronto. We're all huddled in these little strips along the border. There are some interesting aspects of Canada that I enjoy. The Canadian reputation is founded on the idea that America is a melting pot, but Canada is a tapestry—that's the line you learn. I find that debatable, as America is equally, if not more, a tapestry and, I believe, more regionally diverse than Canada. However, Canada has uniquely been able to assimilate many immigrants from different places without completely falling apart, though this has been tested recently. **Jackson:** In a way that's more true about the US in the past. **Alex:** Yes. **Alex:** The Toronto Pearson Airport is the new Ellis Island. It's where people go to start new lives, especially in Toronto. It's a massively growing city, home to many people from different places, and it somehow doesn't fall over. It's worth asking the question about Canada, or more specifically Toronto: Why does it work? I believe it works because Toronto, and Canada generally, have very well-functioning civic institutions. For example, in Toronto, you can go to the local community center, which has a pool, computers, ping pong tables, and many other facilities and programs. These centers are always full of people using them well. This really matters. There's no vagrancy or sense of drift and decline. There's very little sense of abandonment. They are full of people using them eagerly. There's a tremendous hope and civic cohesiveness that comes from seeing everybody pulling. **Jackson:** The people themselves keep these institutions great and make them better. This effect is amplified as more people use them. **Alex:** Absolutely. It's a virtuous cycle that is working well. Another great example is Toronto's public library system, one of the best in the world. It's the biggest library system in North America, larger than New York City's or LA's. It's incredibly well-used, not just for reading books, but also as a place to learn English. It's where people go for all kinds of assistance in navigating their lives. Much of this support happens through the library system. Because these systems are so well-used, they are recognized with funding, and competent people want to work there. **Jackson:** This reminds me of how, in your discussions on scarcity and abundance, you emphasize that demand is as important as, if not more important than, supply. **Alex:** Yes. **Jackson:** It's a similar dynamic here. **Alex:** This is exactly the same thing. The fact that they are used is what pulls everything else forward. It's really good if you can get it. Many people are currently critical of Canada. There has been some drift into ailments similar to those people have complained about in the American left for a while. However, I think much of this story is overtold. For instance, a popular graph on Twitter shows the US and Canadian economies diverging when Justin Trudeau was elected Prime Minister. That's not what caused the divergence in 2015. The divergence in 2015 was caused by crashing oil prices. Canada is overwhelmingly a natural resources economy and was a major oil exporter. That period marked the end of a commodity supercycle. Justin Trudeau was not that immediately effective at implementing his policies, although he was a very effective Prime Minister at what he wanted to achieve in governing. Nonetheless, when there's another commodity supercycle, Canada will rebound. The New York Times op-ed pages will again declare that the American dream is back in Canada. We'll be "so back." It's a culture of "it's so over, we're so back," with people overreacting to the actual situation. **Jackson:** We're in ## [02:44:24] The Most Influential Books on Alex **Jackson:** the home stretch. I've got a round of miscellaneous questions for you. **Alex:** Let's do it. **Jackson:** We've talked a bit about myths. What are the foundational myths, mental models, or underpinning ideas that really shape how you see the world? We might have touched on one with the discussion about gifts. Are there any that immediately come to mind as having shaped your thinking more than others? **Alex:** Let me look at my bookshelf; I'm scanning for some key influences. I'll give you several names and their associated book titles. The first is \*Crowds and Power\* by Elias Canetti. He won the Nobel for this book but has been largely forgotten. It's from the tradition of post-World War II books written in the general tone of, "How did this happen?" **Jackson:** Oh, wow. **Alex:** Many books at that time shared this theme. It explores the notion of how individual people relate to groups and the overall relationship between the group and the individual. In fact, if we have a minute, I'll read you the first page of the book. **Jackson:** Okay. **Alex:** This is a chilling passage: There is nothing man fears more than the touch of the unknown. He wants to see what is reaching for him, to recognize or at least clarify it. Man always avoids physical contact with anything strange. In the dark, the fear of an unexpected touch can mount to panic. Even clothes give insufficient security; it is easy to tear them and pierce through to the naked, smooth, defenseless flesh of the victim. All distances men create around themselves are dictated by this fear. We shut ourselves in houses no one may enter, and there we find only a semblance of security. The fear of burglars isn't just the fear of being robbed, but also of a sudden, unexpected clutch from the darkness. The repugnance to being touched remains with us among people: the way we move on a busy street, in restaurants, trains, or buses. Even when standing near others, able to watch and examine them closely, we avoid actual contact if possible. The prompt apology for an unintentional contact, the tension with which it's awaited, our violent and sometimes physical reaction when it's not forthcoming, the antipathy and hatred for the offender, even when uncertain of their identity—the whole knot of shifting and intensely sensitive reactions to an alien touch proves we are dealing with a human propensity as deep-seated as it is alert. This propensity never leaves a man once he has established the boundaries of his personality. Only in a crowd does man become free of this fear of being touched. **Jackson:** Wow. **Alex:** That's chilling, isn't it? Something powerful reverses when a group of people transitions from being individuals to becoming something else. **Jackson:** Yes. **Alex:** In a crowd, everything reverses. We discussed gifts earlier; the ultimate transformation is changing a collection of individuals into a group. This book, \*Crowds and Power\*, explores the art and material mechanics—essentially, leadership—of how crowds form, under what conditions they listen to someone, and under what conditions they... **Jackson:** ...become one mind. **Alex:** And under what conditions a crowd suddenly dissolves. I once had a great discussion with Eugene about this concerning online mobs. Think of the "main character on Twitter" phenomenon. The joy in it is palpable. I remember a tweet a while ago: "Everybody come on over to Blue Sky. They're dragging someone today." There's something incredibly primal about that. Wow. **Jackson:** Cool. **Alex:** I think about this often. \*Crowds and Power\* is a fun, very dense, and scary reread, but it's excellent. A similar book in the same vein is Gregory Bateson's \*Steps to an Ecology of the Mind\*. It's a collection of essays. He was one of the founders of a now-forgotten field called cybernetics. **Jackson:** Yeah. **Alex:** He was friends with Claude Shannon. He was a psychiatrist in Palo Alto and friends with all the early computer people. More than anyone else, he's the founder of communications theory. This involves the idea that it's not what you're told, but what you receive and how you create the concept of what is received. He has incredible essays on play and its role. He wrote a fantastic, magnificent essay on why kids seem to have the same rules for building block towers. **Jackson:** Wow. **Alex:** He explores why it would feel like cheating to glue blocks together, even if the goal is to prevent the tower from falling. It definitely would be cheating, but cheating what? It's an amazing collection of essays. That's a good one. I also want to include some fiction. One of my favorite books for organizing thoughts, which I think we discussed, is \*The Magic Mountain\*. **Jackson:** Yes. **Alex:** By Thomas Mann. It was one of my mother's favorite books. I hadn't read it until recently, and when I finally did, I thought it was really good. I recently hosted an Interintellect salon on it, which was fun. It was well-registered, but then there was a Zoom outage that day, so only about five people came. We had the best discussion; it was perfect. With 30 people, it's a lecture. With five, we had the best chat. **Jackson:** That's really cool. **Alex:** It's a tremendously useful book for organizing your thoughts. To give you an idea of what it's about: there's a character, Hans Castorp, who goes to a sanatorium in Davos for tuberculosis and ends up staying for seven years, floundering and observing. While there, people argue about life, politics, the Western canon, and everything. Two Italian characters, Lodovico Settembrini and Leo Naphta, engage in a dialectic—like the Leo pointing meme—discussing how they think Western civilization works. The first, Settembrini, is basically reasonable—a bourgeois, progressive, liberal type. His opinions are generally fine and stand up, but they have minor blemishes, and he's not the greatest speaker. His arguments have small flaws. His opponent, Naphta, reminds me of RFK in many ways; he's all over the place in wildly crazy directions. He argues the earth is flat and makes other completely insane arguments. Yet, they contain grains of truth that make you think, "Oh, but he's right about that specific thing." Because of these effective, albeit small, points, he wins every single argument. **Jackson:** Oh, funny. **Alex:** The two of them have this incredible discussion throughout the book, which helps you organize how all of Western civilization fits together—what's inside what. One of the many things they argue over is whether Western civilization was founded by the church or vice versa, and which is more important. Is Greco-Roman Classics the root of all this, with the church merely present? Or are the Greco-Roman Classics just the current fad of the bourgeois? There's a lot of this, and it's tremendously helpful for organizing your thoughts. I recommend it to anybody because Nafta, the second character, is a really good window into understanding Trumpism. Where is it coming from? In what capacity is there an intellectual base here that you can draw on? It helped me understand a lot of what is currently going on in a way that I haven't found in anything else to a satisfying degree. That would be one I would recommend. Another good one I always recommend is the great Russian classics. They are the greatest books for helping us understand our world because Russia is a little different. There's something amazing about it. This is the literary version of having to go abroad to understand your own country. You have to read Russian books to understand Western thought. **Jackson:** What's at the top of that list? **Alex:** \<em\>The Brothers Karamazov\</em\>. It's my favorite book of all time. I've read it three times, and it gets better every time. I want to read it once a decade. I need to read it once a decade of my life. **Jackson:** You recently said that with each passing year, you get more convinced that fiction is superior to non-fiction as a way to learn what's going on. **Alex:** Let's go back to \<em\>The Magic Mountain\</em\> as an example. The fictional device of a novel allows you to have characters that can discuss anything they want. **Jackson:** Exactly. **Alex:** As a result, they can have arguments that are so comprehensive they would never occur in reality. Non-fiction has to deal with facts on the ground as they are perceived. In contrast, a novel allows you to express, through any number of devices, how people are actually living in the world. **Jackson:** It also suspends people's skepticism. Sci-fi does a similar thing. It allows you to see reality as it is, but framed differently, which can be aversive in a way. **Alex:** It's a gift. It suspends the disbelief of "Do I believe this?" It's a story. The great novels have a power in the canon not because they are true or factual events, but because they organize people around a pattern of thought that has durable usefulness. **Jackson:** That's a cool frame. **Jackson:** What did you miss about writing? You took a long break. How did your thinking change without that rhythm or consistent feedback? **Alex:** That's a great question. It's not that I stopped writing; I was writing internally at Shopify. A couple of years ago, I realized the writing was great, but it was taking a lot of my attention, and I needed to give that attention to Shopify. **Jackson:** You were publishing weekly for five years, or more. **Alex:** Yes, if you include the Social Capital newsletter. **Jackson:** Yes. **Alex:** For about five or six years. My period of really high-intensity writing was 2019 and 2020, when I was producing a big, long post every week. That was great fun. There are seasons in life, and I would love to make that kind of effort every few years, but not all the time. **Jackson:** I wrote 30,000 words in a month last year and haven't written anywhere close to that much since. That definitely requires a certain mental state. **Alex:** That's a lot. It's like runners talking about their mileage—60 miles last week. I was on parental leave recently. Toby very graciously allowed me to write for a while, so thank you, boss. Now I'm back at Shopify. ## [02:56:47] Learnings from Being in a Band **Jackson:** What did you learn about business and life from being in a band? **Alex:** Oh, everything. I learned everything from being in a band. One, you learn that it doesn't matter how bad the drive was or what you're arguing about. You have to get on stage and do a show. People came to see you. You have to perform. You have to be enthusiastic and learn how to summon energy to perform for a crowd. **Jackson:** Give them a gift they can receive. **Alex:** Exactly, you have to give them a gift. Two, you learn all about working a crowd, which is similar to the concept of crowds in power. All shows are different, but also all shows are the same. A show is a gathering of individuals. Then the performer gets on stage and asks, "Are you ready?" It's unsaid what they're ready for, but it implies, "Are you ready for a challenge?" I am challenging you to dance. Can you do it? **Jackson:** I'm almost pleading for you to dance. **Alex:** I don't know if you can do it. Can you do it? **Alex:** Can you hear me? Can I hear it? Then, when the band plays, people start dancing and they become one. **Alex:** They become one thing. **Alex:** There's tremendous force and energy created in this moment where a whole bunch of people undergo an energy phase transition into a single crowd. They're at a heightened state of fandom, energy, and intent. Then, as soon as you end the show, your job as a businessman is to get that energy to the merch table. People buy merch only once: in the 20 minutes after your set. Nobody buys your merch online or at any other point. They buy it immediately after the show. **Jackson:** Emotional dopamine. **Alex:** You are trying to get people to bottle up the feeling they had in the form of a $50 t-shirt that costs you $8 to screen print. That's what you are doing. If you can do that, you can do anything. You have the ability to create demand. This is what it's about. ## [02:59:05] Scammers **Jackson:** Why are you interested in scammers? **Alex:** It's a great ongoing fascination, one I share with Orin Hoffman—if you know Orin. **Jackson:** Vaguely. **Alex:** He was part of the original PayPal Mafia. He and I share this interest. Scammers have to understand how a system works. **Jackson:** You've recommended the Anna Delvey book as a reference. **Alex:** Scammers, for example. There's a great book called \*Lying for Money\* that provides a very intelligent walkthrough of all the different kinds of financial scams. Scammers have to understand what actually matters in the system to work; they're the ultimate Nassim Taleb-style "nothing explosion." I forget which Nassim Taleb book it was, but he discusses the Greenwood traders. There's a market for something called "green lumber." One guy was very skilled at it and rose to the top of the trading market for green lumber. Only in retirement did he learn that green lumber meant a certain age of the wood, not that it was painted green. The point is, it doesn't matter what kind of lumber it is. What matters is whether you know how to make a market. That's what actually matters. Similarly, there's a great story in \*The Prize\*, the definitive book about the oil industry. It's about a guy who was an absolute power player in the oil market in the late 40s and 50s. Late in his retirement, he was with his daughter, looked out at the ocean, saw a big boat, and asked, "What's that boat? Why is it so big?" She replied, "That's an oil tanker." He said, "Oh, I've never seen one before." So, scammers have to understand the part of the system that actually matters. **Jackson:** And most people in the system probably don't understand that. **Alex:** Many people don't understand it. Another reason scammers are so interesting is that many scams invoke a common motif: the person being scammed has to \*want\* to be scammed. This is really important. A classic example is romance scams. Someone allows themselves to be scammed because they want to be loved. They don't want to contemplate the fact that this is a scammer. **Jackson:** Right. **Alex:** You will refuse to interrogate this possibility, even when facts are screaming that they're getting you to wire money. There needs to be a reason why the victim wants to be scammed. If you can understand that, you have a good sense of what's happening. **Jackson:** It's high-dimensional. **Alex:** Exactly. In Silicon Valley, it's interesting to consider why there aren't more scams in tech. I always wonder this, especially with all the... **Jackson:** The gift-giving going on. It's all this positive, earnest trust. **Alex:** I think the gift-giving, in some ways, is part of the antibodies. If it were more transactional, there would be more scams. That makes sense for a bunch of reasons. It's interesting. I'm really surprised there hasn't been an episode of a really hot founder with a great AI model, for instance, getting a whole bunch of funding or resources together and then just absconding with them. **Jackson:** Knock on wood. **Alex:** Maybe, in a sense, this does exist; it's just called rug pulls in crypto. We have our version of Hamsterdam from \*The Wire\*. **Jackson:** Right. **Alex:** Where, if you want to be a scammer, we have a designated area for that, and it's fine. **Jackson:** It's honestly way more tolerant. It's just considered the norm there. **Alex:** It's like being in the water; no crying in the casino. **Jackson:** My ## [03:02:56] Being a Dad **Jackson:** second to last question: you're a dad of three girls. How has being a dad changed you? **Alex:** In every way. I feel that when you become a parent, that's when you start playing for stakes. Until that point, you're living life, but it's the warm-ups. You're not playing for real money yet. You're not actually applying everything that you've developed in the early stage of your life. **Jackson:** Wow. **Alex:** The actual thing we're here to do is pass on everything we've learned to the next generation, in the form of our kids being raised by us. A question I sometimes ask is: Is it based or cucked to try and cheat death? My answer is that it's cucked to try and cheat death because the way you cheat death is by having kids who are like you. It always has been. Here's some advice for young parents: one of the hardest things about becoming a parent is that kids demand an incredible amount of presence from you. You can't be half-present with a kid. It doesn't work the same way as with adults. With adults, you can be present but also be on your phone or thinking about something else. Kids will demand 100% of you. This is a muscle that really atrophies when you're a young adult; you're not good at it. Kids force you into the gym on that muscle immediately. As painful as it is early on, the cool thing about muscles is that once they're built up, you're strengthened. Then you're more present all the time, happier, and just more. **Jackson:** It seems like kids put you in the world more. They're an emergency solve for two really important things: one being attention, and the other, getting out from under yourself. **Alex:** Yes, focusing on anything other than yourself. I have a good friend who, at some point in his 20s, felt like his whole adult life was leading up to a culmination of getting bummed out about the world. But then you have kids, and it solves all those problems. **Jackson:** Right. But then you have new problems. **Alex:** Exactly. It's like that Marc Andreessen pinned tweet: you're going to be upset about all kinds of new and interesting things. But no, it's the greatest gift. **Jackson:** That's a great answer: it's the greatest gift. ## [03:05:24] The Best Gift Alex Has Received and the Gift He Hopes to Give **Jackson:** Speaking of great gifts, for my final question—we started by talking about gifts—what is the best gift you've ever received, and what gift or gifts do you hope to give? **Alex:** Fantastic closing question. The greatest gift I've ever received... it's hard not to mention the various forms of unconditional love from my parents. Being given a sense of gratitude by your parents is itself the meta-gift. **Jackson:** Totally. **Alex:** Right. **Alex:** So I feel very fortunate for that. **Alex:** All of that has to be in there. I'll give you a closing answer: one of the real gifts I'm glad my parents gave me was going to church growing up. It wasn't an obligation but a real option to return to later in life. Like many people, I stopped going to church in my 20s and didn't think about it much. Then, similar to having kids, we're right back there. It's wonderful and amazing to be part of it again, like you never left. It's just part of your life again. It's wonderful to have that now with your kids. That's a gift your parents give you. This isn't to say you can't find it on your own, absolutely not. But being given it as a gift earlier in life and being able to pick it right back up is wonderful. That's something that's been top of mind for me recently. **Jackson:** Cool. **Alex:** Then there's the great gift you hope to give. I'll give you a slightly cop-out answer, something more actionable than just saying I hope to give my kids the same thing: throw more dinner parties. Have people over constantly. This is the single greatest happiness hack we exploit all the time. There's some discourse on this online; Nicole and others talk about it. People are often flabbergasted to hear that we usually host people for dinner a minimum of two times a week. **Jackson:** That's so great. Wow, that's awesome. **Alex:** It's a muscle. Get good at it. You get lots of friends, get them into the habit of coming over, you have a meal, and you take care of everything. If your house becomes a place where people go to be happy, where you're giving them the gift not just of literal food, but of having your kids running around while you talk, that's the absolute one-way ticket to being in a great neighborhood and having a great life. **Jackson:** Oh man, I love that answer. **Alex:** Do it more. I'll give you a free hack for how to do this non-awkwardly. If you ever want to invite people over for dinner but feel it might be awkward—perhaps because you've been friends for a while and don't know how to initiate it—say it's a barbecue. If you say, "We're having a barbecue, do you want to come over for dinner?" **Jackson:** It's so casual. **Alex:** It's casual. You're allowed to do it if it's a barbecue. **Jackson:** That works if you live in Toronto, not quite as much in a New York City apartment. **Alex:** You don't have to literally barbecue. It doesn't matter what you actually do. If you say the word "barbecue," you can be cooking in the kitchen, but it's still a "barbecue." You just have to say the word "barbecue." **Jackson:** You've made it casual, which I think is why you're able to do it so much. **Alex:** You've created permission to say yes. I don't know why it works, but it does. **Jackson:** I was with some friends recently, and we were asking: if you had a national holiday, what would people do on it? I said everyone would have dinner parties. So, I'm inspired by your answer. **Alex:** It doesn't have to be a holiday. Do it every day. **Jackson:** Alex, this was a gift. Thank you, my friend. This was really wonderful. **Alex:** , thank you so much for coming out here. I'm glad this is your first Toronto experience—my basement. **Jackson:** It was wonderful. I got a day down here. This is the longest interview thus far. I probably have some cutting to do, but it was a blast. **Alex:** Thank you for listening, especially if you've made it this far. Please reach out; I'd love to hear from you. **Jackson:** Please do.