Invest Like the Best with Patrick O'Shaughnessy
00:32:53 · Noah Shinn
[00:32:53] S2: I'm serious when I say... I mean, you're alluding to this too that I think most digital services or industries are going to be not disrupted, but just changed and transformed. I was running through an exercise the other day of pulling effectively, like, every digital service or business or application from various different verticals and industries and plotting it along the line of saying, what proportion is the user's attention, experience on the product as a proportion of revenue, and then what proportion of it is delivering the underlying service? Meaning, if the user didn't use the app, what proportion of their revenue is due to the underlying good being provided or service being provided? So I think that your question is of that upper end of the scale where, let's say, the majority or some significant amount of revenue is due to attention on the application or advertisement or things like that. So, yes, that's Uber. I actually don't know what Uber's number is. A lot of the food delivery services, travel agencies, or even Amazon themselves with the upselling that they do on their platform. There's one simple way to look at this, which is, okay. Well, it's 70% ads, 30% good, and so, therefore, you're gonna slash the 70%, and they're gonna be a 30% business moving forward. There's another way to look at it, which is take any business. Let's take Uber Eats or DoorDash as an example. I don't know the numbers, but they know the numbers of... As they reduce the number of clicks needed to check out to order food to your house or to order an Uber, as they reduce that time to check out, that transaction volume increases because it's reduced friction to get the same underlying good. We're taking something like Instinct and making that friction to do anything almost zero. It is literally zero in the case that there is proactive behavior. For Uber, let's say for ride sharing. If Instinct has access to your calendar and owns your calendar and is booking, you know, all of these events and knows where you need to be in person here and in person there, what if Instinct always had a car lined up for you every time where you need to be so that it's out of your mind to know, five minutes, I need to order this Uber because I need to be in this place in forty five minutes.
00:34:47 · Noah Shinn
And there might be traffic, so let me check the app to see how much traffic there is to see when I need to order. Instead, what if it was just proactive behavior? A car will always be lined up, and you will never be late because it's gonna calculate traffic. It's going to find these things. What would that do to Uber's business or any rideshare business if now the default for existing riders that love Uber or love Lyft or or any other rideshare business? What would it be like to have productivity now make the friction to have access to that good or service to be nearly zero? I think that that will result in that 30% looking a lot bigger. You talk food delivery service. Maybe you're coming home late off of an airplane and you need to be at your house and you haven't eaten yet and it just texts you and it says, are you hungry? Do you want the same thing that you ordered yesterday or five days ago? I can send it to your house. I know you're in the Uber and you'll get here at this time. So with very little friction, what will that do to the total transaction volume or the amount of times that a user interacts with the business? I actually think it'll go up. So it's this interesting game, interesting transition period between users spending a lot of time on apps, like, painfully spending a lot of time on apps, and that being a monetizable surface because that's where the user's attention is, to users actually interacting with the business even more, which is counterintuitive, actually interacting with the business more because the friction to do so is actually much less. So I think it'll be this interesting game. All these various industries are going to move in a different way, and we hope on our end the way to approach any big change like this is not to come in hot... We're a new company. We're just getting started. Not to come in hot and immediately just start disrupting certain businesses, but go to them and just say, this is what we think your business looks like. You guys certainly know what your business looks like. This is how users on Instinct are interacting with your business now already. What can we do in collaboration to make that a better experience for both sides where it makes sense for your business It makes sense for our business, and it's just a much better experience for the end user.
00:36:44 · Noah Shinn, Patrick O'Shaughnessy
That is something that we're exploring and we're learning across so many different industries. [00:36:48] S1: If you think about the things that traditional companies can be doing now to prepare themselves for an agent rich world, Let's just pretend half of Americans or something have an agent that's doing all the stuff you just described, which sounds incredible and magical and very democratizing. That's something to highlight. This is gonna bring to everyone capabilities that have been rare or expensive. I think that's a really cool feature of agents in general, but we can come back to that. What kinds of businesses are gonna thrive in that world? Like, what should businesses think about doing to prepare for that world to be successful in it, do you think?
00:37:23 · Noah Shinn
[00:37:23] S2: I think it comes again back to that breakdown. That's why I was doing that exercise the other day, which is just where is your revenue coming from? What proportion of that is the user spending time in your app? What proportion of that is the user having access to the underlying service? And it's clear if your business benefits from more transaction volume even at the cost of less time on the application, then you're gonna be in a really great spot because Instinc is gonna make it a 100 times easier to do that. And if you're in a spot where nearly a 100% of your revenue is due to the user's attention, in a lot of cases, against the will of the user and what they want to do, and there's so many games that... Or so many malicious product building almost trying to convince the user against their will to use the application more, we're thinking about a lot of these social media companies that the user, they don't feel happy when they're on the app. They're unwillingly giving their time to the app, and they can't get off, they keep scrolling. But it's because that underlying business is benefiting from the user's attention. It's almost liberating for the user. Again, this is why it's so important for Instinct to act on behalf of what's best for the user because it's able to deliver experiences like this where you can actually liberate the user from from being sucked into these infinite scrolling moments like that. Any blanket advice is probably not well thought out. I think it's a case by case basis, and it is certainly different within different industries. Very practically, there are early partners with very innovative CEOs or other executives that are really thinking ahead, and they're willing to be early partners. What we're discovering is, like, a playbook for how every business, no matter where they exist along that risk curve, can kind of discover, honestly, what are the risks so that they have a little bit of data to be able to work with, and then we can work together on finding ways where we can land in a happier spot for both sides. One of those things is you don't have to go all in. You don't have to say, let's just turn it on. Let's just go, and now you see 70% of your revenue going to zero, and then now you're stuck in this odd place. You can mitigate the risk. You can scale down the experiment.
00:39:13 · Noah Shinn
You can run AB tests to figure out, okay. If we enable this certain thing across 1% of users or something like that and we find how they interact with the business, and does the user like it more? Is it a more enjoyable experience? For the brand side too, does the transaction volume go up? Does the willingness to buy the product or access the product itself? There's a lot of work in product discovery too. There's a lot of times the user... They want to buy something, but they can't find it. So does that actually increase the user being able to find exactly what they want? So I think doing scaled experiments here is a really great playbook to run because you can scale the risk accordingly. At the end of it, you get the data. It's proportional data, so you don't have to run it across your entire user base. And that's what we're finding is really working so far. Again, it's still very early, so we're still discovering this in real time.
00:39:57 · Patrick O'Shaughnessy
[00:39:57] S1: Before I ask more questions about the world reordering nature of personal agents, I'd love to take a little side quest in the conversation and talk about what it takes to do all this, to provide all this. I wanna hear about what's been hard about building this, the technology itself. I wanna hear about compute. I think you said to me at some point that you spend a big chunk of your time just thinking about compute right now. And maybe that's different five years from now, but certainly in the moment when you're growing fast, this is a really important thing. I'd love to hear your thoughts on that. Talk us through what it's been like to build instinct itself and the key and hard things to do so. Maybe before we do that, just because I'm remembering all of our conversations, it would be helpful for you first to frame up what you want it to feel like and why it's so important to you that it has this distinctive quality and performance before we talk about then how you deliver those things. So maybe first just say a quick word on that, like, what you want Instinct to feel like as a product.