"People often say that what you measure, improves. While true, it overlooks how strategic the decision of what you measure is. If you get stuck measuring the wrong thing, you could end up wasting your time on the wrong initiatives."

"the team shifted their focus from MAUs to increasing the number of new weekly active pinners (the people who use Pinterest to pin or repin something new on the site that week — Pinterest’s core action)."

"if you measure it, it will improve. But make sure you measure the right thing."

"Most execution problems boil down to two root causes: Wrong org structure, or wrong person in the job."

"Org changes are often painful and distracting but they’re absolutely necessary as a company scales. When an org structure doesn’t reflect your strategy or is overly matrixed, it acts as a tax on your company’s ability to execute."

"Your loudest users — the users who complain when you ship something they don’t like, and post in your Facebook Group their feature requests, are a blessing and a curse. Without them, you wouldn’t have a company. But to reach your next 100m users, you need to be willing to ignore them."

"Remember when Facebook first rolled out its newsfeed in 2006? It caused a huge backlash. Users threatened to boycott Facebook, they created Facebook Groups protesting the feature. But over time, it became the core of the product."

"The key is to listen to what the data says, communicate to your users, and be prepared to ignore your vocal minority if the data points you in a different direction."

"If you build every feature your users ask for, you’ll end up with a very small, highly engaged user base."

"Whenever we built the 1 most requested feature of our existing users, it got used by <5% of users, so it really needs to be a game changer for those <5%. And remember: it’s a lot easier to add features than it is to take them away. So be careful with what you add."

"Your job is not to build the features your users ask for, it’s to ask the right questions that help you find the scalable solution — the solution that the majority of users will do."

"Once you reach a certain point and have built a sticky product, you have to stop building for the users you already have, and start building for that next hundred million users. You have to be willing to risk angering your existing users in order to win the next big group."

"it takes five positive experiences to make up for a single negative experience. That’s an expensive exchange rate."

"It takes leadership to stick to your first principles during moments of organizational self-doubt."

"Ultimately at Pinterest, we dug in to really understand who we were, doubled-down on our value prop to users, our growth team persevered and cracked a new distribution strategy."

"For any consumer startup that works, hype — the moment, either organic or manufactured, when the perception of a startup’s significance expands ahead of the startup’s lived reality — is an inevitability."

"Hype applied at the right moment can make a startup, while the wrong moment can doom it."

"As tempting and sexy as hype may be, I’m a believer in avoiding it as long as possible."

"unlike economic subsidies, the hype subsidy is not in your control."

"As we saw with the on-demand marketplaces (Uber, DoorDash, Instacart, etc), subsidies can be a valuable weapon to get a flywheel spinning."

"The risk with subsidies is that they can be blinding. As they say, it’s easy to grow quickly if you sell $1 for $0.80."

"Hype creates the aura that something is bigger, more important, and more inevitable than it actually is. In this way, it acts like a subsidy on engagement in a consumer social network."

"In the reality distortion field of hype, consumers lean in and invest in a platform with their time and engagement ahead of when they otherwise might have."

"They pursue status-seeking-work, not because they necessarily get the reward for it relative to other uses of their time, but because they expect to be rewarded for it in the future, either because of the typical rich-get-richer effect of networks, or just in the status of being an early adopter in something that ends up being big."

"Everyone wants to be part of what they perceive to be the new hot thing."

"The challenge however is that while a marketplace has complete control over how much they subsidize a transaction, once hype starts, the hype subsidy is out of a founder’s control."

"hype applied too early in a network’s evolution can doom it because it makes it extraordinarily difficult in the beginning to know how consumers will engage once the hype subsidy is removed. You risk optimizing for the wrong things."

"If a product’s flywheel has any weak parts to it which stop it from spinning faster, the actual average experience on the network can’t catch up to the hype fast enough, and when the hype subsidy drops to 0%, the network hits an air pocket."

"This is why I’m an advocate for avoiding hype as much as you can until you feel like you’ve got a product and flywheel that is really working."

"hype catalyzes incumbents to react to you vs be surprised by you."

"It’s why I love companies to be underestimated from the outside in the early days. From the outside, Pinterest seemed niche. From the outside, Robinhood seemed niche. From the outside, Etsy seemed niche."

"Being underestimated gives you a lot more time to figure things out, and by the time the incumbents see what’s coming, it’s too late."

"When your product is ready, your flywheel can spin faster as new users sign-up, and you can retain those users."

"unlike economic subsidies, hype is better used after you get to product-market fit, not before."

"Stoking hype too early in a startup’s lifecycle might look and feel good in the short term, but dooms it for, at worst, failure and at best a lucky acquisition or a long painful road to rebuilding."

"If you can democratize something that is valuable but previously the domain of a few specialized talents, you can dramatically expand (and capture) a market."

"In a company, excitement for features follows a hype cycle. First inflated expectations, then, with rare exception, the trough of disillusionment. Great product organizations realize when they are in the midst of this cycle, and push through to the slope of enlightenment by iterating on the feature, not abandoning it for the new shiny ball."

"I believe startups go through four phases of using data. First, you must ignore it and lean on user research and first principals. Then, you drown in data and have to figure out what matters. Next, data actually becomes necessary to make decisions, but beware relying on it entirely! And last, if you are lucky to get there, you have to consider the impact of things in your system."

"the two-dimensionality of a learning curve conflated two things: how quickly I could learn, and how quickly a job could teach."

"More often than not, how quickly a job can teach is what slows down a person’s learning curve, not the other way around."

"At a fast growing startup, your learning cycle is incredibly fast."

"a brand new startup might actually have a slower learning cycle than a startup that is already a “rocketship”. This is because there is a lot of wandering in the desert before you find product market fit."

"my advice: find a place with a fast learning cycle, and a steep learning curve."

"""Accomplishment arbitrage"" occurs if someone refers to an accomplishment that occurred in the past when the value of that accomplishment was different than it is now."

"The key is that there is a disconnect between the perceived value of an accomplishment, and the true value."

"The problem with accomplishments in the tech world is that they're not consistently changing in one direction"

"we interpret the value of the accomplishment based on how easy or hard it is to accomplish now."

"The insight is clear: it’s not just about being 1. It’s about being 1 by a lot."

"If you’re ready for Level 3, your cohorts are performing stronger and stronger, and you are seeing more and more organic growth."

"First, there is outrunning and becoming 1 by a wide margin in your original market or category (your thimble)."

"Second, there is expanding beyond your thimble and broadening the buyer use cases you solve for."

"And third, there is taking the playbooks you’ve honed in Level 1 and 2 to pursue multi-threaded domination of the map."

"There are three vectors to domination"

"The key with broadening is to do so in a way that is consistent with your brand and mission."

"Third, guests now have an easy way of knowing who the great hosts are on Airbnb without having to read dozens of reviews, leading to a happier experience."

"There are three positive “superpowering” effects of doing this"

"ou need to find a scalable and systematic way to grow that lets you create better and better matches between buyer and sellers over time."

"to increase happiness marketplaces need to grow. But the growth must be in service of increasing happiness."

"Level 2 is about reaching a new happiness threshold where you are just so much better than any substitute that the market “tips” in your direction."

"There are two types of loops that work together symbiotically: growth loops, and what I’ll call happiness loops"

"First, it provides even more clarity to ambitious hosts of what behaviors are expected and rewarded on Airbnb, creating a better experience for guests"

"Second, it creates what I described in Level 2 of the Hierarchy of Engagement as an “accruing benefit and mounting loss” to hosts. Once they achieve the badge, they get more value on Airbnb from having it, and don’t want to lose it"

"The more you reduce friction in the transaction, the easier it will be for you to scale beyond your early adopters."

"And if you worry you may be going after too big a market, look to see which cross-section of your cohorts is retaining best, and double-down on that use case or market instead."

"The marketplace that wins is the marketplace that figures out how to make their buyers and sellers meaningfully happier than any substitute. GMV is irrelevant — a vanity metric that can lead you down the wrong path if you chase it."

"GMV does not get to the heart of whether you are creating enduring value or not. No matter how large an incumbent may be, they are always vulnerable to a new entrant that makes buyers and sellers happier. In other words, happiness — not scale — is your moat."

"if you think of growth as a means to increasing the average level of happiness per transaction (instead of the goal itself), it will focus you on quality growth over vanity growth."

"by pursuing happiness, you’ll achieve growth. But not vice-versa."

"If you’re worried you may have chosen too small a market, you’re probably on the right track. Just make sure it’s not a dead end. The best marketplace founders I’ve seen are brilliant at knowing which opportunity to go after first, and how to sequence from there."

"“net revenue retention” is not a perfect measure of happiness, but it’s the best single measure I’ve seen. Some people ask about Net Promoter Score, but I’ve never been convinced that it’s useful."

"it’s also worth noting that Minimum Viable Happiness is a dynamic measure you have to watch vigilantly, because happiness is relative to expectations, which is itself relative to what the available substitutes are."

"Hierarchy of Engagement. The hierarchy has three levels: 1) Growing engaged users, 2) Retaining users, and 3) Self-perpetuating."

"As companies move up the hierarchy, their products become better, harder to leave, and ultimately create virtuous loops that make the product self-perpetuating."

"Simply, sticky products use the data a user creates while engaging with the product as fuel to make the experience even more engaging for that user (accruing benefits), and at the same time harder to leave (mounting loss)."

"A product has accruing benefits if a user would say “the more I use the product, the better it gets.”"

"Leveraging the combination of the explicit and implicit actions is a one-two punch to create strong accruing benefits."

"Mounting loss happens as a product becomes something you depend on, part of your identity, or a product in which you’ve accrued value of some sort (e.g., a following). “I’d have a lot to lose if I left this product” is the claim to test."

"because identity is persistent, users can have accruing benefits (new follows/followers) and experience mounting loss (losing the investment they made in their followers)."

"Growing users without growing users completing the core action is the empty calories of growth. It feels good, but it’s not good for you."

"What is a core action? The action that is the very foundation and essence of your product. Pinterest would not exist without pinning. Twitter would not exist without tweeting."

"Twitter, most people wouldn’t tweet if there weren’t other people who read and engaged with their tweets. So you need people to be following other people, liking, replying; you need a good new user experience so they understand what a tweet is and how to write it; etc."

"Optimizing for total number of users will feel good for a while, but will quickly start to feel empty if in the meantime, the number of users completing the core action isn’t growing."

"if a growing number of people don’t continue to complete the core action, your product’s momentum will quickly peter out."

"Hierarchy of Engagement, Expanded"

"For example, if the accomplishment was easier to achieve in the past, the speaker can take advantage of that spread in value, make claim to an accomplishment that happened in the past with perceived value that is higher than the true value of their accomplishment, and in doing so, essentially arbitrage the accomplishment."

"I would guess that a negative arbitrage occurs if the acquisition happened before 1995."

"The same phenomena is true for when it comes to taking a company public.  Sometimes it's been easy, sometimes it's been hard. But we interpret the value of the accomplishment based on how easy or hard it is to accomplish now."

"To see why that isn’t the case, it’s useful to explore how hype functions similarly to an economic subsidy a marketplace might provide"

"The first step is to get the flywheel spinning. A common technique founders use to do so is to subsidize the transaction."

"When applied well, the subsidy lets a marketplace kickstart transactions and grow faster than it otherwise would because the higher average value per transaction means the value proposition appeals to a larger group of people than the marketplace would have been able to command without the subsidy."

"The risk with subsidies is that they can be blinding."

"Many companies have fooled themselves into thinking that they’ll be able to remove the subsidy once they reach sufficient scale, only to find that the model can’t work without it."

"“Hype-market fit”"

"Imagine building a marketplace where a hoard of people outside the company are deciding how much of a subsidy you should provide for transactions every week, and to you, it’s a blackbox."

"Everything works better (and differently) than it would without the hype subsidy."

"In this way, hype applied too early in a network’s evolution can doom it because it makes it extraordinarily difficult in the beginning to know how consumers will engage once the hype subsidy is removed."

"Hitting the hype air pocket"

"When a flood of new users sign-up for a product, all the cracks become obvious."

"Live experiences like Houseparty, while brilliant, had a fundamental flaw in their reliance on push notifications. As users added more friends to their network, the push notifications (a critical part of their engagement model), got too noisy and rather than gain momentum, the flywheel mechanics broke down. People started to ignore the notifications, or unsubscribe all together."

"Catalyzing competition."

"The last risk worth noting which we’ve seen play out with Clubhouse, is that hype catalyzes incumbents to react to you vs be surprised by you. Would Twitter have moved as quickly and aggressively with Twitter Spaces were it not for the perceived inevitability (and therefore existential threat) of Clubhouse?"

"But unlike economic subsidies, hype is better used after you get to product-market fit, not before."

"Users hit the hype air pocket faster than the network can support it."

"I think of user engagement as the fuel powering products."

"The hierarchy has three levels: 1) Growing engaged users, 2) Retaining users, and 3) Self-perpetuating."

"Growing users without growing users completing the core action is the empty calories of growth."

"your focus needs to be on growing users completing the core action."

"These features work in concert to motivate the core action, and every product has them. Understanding the relationship between them and your core action is critical."

"your product can’t start if people aren’t completing the core action."