Holiday Special 2023

Yes, I purchased this holiday sweater at the Seattle Nordstrom for our 2019 live show at

the University of Washington.

It's like two months before the pandemic hit.

That's right.

And I think I wore it last year too.

I feel like you did.

Yeah, we were right behind me.

I wish we were doing it again this year, but it seems prudent to not have a father of a

toddler hopping on an airplane and then sit in a confined space with me for five hours

right now.

A lot of germs in my life right now.

Thank you for your precautions.

Who got the truth?

Is it you?

Is it you?

Is it you?

Who got the truth now?

Is it you?

Is it you?

Is it you?

Sit me down.

Say it straight.

Another story on the way.

Who got the truth?

Welcome to season 13, episode five, the season finale and holiday special of Acquired, the

podcast about great companies and the stories and playbooks behind them.

I'm Ben Gilbert.

I'm David Rosenthal.

And we are your hosts.

You see what I did there, David?

I did.

I did.

No technology.

No technology.

Yes, I motion to, you know, the whole board of directors here that we drop technology

from our intro since I crunched the numbers and four of the 14 episodes we did this year

were technology companies.

All right.

Well, it's a good thing that there are no other board members of Acquired besides you

and me because I am in full agreement.

Unanimous.

And otherwise we would have had a deadlocked vote there one to one.

That's true.

And I don't think our charter really actually ever accounts for what to do in that circumstance.

So yes, listeners, if you count Lockheed Martin, it's five.

If you count Visa, it's six.

But the minority of the episodes that we did in 2023 were tech companies, which is a very

fascinating evolution to me based on where Acquired started analyzing technology acquisitions

that actually went well.

But of course, we will keep doing deep episodes on tech companies since we are nerds.

And that's where we've spent, you know, our whole careers so far.

So if you liked the programming and assembly language on air from NVIDIA, or I guess assembly

language pseudocode, or our Qualcomm episode where we tried to describe how the CDMA protocol

works, we're still here for you.

We're just going to do a lot of LVMH, NFL, Visa, Costco, Nike, you know, mixed in there.

So what are we doing here today?

Well, David and I are going to bring you good tidings, good cheer, hopefully, and keep you

company.

Yes.

Happy holidays.

Cheers.

Cheers.

I've got my cinnamon infused hot chocolate here.

It's delicious.

Ooh, you're feeling very festive.

Yes, we are here to keep you company on your long drives or flights or workouts or house

cleaning or whatever over the holidays.

On our agenda today is a recap of Acquired this year, both the state of the franchise

from the board of directors themselves.

We will also be giving you some new tidbits on our favorite episodes behind each one of

them, why we picked them, how they came to be, what listeners helped us select, that

sort of thing.

We're going to talk about how we see Acquired fitting into the broader media landscape,

how our views about the show and the stuff that we cover have changed over time, what's

in store for Acquired in 2024, new carve outs, and answering listener questions from the

Slack.

And then at the end of the episode, we're going to share a little bit about David and

my investing lives and how those will be changing in 2024.

As David, you and I are going to get to do much more of our investing together.

I know.

It's going to come full circle.

We started both at Madrona investing together and well, we'll just have to talk about this

later in the episode.

We will.

But first, listeners, I mentioned in one quick line on the Charlie interview and have not

said anything on any social media or anything like that since, but I am a parent.

I'm joining David on the parenting journey with approximately a one month old here at

the Gilbert household.

Ben, Jenny and I are so, so, so happy for you guys.

Parenting, as you know, now is the most joyous, difficult, wonderful, biggest thing you will

ever do in your life.

And there is no way to understand or describe it until you become one.

So welcome to the club.

Thank you.

I think that's right.

I think any words that I would say about what it's been like so far are words that other

people tried to use to describe it to me, and I found them largely meaningless.

I mean, I could say the same things that everyone else always says.

And there have been some amazing things written.

I think I read the Paul Graham article on kids.

I read the fourth trimester of Wait But Why piece.

I've read.

You read the Michael Lewis book, right?

The Michael Lewis book.

Yeah, that was good.

But like, I don't know, the words kind of bounce off you.

You're like, well, why would that be fun?

Why would that be rewarding?

Why would waking up at 3 a.m. to change a diaper ensue the, you know, screaming like,

why is that?

But it's actually Morgan Housel put it to me in a really lovely way where he just said,

what greater gift could you have than helping another human, another member in your family

who's new to the world in their most intense time of need?

And you know, that intense time of need comes a dozen or two dozen times a day.

But the sort of privilege of being able to soothe someone when they're experiencing that

sort of intense emotion, you know, they may not be fully formed, but babies are people

too.

So absolutely.

Yeah.

Well, so great.

That is big, big change.

Number one, since we last reconvened here.

Big change.

Number two is GeekWire reported about this already, but you are joining me full time

next year on Acquired.

I'm so, so excited.

Is about freaking time, huh, David?

I wasn't going to say it, but yeah, I can't wait.

You and I are so just fired up to double down on Acquired and it feels very fun to be going

all in on it together.

And on the one hand, it feels like it's been a long time coming.

On the other hand, Acquired has been such a slow burn over the last eight plus years

that there was not like an obvious moment to do it.

So it was one of these moments where you sort of look back and you're like, whoa, how am

I not spending all of my waking time and energy on this when, you know, it is something that

is just, you know, it's our life's work.

As our friend Patrick O'Shaughnessy likes to say about the types of entrepreneurs he's

looking for.

Like this is definitively our life's work and it wasn't when we started and somewhere

along the way, gradually it just became that.

Yeah, totally.

And the way it's going to work, I'm transitioning to a venture partner at PSL at Pioneer Square

Labs here in Seattle.

So I still get to keep my board seats, which I think keeps me sharp for the show and stay

a friend of the family there.

So I'm excited to sort of change my role at PSL, but of course all of my real time and

energy going forward is Acquired.

I'm so happy not only for as a, you know, 50% shareholder in Acquired, but even more

so.

Like you're my best friend and this means we're going to spend even more time together

and just outside of the show, outside of anything that that means for us, our business, you

know, the episodes, all of which are going to get so much better.

It just, it brings me joy.

I'm so happy.

Thanks, man.

So we should say before we get too far in, this is not investment advice.

This whole show, Dave and I may have investments in the companies we discuss in the show is

for informational and entertainment purposes only.

Somebody here has to follow the rules and keep us.

I've got a nice script that's well built out in front of me.

I also must apologize to listeners.

I am coming in hot from podcast or paternity leave here.

And if anything I say is completely incoherent, I am on pretty minimal sleep.

So thank you for bearing with me.

All the parents out there will understand and appreciate you being here.

As do I.

Yeah.

Well, let's start the 2023 Acquired Year in Review recap.

Dude, this has been freaking wild.

I mean, you were talking about like, Acquired has been a slow burn, you know, we have doubled

every year and we've always been this example of exponential growth that like it starts

small.

And, you know, first year we doubled from two to four listeners, you know, like, but

no, it wasn't exactly that.

No, I worked at Backwards one time.

I think it was like 500 to 1000 or something.

Actually, I should crunch that number.

But there is a number you can figure out in year one, since you know what our current

numbers are.

Yep.

But small base.

It was like small base.

Kind of small base, still pretty small base, you know.

There were many years where nobody would have imagined that this would be either of our

full-time gigs.

No.

And I actually, when I looked it up last year on our holiday special, I was both pretty

excited and proud to announce and also terrified that we had hit a quarter million listeners

to the pod.

Felt like, holy crap, that's a big number.

This is like real what we do.

And I was terrified because I was like, we talk all the time.

Ben talks all the time about how we double every year.

Like, how on earth are we going to do that?

Right.

You were like, you should stop saying that because it's eventually going to not be true.

Yeah.

Because it's about to end.

Which is true.

Eventually it will not be true.

Of course.

I mean, unless literally we start expanding galactically or something like that.

Yeah.

And the question is, how big is the addressable market for people who want to, in an audio

only medium, consume, you know, four hour, essentially books, conversational audio books

about business histories, often in kind of an esoteric way.

And granted, you and I have gotten much better at becoming storytellers over time, but each

one of those sort of concentric circles niches it down.

And I think you and I just thought that that addressable market was, you know, a hundred

thousand people or something at first, but now we know it's at least half a million.

Yes.

So the big news, we hit half a million listeners this year, which is pretty wild.

Hopefully we can put up the chart, the Ben Gilbert acquired chart that you make obsessively

every month showing our episode growth over time.

Which at some point I do want to stop making, because I said last year on the show, like

at the holiday special, I don't think growth is inherently virtuous for us, for the goals

of our business here.

And yet I am the person who's sort of obsessively trying to compile the numbers and figure out

is it going to double again organically since we don't advertise or anything.

And so do I want to be known for the Ben Gilbert chart?

I don't really think so, because it's actually antithetical to how I think about what we

do, but I do make the chart.

I do put a lot of thought into it and what episodes will do what and trying to predict

the numbers.

I think a lot of people describe it as virtuous to, oh, I don't pay attention to the analytics.

I think to each his own, I pay a lot of attention to the analytics.

I think that helps you become better at making a product that people like.

I don't understand why you wouldn't immerse yourself in every single number you possibly

could all the time.

It may lead you to a different outcome, but that outcome, as long as you're measuring

correctly, seems to be make something that people want more.

So yes, I obsessively look at the numbers.

I look at the completion rates.

I think that's super important.

And a related side part of that, thank you to all of you, the half a million of you now

for spending all this time with us this year.

There's a lot to discuss.

So for me, I've kind of gone back and forth.

You started saying, I think about two years ago, growth is not a goal.

I don't know that growth is good for acquired.

And I sort of nodded my head, but I wasn't totally sure.

This year, I think has really helped crystallize my thoughts on this as we've grown so much.

I do completely agree with you.

Growth in and of itself should not be a priority.

And in fact, can be very detrimental to what I think we both want to do here.

If we optimize just for growth, what I think we've done this year goes back to the very

start of this episode and you changing the intro.

We went from a podcast about great technology companies and the stories and playbooks behind

them to a podcast about great companies and the stories and playbooks behind them.

And yes, we have continued to grow in the tech world and sort of our core niche.

And I think that audience and audience potential is way bigger than we ever realized.

But we've also added everybody else in the world now who is interested in business and

runs a brand and thinks about brand management or runs a retailer or runs a large hardware

business like Home Depot or something like that, you know, and also all around the world

too.

I mean, some of our biggest episodes this year were A, not American companies, B, even

if they were American companies, they were truly global brands and global companies.

A lot of what we do, if we just wanted to optimize for growth, we would do differently.

We would not make four-hour episodes.

We would release more frequently, et cetera, et cetera.

It's interesting.

Growing from a podcast about great technology companies to a podcast about great companies

is certainly a growth strategy or a byproduct of doing that is growth because the addressable

market is larger.

But I think it would fail if that wasn't just you and I following what our natural interests

were.

People ask us all the time, how do you pick episodes?

And the answer is you and I talk for hours a day.

We wander around our house and our neighborhoods, putting on AirPods and calling each other

and talking about, you know, what's currently in our email inbox, what we're researching,

what we need to do to ship an episode, prep for guests, that sort of thing.

And one of the conversations that always is happening is, what are you interested in right

now?

How have your views shifted over X period of time?

What is fascinating to you now?

And I think the growth is sort of a byproduct of our obsessions shifting and becoming these

durable businesses and trying to understand what makes a company worthy of being a century

long company, regardless of where it came from or how it was funded or what technologies

were used in creating it.

I think that's been what's so cool for me and my big lessons and takeaways from everything

we've done this year is that those stories and studying the LVMHs, the Costco's, the

Nike's of the world, if anything, that's like even more important than studying the great

technology companies for building a great technology company.

Yes.

We found this just incredible response, especially to the LVMH episode of like, wow, here are

these lessons that are not well talked about and known in our world.

Right.

It is kind of strange becoming canon.

I never thought Acquired would get to the point where when we do an episode on something,

it has the possibility to become an undertone of themes that people are discussing.

And certainly years one through six or seven, that was never the case.

But with LVMH, with Costco, maybe with Porsche, certainly with Nike, I think there was an

element of we released the episode and suddenly we noticed the discussion, especially amongst

the tech sphere about that topic massively picked up or people would go on CNBC and make

a point that we made and I'd call you David and go like, I wonder how that comparison

got made.

This is great.

Maybe they didn't even listen to the episode.

But what was cool is that enough people now have been consuming this and talking about

it and getting value out of it.

It gets in the water.

It gets in the water.

Yeah.

It's wild.

My favorite was a friend of mine who's a VC at Lightspeed texted me about two weeks after

the Costco episode came out and said, dude, I've gotten three pitches this week from startups

where at some point in the deck they talk about how their business model is similar

to Costco.

Yes.

I don't want to overtude our own horn on this, but that has been a huge change this year

that we have never seen in previous years is once we do an episode, it sort of gets

in the water.

Yeah.

All right.

So let's talk about the episodes.

So we started the year actually with the NFL, which I think a lot about that episode still

to this day.

Absolutely.

And we did the Visa episode that we finished the year with was like the NFL CODA part two.

Then we did LVMH, which I feel like we have even more to talk about.

Nintendo, Lockheed, Porsche, Nike, Costco, NVIDIA part three, and then Visa.

And then our interviews this year, and we should talk about our kind of change in strategy

from what used to be specials last year to acquired interviews this year.

Daniel Ek, Dara Khasroshahi from Uber, Jensen from NVIDIA, and then Charlie.

But let's stick with the season first.

Of that, what was your favorite that we did this year?

Like Ben Gilbert's personal favorite episode?

I think the most interesting businesses or businesses that sort of tickle me are Costco

and Visa, because there's a purity to them.

Costco's is the purity of the way that the puzzle pieces fit together in a way that is

just artful.

It's almost like a discovery of laws of physics, the way that Sol Price and Jim Senegal and

the rest of the crew have sort of built that business over the years.

It's just beautiful.

It's like watching a ballet.

I think that we likened it to that in the episode.

Visa, on the other hand, is like the best operating leverage business.

I mean, they have over 50% net income margins.

They seem like they're locked in forever, for better or for worse, as we described on

the episode.

But I wouldn't ask someone like, what is the best at scale business model?

It's probably Visa to do this sort of least work for the most free cash flow.

You look at Costco, not that much free cash flow, crap ton of work.

It's almost like the complete opposite over in Visa land.

Total opposites.

But you asked me what my favorite episode was, and my favorite episode was LVMH.

Because it was so not on my radar at all, and not something that I valued at all.

And I scorned luxury before doing the research, and I didn't understand any of the history.

And now I feel like a whole new world has been opened to me of understanding brand and

value.

And now you have a whole closet in your house filled with Louis bags.

I do not.

I do not.

I only own one thing from one luxury brand in all my possessions.

And actually, that item is not made by LVMH.

Dude, you're just going to leave it at that?

Well, I want to reveal it on a 2024 episode we are planning.

Oh, okay.

All right.

You heard it here first, there will be at least one luxury episode in 2024.

Is that what you're telling me?

Yes, absolutely.

And I should say, I own probably a lot of things that are LVMH, but none that I would

consider luxury.

I don't mean like a Louis Vuitton suitcase.

I mean, like, I have some Woodinville whiskey in the closet that LVMH somehow over the last

few years came to own Woodinville whiskey.

I think there's a lot of those sorts of things that where I've bought a lot of things at

Duty Free Shoppers or, yeah.

You're talking about an item that is truly a luxury item, which is on a whole different

rubric.

It has a sense of place.

It has a sense of place.

It is not a premium item.

You could look at it through a certain lens and say, this is utterly ridiculous.

Correct.

And like, how on earth is this, you know, piece of raw material worth that?

Right.

I only own one of those things.

Yes.

Okay.

I'm curious.

Would you describe anything that you own that way?

Other than things that are obviously that way, other than some like Louis Vuitton suitcase

that you have or something?

I don't know what you have, but you've got some Rolexes.

Yeah, I have some watches, but honestly, those are mostly from my dad.

My dad is really into watches and a few of those sort of trickled to me over the years.

I was thinking about it in preparing for this.

I do not.

And maybe part of that is having a two-year-old, which is not good for the health of the objects

in your home.

But I was thinking about that and I was like, you know, I would like to change that and

have something that is meaningful on a different level beyond just what it physically is.

I guess any jewelry would count as that.

Oh, yeah.

And these things may not be branded the way that we're talking about luxury branding,

but like a diamond engagement ring is inherently not premium, but luxury.

Yeah.

And I certainly, I would count my wedding ring amongst that.

Or a real world NFT for the crypto folks out there.

Oh boy.

All right.

Let's keep it moving here.

Which by the way, I think is actually the best way to think about diamonds.

I spent some time recently looking into lab-grown versus mined diamonds.

And there's sort of an interesting, I know we're on a diatribe here, but you asked me

about my favorite episode and LVMH came up and here we are.

So there is a fixed supply of diamonds in the world and there is a rate at which humans

can mine them.

So regardless of the intrinsic qualities of diamonds, it is a thing that can only come

out at a certain volume.

And largely they go through the GIA to be identified with a serial number and it actually

gets laser etched microscopically onto the diamond.

So these things are like, you know, verified that they came out of the ground and you know

the year they were mined and you know where they were mined and all that stuff.

Yep.

De Beers would be a fun episode to do someday.

Totally.

And the lab-grown diamonds are chemically identical and it's a huge accomplishment of

humankind that we've figured out how to do this.

And on the one hand, they're identical.

You look at them, you right click, you download the JPEG and like these things are identical.

But on the other hand, we are only going to get better, Moore's Law style, at creating

lab-grown diamonds.

And so they will asymptotically approach zero.

Maybe not zero, but some number.

Every year, presumably, they should get cheaper and cheaper and cheaper.

Whereas for something where there's a known finite supply of them, like GIA certified

number etched diamonds, there's a strong argument for that to hold its value to the extent that

you care about an engagement ring holding its value.

But that will hold its value much longer or much more durably.

And truly, the best way to articulate it is, well, if you believe that this JPEG has value

but that other JPEG doesn't have value and that other JPEG is the exact same bitmap as

this one, like, why do you believe that?

Oh, I see.

It's got an on-chain location.

It's literally the exact same thing with diamonds.

All right.

We're going to have to do a De Beers episode at some point because this warrants a full

acquired deep dive, I think.

Yep.

Agree.

David Rosenthal, what was your favorite episode this year?

I was thinking about this.

To not bury the weed, my favorite episode was Nike.

But I don't think it was our best episode.

I think our best episodes this year were LVMH, Costco, and Visa.

And I've come to think that there's a sweet spot for you and me in terms of preparation

and our sort of emotional states preparing for and leading up to an episode that leads

to it being good.

And I don't think Nike was bad.

I think it was perfectly acceptable.

But my level of work preparation and emotional concern and stress heading into Nike was the

peak that it has ever been about an acquired episode.

Yeah.

You were a wreck.

I mean, how many books did you read?

Over 10.

And part of that was, it was the first episode of the season.

Part of that was, I went to Stanford Business School, which is the Knight Management Center.

And this is Phil Knight.

And I've never met Phil Knight, but I felt an extra debt of gratitude to him and obligation

to do it right.

And then part of it too was our friend David Litsky at Fast Company was trailing us, following

along with us as we were making it, which was super cool.

The article that he wrote was wonderful and very complimentary.

Yeah, he's a talented writer.

But all of that stew, I felt like, okay, I really got to bring it on this one.

And what was interesting, that's why it was my favorite.

I'm proud of all the work that I and we did for it.

But I think I finally went too far.

If you look at that episode, I was trying too hard.

Which may not come out in the final edit.

I got to be honest, if you go back and look listeners, you may not hear it.

I could hear it in the first edit.

And certainly while we're recording here live, I mean, the number of things that we end up

cutting is massive.

But David, I completely agree with you.

Until this year, I don't think I would have agreed with the statement that the quality

of our episodes is governed just as much by our headspace, the day of recording as it

is by the quality of the research that we did.

And now I believe that that is immensely the case that the flow of the episode, the excitement

about the topic, the clarity of the points that we're trying to make.

It's about treating it like Sunday if you're an NFL player and having a game day routine

in the way that teaches you how to perform at your highest.

This is going to sound incredibly self-aggrandizing here, but this is how I've come to think about

it like NFL Sunday when we're going out there.

You go back to our NFL episode at the beginning of the year, it takes me right back to playing

football in high school.

The games that I prepared the hardest for felt like I really put the effort in.

Those were not the ones where I played the best.

The ones where I played the best are when you play loose, you know, you go out there

and you have fun and you enjoy yourself and you let it flow.

And like it is the exact same with Acquired Episodes.

All right.

I wasn't going to share this, but now that we're on the topic.

So at the top of my show notes document for every episode, there's two things written.

One is what should the listener take away from this?