Substack: Chris Best and Hamish McKenzie

0:00 It was a good idea for a company and a bad idea for an essay. Like you could tell people this thing and they would give you a blank stare. I would tell people in my life, Hey we're gonna make this platform that's gonna you're gonna

0:22 Pay for writers on the internet. that you really like. And they would look at me like I had horns. Or they would take pity on me, they would say like, Oh, that's that's so nice, that would be so cool if that worked. But you know, and I'm sorry to be the one to have to tell you this.

0:36 You idiot. But like Nobody's ever gonna pay for something on the internet. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. The built.

0:59 Guy Raz and on the show today, how two partners built a getaway vehicle for journalists called Substack, a platform where writers could connect directly with their readers and write. Pretty much what they wanted. When I started out as a reporter, and this is the late nineteen nineties, the idea that some random person with a laptop could reach more people than the New York Times or CNN? was absurd. At the time, most people got their information from mainstream sources.

1:34 And a little bit from the internet. Now, these days, the average evening newscast on CNN gets around half a million viewers, half a million people. And yet. There are 14,000 YouTubers with audiences at least as big.

1:51 Once mighty newspapers, radio news magazines, and TV broadcasts Have largely lost their influence and power. And while this isn't a new story. These products have been Pushed aside by podcasts, the aforementioned YouTube channels, social media feeds, Twitch streams.

2:10 And something that's grown a lot in recent years. Substack. It was founded in 2017 by Chris Best and Hamish McKenzie. At the time, Chris was a tech entrepreneur who had left a once promising startup that would eventually fade away. Hamish was a journalist who wrote mainly about tech and culture for different websites.

2:32 Yeah. Ban a hunch that people would pay to read the writing of specific writers. But At the beginning, most people were skeptical. Understandably, because newspapers and magazines were hemorrhaging paying subscribers.

2:47 What Chris and Hamish were offering was a platform that would make it easy to basically run a small publishing business. With almost no technical skills. Anyone could write an article, insert photos and videos, Publish it to the internet, manage a mailing list, and accept payments. All in one place.

3:07 Slowly, they started to attract writers, first A few obscure ones. And eventually some pretty heavy hitters like Andrew Sullivan and Matt Taibee. The business model is pretty straightforward. The writer can charge a monthly subscription fee, usually five to eight bucks. And Substack takes around ten percent.

3:26 Now today, it's estimated that more than 50 Substack writers earn over half a million dollars a year from paying subscribers. And recently, Substack announced that it has about 5 million total paid subscriptions. For some journalists who used to work for big publications, Substack has become a lifeline. But the company has also taken a pretty strong position on free speech. It means that with a few exceptions like calls for violence or pornography or spam,

3:57 Substack will let you write Basically whatever you want. And the founders have big ambitions for what they expect SubStack to become in the future. In a few minutes you'll hear from Hamish, the other founder, but first to Chris Best. who grew up in the suburbs of Vancouver in the 1990s and early two thousands.

4:16 Chris got his degree in engineering at the University of Waterloo in Canada. The most important thing about Waterloo though is not actually what you learn in the classes is the fact that they have this mandatory co-op program. You basically go to school for four months, then go and work at a job for four months. Oh. So what kind of jobs would you would you do? Oh, I mean my first one I was I was working in a in a bearing factory in Stratford, Ontario. Like ball bearings? Ball bearings. Oh yeah, that's h that's serious engineering right there.

4:45 Yeah, I mean I wasn't doing the serious part. I was doing the like little Programming and Y honestly being pretty useless. But it I mean it I learned a lot. I learned that I didn't want to work in a ball bearing factory in Stratford, Ontario. Fair enough, yeah.

4:58 Um all right. So you're you are doing this program and and and while you're there, there's a uh I guess you meet this guy named Ted Livingston. Who's like a roommate or he becomes a friend. And he's somebody I guess you start to talk with about maybe coming like a cool idea. Tell me tell me about this con these conversations you guys start to have. Yeah, w it wasn't very serious at first at all. It started out just kind of as like a project. It was like, Hey, let's let's build some stuff, let's hack on some things. We were building You know, the original thing we started working on was a music player for the BlackBerry.

5:30 I don't know if you remember that the the the the phones with the keyboards. Everybody remembers what what Blackberries were, of course. I had one. Um and it was, of course, a Canadian company. So you guys originally had this idea to build An app for the Blackberry that was like a music app. Yeah, we're building a music we actually built a music app. We were like, Hey, we'll go in and make this thing that's way better. Yeah.

5:54 The the insight that we had, which sounds very stupid to say out loud now. But it was novel enough at the time was Hey, this new device, the smartphone, which for a while It was basically only like, you know, bankers on Wall Street that had Blackberries and

6:10 This was gonna like the smartphone was gonna take over. This is the new center of your life. And so the idea that you have your music collection on your computer and then sync it to your phone is the dumbest thing ever. you should be able to stream any song you want at any time. So it's like Way better than like syncing your music from the computer. Right. And it was supposed to be a way for people to share music legally.

6:35 It was yeah, it was basically Spotify. It was basically like an early version of Spotify. Okay. And w we got stuck in negotiations with the record labels, like Universal and stuff. Yeah. Um and that we s I think we were sort of just like oh we'll get there, we'll get there. And then it's it while we were basically waiting for that. We ended up making a messenger on the side because a messaging app. A messaging app.

6:58 We're like, what else can we do? What else are these smartphones gonna matter for? And you know, BBM Messenger had been a huge deal at the time. And so we built a messaging app that would pair with the music app. So we built we built this messaging app almost as like a you know, an accompaniment while we were sort of waiting for these record deals to come through.

7:18 And that thing blew up. Huh. It hit at just the right time and went totally insane. And we went through a period of sort of surprise crazy growth. And just to be clear, I think it was similar, a little bit similar to WhatsApp, right? It was very similar to WhatsApp. We were basically WhatsApp before WhatsApp.

7:38 Th this is I think this is called Kick, right? You call it it's called Kick Interactive and the m app is called the Kick Messenger app. K yeah. And um and so you were Essentially the s the CTO and the co founder of this thing. And I guess Ted was also co founder, or the founder too. Yeah. And he kind of and CEO and he kind of oversaw like the fundraising and and that sort of the business side of it. all the fundraising, all the business side, and to be honest, it was really his vision.

8:09 Um he he sort of had a strong sense of what the product you wanted to bring into the world and He was driving. Driving a lot of it. And so between twenty ten and twenty fifteen, I mean you guys had ri start I mean, you're getting investors coming at you.

8:26 This was The hottest messenger app by tw by twenty fifteen it was valued at over a billion dollars. Get a hundred employees. It was it was this is no joke. I mean this is I think There might be people who are listening who remember Kick.

8:41 Yeah. I mean at one point there was I think forty percent of US teenagers were using KEC for a few years. It's amazing. I mean it had ninety million users. Bye. twenty thirteen and I mean, this was bigger than the Blackberry Messenger, which had sixty million users. They uh would eventually sue you guys, claiming there was patent infringement and that, you know, and and eventually you guys settled with them. That happened pretty early, so th the story actually went so this blows up. We can't believe it. I'm like I d I don't appreciate it the time'cause I'm not sleeping because I'm trying to keep the servers up and it's just like

9:13 Crazy. Um but then the people at BlackBury noticed the traffic. A substantial fraction of all pushes going to Blackbury's were just messages for R service. and at the time they they felt that they had a a real strategic a defensible strategic Thing and Blackberry Messenger, which is basically like their version of like the Apple Messenger's app.

9:35 And they flipped on a dime. They went from kind of supporting us and thinking we were cute and fun to saying, No, we're gonna kill these guys. And they They I got a stack of papers like this alleging all kinds of insane patent infringement, like On stuff that was just completely

9:54 But just you know they just you're it's Couple of people in a startup and they send you this huge stack of papers. But more importantly than that, even they kicked us out of the BlackBerry app store. They said you actually can't have an app on Blackburn anymore. And They we're gonna turn off your push.

10:10 Well so not the people who already have Yeah. They're not gonna get their messages on time. And if you're a messaging app And your big

10:19 drive is your half on BlackBerry and half on iPhone. If you lose half your users You don't actually lose half your u users, you lose like ninety five percent of your users because the whole point of the thing kind of goes away. Meanwhile, there's this little other cross platform messaging app called WhatsApp that kind of like trucks along through this phase and they kinda go on to build like an awesome amazing thing that

10:44 you know, soldier. And by by twenty fifteen, I mean I actually I think you guys had like two over two hundred fifty million users. I mean massive. So we it went went almost went up to a million users. Almost back down to almost zero. But we did we built it back up uh From almost nothing to get very big again. And and essentially

11:07 The great good fortune was that BlackBerry started is declining very rapidly and iPhones, of course, just, you know, uh made them obsolete. Yeah, it turned out in the long run the Blackbird didn't actually didn't actually matter. And and This was a m again a major app. It's almost impossible to believe.

11:26 That something with almost three hundred million users doesn't exist anymore today. Yeah. Um but you're there grinding away. And By twenty seventeen, I guess you decide

11:40 You're done. You you're maybe burned out and you wanna you want to go. Tell me what what was going on. I mean I'd been there for I guess eight or eight ish years. You know, after we sort of had this

11:54 This Blackberry thing. We had this messenger that was growing. And we but we never really figured out what's the business model for this thing. What are we gonna turn it into? Like what does this thing become? And

12:06 We eventually made the decision to launch Like a early crypto. Thing. A cryptocurrency in part to raise money? In part to raise money and in part kind of like as a t i in answer to the question

12:21 What do you do if you have a very popular messenger? That lots of people use. But you don't know how to make money from it. Right. You weren't making money. It was a free app, yeah. It was a free app. So you're thinking, well let's let's use it let's start a cryptocurrency because we've got the hundreds of millions of people using it, so maybe they'll They'll buy it.

12:38 Yeah. Um But I didn't I that wasn't what I wanted to work on. Yeah. Um, it had been you know, I'd been there for a long time and so I left.

12:47 W were you able to m personally make any money from from the company? I mean you you had investors, were you able to To take some money out off the table. I made some money.

13:00 changed my relationship with money, I would say, from somebody that never You know, was always kind of like scrabling by to figure out how I'm gonna like Pay rent to Hey, I've got kind of like some room but room to maneuver.

13:13 It was definitely not like set for life money. And it was definitely not, I think, what some people imagine from a company of that scale. Right. Okay, so you are let's pause here for a moment because um this is where you know eventually we'll circle back and and with with Hamish. Hamish I wanna br bring you in and and ask you a little bit about you about your life before you and Chris met. Um I know you You're grew up in a small town in New Zealand, right?

13:43 Yeah, that's right. It's called Alexandra, five thousand people. The nearest town that anyone's ever heard of is called Queenstown, which is kind of thought of as the adventure capital of the world. Got it. Um I know that eventually um you you went to university and and and you end up getting a master's degree in journalism. And pretty soon after I think you started your career, you uh you moved to Hong Kong and and started working there as a writer. Um tell me about m how that happened. W what'd you do there? I did end up going to Hong Kong and my logic was this was two thousand six and China was on the march, China was on the rise, the Beijing games were two years away, and I thought

14:24 I could go to Hong Kong, learn Chinese. and report on the rise of China as a foreign correspondent. Smart move. I mean could have been. It didn't really work out like that. Instead I ended up I just had a money uh I had enough money in my bank account to la last a month there. But I did find a job after the

14:45 trying in a bunch of places um and the job is writing for this freebie entertainment magazine sort of writing about the bar scene and writing about pop culture in in Hong Kong. And I guess uh and that magazine was called Digital Media and then I guess that's right. By tw two thousand eight Um you May I think you help to launch timeouts.

15:04 version in Hong Kong? Yeah. My friend got m deeply familiar with my work, and then he got tapped to be the editor of this of Time Out in Hong Kong, which we were about to launch. uh this timeout in London uh been around for forty years, timeout in New York. And so He liked my work and asked me to come in and be there. music editor, basically at the start, and then later moved on to other things. So this really is kind of like I mean you're still young, right? You're still in your, you know, late twenties at this point, but but working in like music entertain like m music and and entertainment journalism, right?'Cause timeout's more about culture. It's like what's what's on, what's going on, nightlife, rest of the things like that. That's right. I did get to

15:45 Also be the online editor. in the in the days when people thought of the web as a separate kind of entity from the magazine. Right. And I got and then became the features editor as well. And as a features editor I also reported. And so I got to write big sort of think PC culture pieces like what's the difference between an expat and an immigrant. That was one of my big pieces. Right. And as an online editor I got this exposure to what it's like to build A website.

16:11 Especially one that is oriented around listing everything that's going on in the city. Which was quickly to become obsolete as the um Smartphone amps took over. Alright, so you um you stay there for a couple years and um Two thousand ten.

16:29 Й лев і мув тю до Інати Стайс. Why and where did you go? Leading up to the last year of uh my time in Hong Kong. I started a relationship with an American girl.

16:41 who lived in the Washington, D C area. And her name is Steph. She's now my wife. But Steph. got into law school and I was most interested in this law school at University of Maryland. which has its campus in downtown Baltimore. And so

16:58 We moved there and I just thought of it as another interesting adventure. I around twenty twelve you started working for for the tech blog Pando Daily. And one of the things you start to to cover is Tesla. And SpaceX. And I guess like at uh uh uh this kind of catches the eye of a of of an editor.

17:17 At Faber and Faber. And they said, Hey, do you want to write a book about Elon Musk? Yeah, this is twenty twelve, twenty thirteen, where people in Silicon Valley sort of knew about this guy Elon Musk, but he hadn't become an outside phenomenon yet. The Model S had come out in one car of the year in twenty twelve. And

17:36 They also created this thing called the supercharger. Which would allow you to charge up. your electric car for free. Yeah. Yeah. And fast. And it could be powered by sunlight. And I was saying, why aren't more people hyped about this guy who's managed to land these rockets? Oh sorry, it was

17:51 making these successful launches and was on the way to figuring how to land them. and had created these amazing electric cars that were winning Best Car of the Year award. And could run on nothing but clean energy. And so I wrote a bit about those things and there's the editor in the UK, Julian Luce is his name. He's like, Do you think there's a way to do a good book about this guy? And do you think you could get him to cooperate?

18:14 Nice. Kind of working out of my spare bedroom and boxes shorts. In Baltimore. And I thought, Yeah, let me Let's go.

18:21 Do that. And so I got in touch with Elon through his mother's website. She's a nutritionist, listen to her email address there. And it led to a conversation with Elon. who I actually knew already had liked one of the pieces I'd written because his PR person had told me he liked that piece. And so I thought maybe I have a shot of getting his attention.

18:40 And he ended up On this phone call with me. You got a call with him asking if he would cooperate for a biography. That's right, I was pitching in the idea of this book. But Elon said, I don't know about the book, um, maybe, but would you be interested in a job at

18:55 Tesla. Mm. And I thought, well, that sounds like an insanely interesting opportunity. I could sort of go into Tesla this is my idea at the time, I could go into Tesla and be like an in house journalist. telling the story of this company that has so many fascinating aspects and so many moving pieces.

19:15 And I can help the world see. That electric cars might be actually actually a good thing for the world. Yeah, so you accepted this job and did you move to California with your Yeah. Then go for now wife. Then go for now wife, constantly amused by that description.

19:31 Um yes. Their job required me to move to the Bay Area. Alright, so this is twenty fourteen and this is still I think before the model three is is is being released. Yeah. January twenty fifty. I I remember I profiled Tesla maybe in two thousand nine, gosh, it was a long time ago. It was like when the roadster was still, you know, their car.

19:52 Yeah, and um and so it was a different company, right? Like you probably saw Elon Musk rarely. Yeah, I I saw him in the office regularly. I think there were like some thousands of people by the time I was there, so it was substantial. But I also was in meetings with Elon and I had a couple of one on ones with him. I started off when I went into that company, I started off as like teacher's pet. But like as what happens with many people, sort of quickly became Personal non gratitude, you're on, but

20:20 Wha what happened? A bunch of things. I had worked on a report a with uh one of the engineers about The batteries and how much. Cleaner they are than Gasoline.

20:32 Uh powered cars. And the report didn't come out the way he wanted, it wasn't written in the way he wanted it, or edited in the way he wanted. I took over the social channels for Yeah. Taslan did some tweets that he didn't like.

20:43 I got an angry email from him once about the state of the tweets and uh and and uh And it just sort of just contributed to a deterioration in the l in the relationship. But to be clear, I mean it sounds like you were a big believer in what he was trying to do. I mean you would eventually write the book about him. He didn't cooperate, but I mean it was about this revolution in in electric cars. And and I mean it it it sounds like you really did Believe in what

21:10 He was trying to do. I s I'm still a believer in that. I still think that electric cars a much better option than internal combustion engine cars. And I believe that Tesla has made an an amazing and important contribution to the world and accelerating that transition away from

21:28 fossil fuels towards a cleaner energy economy. Um, all right, so you're there for a year, you leave, you write this book And and I guess shortly after you leave you get some consulting work at this company called Kick Interactive.

21:47 Tell me how and then'cause now we're gonna come together with you and Chris, how did that how did you get work there? Were you just looking for work? Were you looking for consulting work? So what happened is while working on the book, wanted to figure out a way to pay my bills. And I thought maybe I could work half time at Okay.

22:05 And I'd like to kick because I'd become friends with Ted Livingston. And so I thought Maybe if I can get in and work with Kick I can be close to this guy, Ted. It's a much more Canadian culture. It's totally different from Tesla, which was messy and cutthroat and had to like throw everyone under the bus kind of culture.

22:23 An at kick. I became friends with Uh Chris. Can I tell one story from that period?

22:29 Yes. Hamish did a bunch of stuff. And the probably in the natural course of things, we wouldn't n we would not have interacted that much. Because Ted was really the face of the company. But he had a weird

22:41 I don't know. quirk of his personality or preference or something. Where he really didn't want to Go on TV. Like he didn't like being on video.

22:51 Right. Uh so he's like Chris, you gotta go Do the like be the representative of the company. in video appearances. And I was like You know the

23:02 CTO like technical co-founder that was used to just hiding in a back room. Right. And Hamish was kind of assigned to shepherd me through this process. One time I remember in particular. Do you remember the time I had to go on Squawk Box? C N B C wanted to have one of the founders of Kick

23:22 Chris got assigned to do it and I got assigned to be his handler for it. And Chris's Little bit nervous about it, feeling a little bit uptight, I could see. And so it's Eight o'clock in the morning.

23:35 And I thought, Well, I think Chris should have a beer before he goes on that might just help him loosen them up and so he had an eight AM corona and I joined him as a act of solidarity and then he went on the interview and crushed it. And from that moment on became a media hero for Kick. Well. So you guys Uh you're the editorial kind of editorial advisor of Kick Hamish and

23:59 You get to know Chris because you're helping him. prepare for interviews and you just become friends, basically. Exactly. Meantime, um, and and this is I guess you're there over a two year period, Chris, uh you are starting to kinda think about transitioning out. And you leave in early twenty seventeen, um and just to kinda take some time off. And what did you want to do during that year off? Mostly I just wanted to give myself some space. Like I had

24:27 You know, I'd I'd done this crazy thing. I should Take some time. Live my life, you know. do some of the things that I would have done if I'd had spare time o over the past eight years. Anyway, one of the things that was on this sort of bucket list was You know, maybe I should write.

24:45 and I had enough of sort of like the programmer's hubris where I was like, I know how to read, I know how to type, like I should write, surely I would be good at that. And I started writing sort of an essay or a blog post or a screed. outlining my frustrations with the media economy on the internet. It was very pretentious. It was very

25:07 There was a lot of like Facebook is driving us crazy, Twitter is dividing us, like wow, wow, wow, wow, wow. And I sent this essay to Hamish'cause I'm like, he's my friend who's actually a writer. And he let me down very gently. We joke about this. Um he was like, Okay, like you're it's twenty seventeen.

25:25 You're writing this essay, the thesis of which is like maybe the internet is bad for newspapers. Like we know. This is not new information. But If you wanted to make this good The more interesting question you should be asking in it is so what? Like

25:40 Let's assume that all of these things you're whining about are correct. How could it be different? I should mention, by the way, that Hamish disputes my interpretation of that essay. Yeah, uh yeah. It was not a piece of shit. It was a very good essay and it was very well argued and I gave him a a series of bullet points of feedback. Mostly praising it and then one of the bullet points it was like well.

26:02 Can we push this further? Um, you know, people who in the who work in the media know that these are the problems, but No one has a good idea what the solution is. What's the solution? Yeah. Yeah. And so that's what led to to Chris think we we had this conversation about Chris is the systems thinker and the genius who is mostly responsible for the sub stack model and th the core insight he had was that You should make.

26:25 readers the customers instead of advertisers the customers and if you change their core dynamic Especially if you monetize the relationship. over time through enough subscription then Different things are possible.

26:37 Right. But Despite the world knowing that these There are these grand problems with the business model that supports media.

26:46 Even some of the smartest. most well funded minds and organizations. weren't quite figuring it out. And it was starting to feel like Maybe this thing is all just gonna crumble and we're all gonna live in a Facebook world now. Yeah. But there was one bright spark.

27:01 And it was a really small bright spark. And it was a guy named Thompson. Who writes a publication called Stratekery. Which is the worst name in media history. Yeah. And he's had this blood for a long time.

27:14 He had had it for a couple of years, even by the time we came around in twenty seventeen and were paid subscribers. Taiwan right. Writing this thing out of the spare bedroom in in Taipei. He's just writing about the business models of technology companies. And his model's really simple. He would publish A blog post each week that was his Most polished and

27:33 Best work. And he That would be free. And then if you wanted more Ben Thompson, if you wanted his view of the world on more things. you could pay a hundred bucks a year and you'd get three more posts by him.

27:45 Over email. And it was a really lucrative Business for him, we figured out, yeah, through napkin math and guessing basically that he was already making m more than a million dollars a year from that. And Ben Thompson was telling anyone who'd listen, I don't know why more journalists don't try this model, because it works really well for me. Yeah, we even called them up at one point. Yeah, we talked to him about all this and yeah. He's like, I don't know why more people don't do it. I was like, So what did you have to do? He's like, Well I you know, I invented the business model from scratch. I did it for a year with no money, I made my own tech stack and my own cobbled together product and editorial like he sort of like described all of the things that went into him doing it and he had to be this like triple unicorn of

28:25 a great analyst and a great writer and a great entrepreneur and a great editor and a great technology wrangler. And we were just like, Oh, that's why nobody does this. That's way too hard. He listed on one of his web pages all the tools he uses just to run this thing, and there were like nineteen different tech tools that he paid for. Most writers are not technologically savvy and don't they don't want to waste their time wrangling those different tools. Yeah. You're a writer.

28:51 You know how to write something great. That is rare and hard enough. And to expect you to also be this tech genius and this entrepreneur. It's crazy. you should be able to come and type into this box.

29:03 And if the things you type are great. you're gonna get rich and famous. When we come back in just a moment, how Chris learns to push back when people tell him How bad his idea is. Stay with us, I'm Guy Roz, and you're listening to How I Built This.

29:36 Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2017 and Chris and Hamish have an idea for a new digital platform for writers. And even as they're talking about partnering on the idea, Hamish, the journalist, is Wary about

29:52 A founder. I knew that that was a stressful life where you could never really switch off and it would be many dramas and you're responsible not just for your own job and income but for whoever ended up working for you and then

30:06 Or your customers and all that kind of stuff. So it was like Excited to Go back to journalism at that time and be Returning to freelancing.

30:17 That's what I was really amped up for, but Chris Annoyingly. Was coming down to San Francisco every so often and one of these trips he stayed with me and my I think she was by that point. And once he's excited about that idea after I had prompted him to like

30:32 just invent the the new model that was gonna save for everyone'cause complaining in an essay isn't enough. He started to go to work on me to convince me that I had to do this with him. I had to build this company with him. And I was Like, no, no, no, no, no. That sounds like a horrible life. And Uh I'll just be um

30:51 a consultant or an advisor and I'll help you along the way and point you in the right direction. And he didn't accept that answer. And he kept working away at me and trying to persuade me that I had to do this and this is gonna be fun. And then My wife stiff.

31:06 kind of teamed up with him. And agreed that I Sort of have to do this because It's too much of a convergence of my interests and experience.

31:17 And the things that I like to do. Chris, why did you think you needed Hamish so badly? I mean So you were a tech guy and and obviously Hamish is a talented journalist and and writer, but Why were you so convinced that you needed him to start this thing? I mean I knew nothing about this world.

31:36 I didn't know the people, I didn't know how they thought. I wouldn't have even Known where to start. I can think about things through from first principles. And Having both halves of the brain having the

31:49 first principles understanding But kind of pairing it with being of that world and knowing the language and knowing the people was actually like the magic that made it work. So uh Hamish, you were so you basically were like, Okay, I'll try this. I mean, you did not want that life. You knew what it was going to entail. The like long days, the travel, the sleepless nights Worrying about other people's incomes and

32:16 You agree to sign up for this. I did. And you know I think it's important to mention that I thought that this model that we'd devised was kind of stupid enough to work. It was either it was so simple that it it had some obvious flaw that we just had missed for some reason.

32:32 Oh, it was so simple that it was actually gonna work. And if it could work for more than a few people, then I think it could work for many, many people. And in that world, the difference it could make would be profound. Can I make one one point here that I think is really interesting? Yeah, please. You mentioned that thing it's like it's so stupid. Like either we're stupid or it's going to work. I definitely remember that. Like the way I would have described it at the time was like we couldn't talk ourselves out of this idea.

32:57 But it was kind of like It it was a it was a good idea for a company and a bad idea for an essay, which is how it started. Like you could tell people this thing and they would give you a blank stare. Like I would tell people in my life, Hey, we're gonna make this platform that's gonna you're gonna

33:12 Pay for writers on the Internet. That you really like. And they would Like look at me like I had horns. Or they would they would take pity on me, they would say, like, Oh, that's that's so nice. That would be so cool if that worked.

33:24 But You know, and I'm sorry to be the one to have to tell you this, you idiot, but like nobody's ever gonna pay for something on the internet. Right. And people would tell me, people would be like, That sounds great, but I would never pay. For something like that. And I devised this like parlor trick. Where when the somebody told me they would never pay for some of the internet, I would say, Well, who's your favorite writer? They'd say, Oh, you know, Guy Raz, or whoever.

33:45 And then I would say. Would you pay five bucks a month for that person? And they would say. Well yeah. But that's different.

33:54 Like that's a special that's a special case. Like that's it's it's it's so and so. Like they're really good. And so I think the in retrospect, I think we were on to something that like was a good idea but sounded bad or like didn't it w it it it was not yet in the realm of a thing that people would believe, but it was a realm of thing that people would do. Right.

34:15 So this was I mean, so b basically th you're looking at this and saying, Well, if you're creating content and you're bringing people to the platform, They should be The pe the people doing this should have a guaranteed way of reaching those people. They should own the connection. It should be their relationship. When you subscribe on Substack, you don't subscribe to SubStack. You subscribe to Guy or whoever.

34:39 Yeah. It's an important point because this is twenty seventeen when you're having the conversation, and it's even more of an acute Issue now, which is that You might have A million subscribers on on YouTube. But if YouTube changes the algorithm and stops delivering your videos to people automatically,

34:58 It might be really hard to make a living off of that. But YouTube still benefits every time you post, or um Facebook benefits every time you post, Instagram and TikTok, they benefit because There are more eyeballs and there are more advertisers. And this had happened with Facebook pages at this point. They they'd created a thing where people spent all this money getting people to like their Facebook page. on the assumption that that meant they'd built up an audience and then they said, Oh just kidding, actually when you want to reach those people you have to pay again. Yes. And that had worked for Facebook very well. And and by the way, I mean there were other models, Patreon, right? For musicians and artists and filmmakers, like that existed.

35:37 People were being supported. for their work through Patreon. Yeah, Patreon I think is a hugely important company because it changed the culture. It showed not only that p people will be willing to pay for content online

35:50 they'll be willing to pay for the artist or creator who they most love or trust. And we looked at medium and learned learned a lot from medium and took lessons from both of them. where they had struggled, um or what could have been better. And got to benefit from standing on their shoulders.

36:07 to design something like the substack system. Yeah. I mean, this was one of the things that kind of went into my calculations here as like, what if we made something that had a business model from the start and we knew what was and that's that's actually important, because the thing that we were onto at this point, as it was turning from like an essay into a company that we needed to start Was The big idea of What if you completely change the economics of how these platforms

36:32 Work. The problem with Facebook is not that it doesn't work. Right. The problem with Facebook is that it works too well. And doesn't serve the people who use it. You know, it's it yes, it kills all the newspapers, but it's it's a massively successful business that takes takes advantage of the scale internet. Yada yada.

36:50 So what if you could like design a new economic engine, a new incentive structure that could harness the scale and network effects of the internet. But then

37:03 Actually paid money to the people who were making the culture. And at the same time, we had this thing that we could hold in our hand that was like. What if we just made it like a hundred times easier for the next Ben Thompson to do a paid email newsletter? Yeah. So Chris, w you're in Kitchener in Canada. And

37:22 uh Hamish, you are in San Francisco. And you obviously you're communicating every day, but Chris, you are On your own starting to build. The The platform? You're you're s just working on trying to create

37:38 This thing that would become Substack. Yeah, I mean it was pretty it was pretty simple to start. It was just a website that could host some content and but I mean the thing th n none of it was rocket like none of it was technically rocket science. It wasn't like we were building some software That Only we could have built.

38:00 putting it together and having it actually work the right way, uh, was the the new thing. And it t I mean it b by the way, it tur turned out to be pretty hard. Like it was it was I think we were right about some of the core insights. We got some early breaks that really helped, but it was It took a it there was a whole series of things that we had to kind of like believe and act on for long periods of time that is It's hard to do. Yeah, in like twenty seventeen, writers were not the sexiest customer base in the world. No one thought they were gonna build a billion dollar

38:34 tech company by serving writers. In fact people were forsaking writers, forsaking the media, turning their back on that, they'd given up on that. So all right, so you are building this, Chris, and Hamish, you are kind of trying to drum up potential people to join this platform. and it officially launches in 2017. Before we get to that, up until that point, right, because I think you guys really kinda decide, let's do this in July. So that summer of twenty seventeen, you guys are really working on on building this thing, because you're gonna launch it in October.

39:07 You probably didn't need a whole lot of money at this point, right? I mean you had a little bit of money from from your time at Kick, Chris, so were you able to use some of that money to just finance what needed to be financed initially? Yeah, I I put in a little bit of money to basically like pay the hosting bills and you know, we bought a domain and there was but it was sort of like minimal at that point. And and given and we've had this conversation with co-founders many times, given that, you know, you're s initially kinda this idea that you have in your head, Hamish helps you to kinda refine it. How did you know you s you had some money to put in and Hamish probably didn't have a whole lot of cash to put in,'cause you're you're a ch working journalist. How did you guys have that delicate conversation about okay, here's how we're gonna You know, split the company.

39:54 How did we have it? You insisted on splitting it evenly. Based on past lessons and ideals you Develop for yourself sense. So that was it. It was like we're just gonna split it.

40:06 Yeah. That's right. You well what happened is that My grandmother had recently died and pass down some money. I was I had no money. I had w my m well pay to check to paycheck with my wife and Yeah, like putting in ten thousand dollars at that point for you would have been just like

40:23 We couldn't do that. We couldn't do that. And this this is why Steph's support was so important. She was okay with the risk and luckily I had this inheritance money from my Grandmother. that I spent all on I spent all of it just cover my salary for a few months before we raised a proper round of money from Like more friends and family that could

40:43 Help us start to pay ourselves a little bit of a salary. So alright, so that summer You're working on it. And by October of twenty seventeen you're ready to officially launch and you've got this guy Bill Bishop who you knew You knew him from your your time in Asia.

40:59 He had been writing about China. Um, and he agreed to'cause I guess this was a free blog that he was writing and and he agreed to join Substack and to start charging. Yeah, he accidentally had a really successful free newsletter. He'd been running it for five years. He had never really made money off it except for doing a couple of donation drives.

41:20 He was paying a bunch of money to send the emails. Yeah. And so Bill had been talking in his newsletter that I was a reader of. He had been talking about how he's gonna introduce a paywall soon, he's gonna introduce a paywall soon. He'd been talking about that before we started Substack.

41:36 And I'd been noticing that he kept talking about it but never getting round to us. And so halfway through his process there, I jumped into his inbox and said My friend and I are starting this thing which is kinda like we'll take care of everything for you, th this thing that you're describing that you want to do so you can just worry about the writing. Would you be interested in

41:54 Being a guinea pig for this. And he Luckily said yes. And so we got to launch with Kind of the ideal.

42:03 first customer, the perfect first publisher. That happened in October twenty seventeen. And did you at that point? Chris. Moved to California or were you still in Canada?

42:14 I'm still in Canada. We launched Bill. And we'd also applied to Y C. So Y combinator. You should talk about how you're a Paul Graham fr fan and that was part of your inspiration for writing these essays. I'd been uh

42:27 a Paul Graham fan. I've been the founder of of Y Combinator, obviously, yeah. Yeah. And so we applied to Y C with Sub Stack. And I remember the timing because on the application to YC it said, How much money are you making? And we said, Zero dollars. And then between the application and when we came in for the interview. Bill's launch happened.

42:48 And we had no I had no idea what to expect, but he made like six figures his first day. through this like duct taped like stripe setup that I had built in the preceding weeks. But we I we just woke up and we were like, huh, like I think this is this seems good. Is this good? This seems really good. More than a hundred thousand dollars.

43:07 Revenue. Annual revenue based on his oh his single. In like a day. It was just like that. Oh. And so we went a few like you know, a few days after applying we've flew down and went to the Y C interview. And they were like, you know, it says here you're making zero dollars and we got to say, Oh actually

43:25 And it I think it's contributed to a sense of real momentum. And it was it was sort of funny because our Advisor Jared looked at that and he's like, Oh, this is gonna be easy for you guys. Like you just You have one customer that did this, you just need like four or five more of these, and you're gonna be like sailing off to the races and raising money, it's gonna be so easy. Meanwhile, it took us years to have that kind of success again. It was very like, we just had that perfect.

43:51 You know, I think it's not. Not quite years. Not quite years. Not quite. It was much harder than we thought it was gonna be. It was much harder. It was it wasn't as simple as get the next four Bill Bishops. There weren't the next four Bill Bishops, but it gave us such a burst of confidence. That we were on to something. That it sort of helped sustain us, I think. Through the next the next phase.

44:12 Alright, so you get into Y Combinator. obviously big deal because now you've got You know, you're gonna get exposure to big time investors and you're gonna get mentorship and I'm assuming That's when you move to

44:25 To California, Chris. Yeah, I came down four Y C. We did the thing. Okay. So you're You're now together. in twenty eighteen you did raise some seed money and you got some interesting

44:37 investors who who I guess were interested in In this and I imagine Y Combinator, being part of Y Combinator was certainly helpful. Yeah, the Y C we did the Y C demo day thing, and I I think I would characterize us as being kind of like We were not One of the obviously the hot companies that everybody's

44:54 clamoring for. But we were also, you know, we raised around. We were not one of the struggling ones. We were kind of just like Middle of the pack. Yeah. Uh uh I remember on the first demo day we did, which is the one that's for Y C alumni.

45:08 Em Shear came up to me and he said. And a sheer founder of qu co founder of Twitch who's who was on the show a couple of years ago. Yeah. He's like I look at you guys, I'm really excited about this idea. I think y you guys are like Twitch, but for journalists and I want to invest. And so we got him as an early investor, and then there's a bunch of people who sort of saw the same thing around that time. And so by the time we finished Y C at the end of um Marsh. We had

45:32 we seven thousand paid subscriptions across the network that we could point to and say, look, this thing is working. This thing is going somewhere, at least somewhere relatively interesting. Let me ask you about the business model and the math, right? So the m the model, if I understand it correctly, from that the beginning and even till now was the the writer um gets ba basically you guys get a ten percent commission or whatever, plus there's gonna be the pr the payment processing fees, which is, you know, another w two percent or something. Um

46:04 And And so effectively the writer's getting about let's say eighty five to eighty seven percent of Um

46:14 How did you work I mean, that math is Like By any account very beneficial to the writer. Right. They're getting they're getting uh a good deal here. Like if you compare that to any other platform, right, the writer's doing really well.

46:28 But it means that your margins are really thin. Like how did you come up with that math instead of let's say 20% or 25%. Well, it's interesting. You know, it starts out as a really great deal. And coupled with that, by the way, everything else is free. So we're not charging you SaaS fees to host a website to send email to any size. Like everything else costs nothing. We wanted to be in a world where we would only make money. If the people actually made money, I didn't want to be in a in the business of like selling people a dream of doing this thing and they would pay us, but then they wouldn't make money and

47:03 Well, tough for them. And then it's a great deal at the start, and then you start to get, you know, by the time you're making millions of dollars a year, that ten percent starts to look substantial. You start to think, wow, that's it. But that was gonna take that was gonna take a while. And I I think even now it's it's a very small number of people are making over a million. Not as small as you might think anymore, but it's it's uh It it it scales, right? Like we we really want you to succeed. Yeah.

47:33 Only paid newsletters, only paid subscriptions. And then we very quickly figured out we had to have if you're gonna have a paid newsletter, you need free subscriptions as well, and we have to handle those. And then we very quickly figured out if you're gonna become a paid newsletter, you're gonna start as a free one, so we should make it so that anybody can use it for free. And that became like a big piece of how the the top of funnel kind of work for us. Alright, so He here's my question. Initially, right, now this is you know, you're you're getting some momentum, right? You why combinator? Obviously there's But

48:07 I just want to be clear about something to people listening, which is Why combinator we know about the coin bases, we know about the Airbnbs, we know about the Instacart. But m most of the companies that come out of Y Combinator don't end up making it. I mean the founders might go on and do something else. So just being Y combinator isn't a guarantee that it's gonna work. And so

48:29 We see these headlines every day, you know. So and so company was Your own company, Kick, was valued at a billion dollars at one point. Knowing now you are the CEO of this company, you've learned a lot of lessons'cause you were the CTO of that business. What did you uh what was the sort of the primary kind of lesson that you took from that experience that you were like, We're not gonna do that here because I saw what happened and

48:54 You know, it ended up Going south. I think there's probably two things that I think about a lot. One was just Have a business model.

49:04 And that's uh It seems fairly straightforward. That worked for some of the biggest companies in the world. That worked for WhatsApp who sold for twenty two billion dollars. So I don't think it's like I d I I don't say that as a criticism to say we were stupid for thinking if we got a whole ton of users, we would be able to like th turn it into something that was not a ridiculous way to operate, but it did leave me determined to operate in a different way this time and to have an idea from the get-go of like, what is this business? And then the other one that I think about a lot is

49:43 Like there's this saying in Silicon Valley. That is Keep the main thing the main thing. And we we we went through this at kick where I I think even after like I think we were always kind of unmoored. We were always thinking about like, and because we didn't have a business model, we were like, what are we gonna turn this into? But there was a lot of kind of like.

50:00 trying to figure out the next thing instead of making the main thing actually work. And I think with Substack. we're trying to do the opposite of that. We're trying to have there's like a core of what Substack is and like That's the thing.

50:19 When we come back in just a moment. Elon Musk comes back into the story, this time to make Chris an offer that he can. And does Refuse. Stay with us, I'm Guy Raz, and you're listening to How I Built This.

50:51 Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2019, and Chris and Hamish have built a solid scaffolding for Substack. Writers offer their content for free or for money, and Substack gets a cut of the subscriptions. But now the question is How do they get more writers? We looked for people that we thought weren't being well served by the dominant media structure, but actually had interesting things to say and had a devoted audience, and so it wasn't necessarily the people with the largest audiences. Maybe they'd have a smaller following on Twitter. Twitter was a common hunting ground in those days.

51:28 But the people who were following them were really paying attention to what they had to say. And we develop this tool. Um that allowed us to put like fire emojis beside the names of the ones who had these really devoted audiences. And so if you had a Richter scale. Yeah, so if you had one fire emoji, you're like you're you're Your audience didn't really care that much about what you're saying. If you had three fire emoji, okay, like we're pretty sure you're gonna work on Substack. If you had four fire emoji

51:59 We knew you had the kind of audience that would really respond well to you going independent and would have this direct relationship with you and could help make you get rich with this model basically. And let's say that's the same thing. A prominent writer I mean

52:14 Has a million subscribers, they really just need a fraction of those people to pay them. A monthly. fee to make significant money, right? I mean the math is clear. Totally.

52:25 It's surprising how much we had to make that obvious to writers actually over the course of the years. It was They're used to dealing with huge numbers in terms of audiences, but getting paid pennies as a result, whether by an employer or through the revenue share agreements of those other platforms. And we would have to say to them. Look, if you get a thousand Pay subscribers.

52:44 And they're paying you fifty bucks a year. Do you know how much money that is? And they're like, look, that's enough to live on. And it wasn't always obvious to people. People didn't take that step. And then we're like, If you get ten thousand paying subscribers paying fifty bucks a year, that's enough to actually like really make serious money and change your life. Half a million dollars. Yeah, that's no joke. It's surprising how much you have to do that multiplication for people. Like it's not that they can't do it th themselves, it's that they won't do it. And the the number of times I've had a conversation that's like You know, so and so has ten thousand subscribers paying, uh huh. They're charging a hundred dollars a year. Uhhuh. So they're making a million dollars a year.

53:19 What? And it's sort of like you know, you could have got there yourself, but you sort of have to like Point out what's what's happening. Very

53:28 Fortuitously you had raised money in the summer of twenty nineteen, which would come into great uh use I'm sure by Covid, you raised fifteen million dollars, it was led by Andreessen Horowitz. But you've got the pandemic and this really Is a turning point.

53:43 year for you. I mean in in many ways I think you would both agree that On the one hand, you've got the pandemic. A lot of the social media companies were, as many of them ad have admitted

53:57 the government to deplatform specific people who were talking about who were opposing COVID vaccines, for example, or people who were writing about what was perceived to be misinformation, right? And so there's this kind of Th all these things happening in the background. On the one hand the social media companies are deplatforming and banning people. On the other hand, Prominent journalists

54:21 are uh losing their jobs or are Feeling under pressure. And so you start to get people coming to your platform at Taibi. Andrew Sullivan. Barry Weiss.

54:34 Please the New York Times. Starts a sub stack. It was a big pull forward for us. I mean, we grew something like six X in that first year of the pandemic. I I had this speech that I would give to people at the time, I was like

54:47 Think of Substack as your getaway vehicle. You don't have to get in it right now, but like fuel it up. Have the engine idling, like create your account, like clay your handle, have this thing ready. Just in case something unexpected happens. And if you're in the media in 2020, that wasn't like that didn't sound crazy to you. And then sure enough, you know, over the we had that conversation with Andrew, is expected to be months.

55:11 uh you know he calls us after a weekend and basically says you'll never guess what happened and we're like you know what we actually might be able to guess what happened and you know he was out he'd been fired. Um well he he resigned under under duress. Yeah, sorry, I shouldn't say fired. This is in twenty twenty. This is in twenty twenty. And there was a moment where a lot of those kinds of people you're talking about, the people who are You know the Uh recalcitrant. voices that don't like being told what to say and were kind of like not going with the program.

55:44 were both the people who are selectively the most interesting to read, the people you actually would care about and want to fire. Or sorry, wanna you'd want to subscribe to them if you're a reader, but there was a moment where a lot of them got either fired or pushed out or had some kind of moment where they were suddenly unwelcome in the institutions they'd they'd made a home in and invested in. And so We had done a bunch of things like having a

56:11 stance on freedom of the press and on how it was the right way to approach content moderation. That were v very non obvious and non consensus at the time. That we took a lot of heat for that we w would not have been willing to take a lot of heat for

56:29 Did we not have a theory about what was happening and what mattered and why that set us up to be the platform that those people could trust when that moment hit. I mean A big part of it is the business model, right? Like the fact that we was paying subscribers. We didn't have

56:46 advertisers who were getting spooked and boycotting us, bringing us under pressure. I think we were not yet at the size where we were getting the government attention that the exes and metas were of the world. And let's be honest. I think objectively voices that All of us here could agree are were objectionable, like people who are racist.

57:07 Or Spewing. conspiracy theories that we may find objectionable. There was a lot of pressure. To deplatform people who I'm sure even both of you personally thought, uh I'm uncomfortable with this person.

57:23 So how did you How did you do the gymnastics in your brain at the time? When the culture was somewhat different. To say no. We're still gonna let that happen.

57:34 Well the conversations at the time. Because we were confronted this with this kind of thing in small ways and then bigger ways and then more public ways. that led to us reaffirming our belief and our position on it. And

57:46 cause us to do things like write down and publish our view of this, like why we have a hands off stance on content moderation, which doesn't mean No sounds at all. We still protect the p platform of the extremes in line with the First Amendment. No incitements to violence, no spam, no doxing, et cetera. He says such or such declared no incitements to violence.

58:07 No spamming people and no doxing. So you can't expose where people live or personal information about them if you don't like them. That th those are red lines. If you do any of those things you're off. Right. And so Our view of the world was not that

58:21 The way to address these problems was to devise more sophisticated content moderation. We've seen the attempts of the other social media companies to do that. They've invested billions of dollars in this. They come up with these policy documents that are hundreds of pages Long. And it doesn't appear to us like it has actually

58:40 Helps misinformation. problems, or it's helped reduce the level of harassment, or it's helped increase trust in the media ecosystem writ large. Our view of things is the way to solve these kinds of problems, address them or mitigate them, is through changing the business model, changing the kinds of Behaviors and content. that can succeed on the platform.

59:03 And so the theory is like if people are writing a lot a lot of nonsense, they're just not gonna succeed on Substack because it's not an outrage machine. like social media. It just doesn't work in the same way where that actually is successful. To me th like that's probably too rosy. Like I think there's you know I sometimes think of Substack as an index fund of culture. There's like whatever people are

59:24 Willing to pay for whatever people are interested in. There's gonna be that. That thing. I don't think our role as a platform on the internet should be to tell you

59:36 what's right and what's wrong, or who to trust and who not to trust. And it's a seductive idea that it should be that role, and a lot of platforms took that stance. And it just didn't work. But you guys have responded. At times, like there was an article that you know about was written in Atlantic.

59:53 in in November of twenty twenty three, it was called Substack has a Nazi problem and this writer identified, I don't know, fifteen or twenty newsletters that um use Nazi symbols, so You guys did ban some of these newsletters, so what was the reason? behind that. So I mean our our stance on this is look, we have a set of content policies. If something comes to our attention that is

1:00:17 Against the broadly applicable sub stack rules, we're gonna take action. But we're not changing what we What we enforce based on Pressure.

1:00:26 'Cause I as you know, I read a lot of substackers and uh uh and I really and I pay for a bunch of them. Um and based on on what I see I still feel like Best or most prominent writers tend to be iconoclasts. Now obviously there are some who are on the left, but I find that the the ones that I seem seem to

1:00:47 feel like our more successful or like Maybe on the sort of the libertarian Center right? Is that fair? Would you say that's fair?

1:00:58 You should look at the leaderboards of um Substack with which is ranked by revenue in in the polit in the US politics category, for example. You'll see a diversity of perspectives represented. Yeah. And there's like some of the top ones are like very hard on the left, some of them are very hard on the right, or libertarian. I think there's a r a true mix, but I d actually don't No that one Dominates the other. Okay, let's go back to our old friend Elon Musk, who Hamish you first encountered back in twenty

1:01:27 fourteen I think when you started to uh profile him. and then would eventually work for him. Um He comes back into your world. Less than ten years later, he buys Course.

1:01:39 Twitter which becomes X. Now I think fair to say One of the if not the most influential uh sort of social media platform in terms of of shaping policy because it's clearly read in the White House and

1:01:56 Um, he buys it and one of the things that happens in twenty twenty three is you guys launch Notes, which is a s sort of a short feature where you can do short form content, you know, to your to your followers on the substack. He basically says, look, this is a Twitter clown. Um and he kind of

1:02:15 Kinda you know. Completely flips his shit. Well he what's is he fire the fire a shot across the ball like he basically says Anyone tweeting out a substack link, we're just gonna Block those.

1:02:27 Even mentioning the word sub stack was briefly. If you search for Sub Stack, it wouldn't work. Yeah. I to clarify, uh uh there are plenty of people who to link. their substacks on Twitter or X now. It's very common. Um and so that's obviously no longer the case. But Let's just talk about and Hamish I'd love to hear your take on this because He's somebody you really did admire for the work he did around um electric cars and

1:02:54 And I f think that you felt this way, but all of a sudden you're on his radar as an enemy. And that's no joke. Yeah, it's an Unusual and Uncomfortable experience. I can uh I continue I continue to believe that about SpaceX and Tesla and some of the other things that he's been involved in. He was instrumental in starting the open AI as well. These are major contributions to

1:03:16 But that doesn't mean it That he doesn't have some. personal shortcomings and social shortcomings that show up in other ways. So It's sort of

1:03:28 Sucked at the time. I think he Um Misunderstood and misinterpreted the thing we're doing by launching this notes feed. Which is

1:03:37 only similar to Twitter in the way that an electric car is similar to a gasoline car. The Steering wheel looks the same and the wheels look the same and there's a windshield, et cetera. But the thing that powers it is. Um ultimately creating a

1:03:53 Yeah. totally different product that is better for the end consumers and better for the world. The sub stack feed is No. Twitter.

1:04:01 But it's this subscriptions machine, basically, that helps the independent writers and creators of the world find new audiences and retain them. I a and just just to slightly uh back up for a second, um I I mean I should mention that uh that right around this time Uh Elon Musk actually made an offer.

1:04:18 to buy you guys out. And I I think I think the way this started is that right before you released notes, uh you called him like in and you guys or let him know that you were gonna do it as a courtesy, I guess, and And what, you had like a call with him and told him that? Yeah, we gave him a heads up.

1:04:37 The next day. And that you know, some people are gonna perceive this as a Twitter competitor, but we don't see it that way. I see. And he responded by getting Chris on a call and saying to him, Well, how about Twitter acquire substack. And you I'm looking for a CEO to run the company.

1:04:54 This is before Linda uh Before Linda Yakarino, like within weeks actually. Yeah. And and see I'm looking for a CEO to run the company. I don't want to be the CEO. So how about you come and do that? And I'll be the chairman. Um And How about you think about that? And so We went on an accelerated process of thinking about.

1:05:16 offer, right? He's saying, Hey, we'll buy you and at this point, you know, you raise some money and You know. you're doing well and he's probably gonna offer you premium and you could b be the head of the whole operation. What did you think, Chris? I guess I tried to imagine

1:05:33 That playing out. And I didn't think it would be what I think of as like a CEO role. Like he runs that place now. Like he makes all the decisions. He's you know

1:05:46 To my mind. done a lot of things that make sense from his perspective, but would not be What I would see as supporting the cause of free speech or as a you know, a a neutral independent platform.

1:06:00 Um I got it. I mean it's it's it was interesting, right? It would have been like one of the most interesting crazy things to to like contemplate doing. But For me ultimately

1:06:14 I didn't think it would Let us make the thing we set out to make. This is on the eve of launching notes and he'd saying like well Do you want to come in and do this and

1:06:24 Hang on, we're not gonna talk about that right now. We need to focus on notes. And the next day we launched the notes, there's this huge reaction on Twitter about Substack. being the Twitter killer now. I think he took that launch as a no, which is fair enough. Yeah. And then that's when the bad things happened. And the bad things were him

1:06:41 Yeah, suppressing sub stack links, acute making accusations about how we're m using the API. Yeah. We had been using for since the start of Substack, we'd been using the Twitter API. So you could link you could sign in with Twitter, you could link your Twitter. And He's

1:07:00 got really mad that we'd been using this API and sent me a bunch of threatening stuff saying, Why are you using this stuff to Blah blah blah. Yeah. Got quite angry at me.

1:07:11 And I guess at the time, I mean, just to put it in context, I mean he was because of the changes he had made at at at X and And sort of the the media narrative and and look, you know, I think some legitimate certainly legitimate blowback and criticism. They were struggling. They were not having there were no advertisers, they're losing advertisers, they were hemorrhaging cash. a lot of people were like, What the what did he do? Why would he buy this for you know forty four billion dollars? Why would he buy now, of course, saying the reverse. They're like, look he's got two hundred million followers and he he he's he's the most powerful probably country.

1:07:47 Right. So In in mid twenty twenty three, that was the narrative. So I guess from his perspective he was probably feeling threatened. Right. And and were you guys

1:08:02 worried that he that that those decisions could have a negative impact on your business. I think he overestimated how negative that impact would be. Like he thought he could kill Substack. And he said as much to me.

1:08:17 He said to you. We can bury you. Yeah. There was a there would have been a time in substantive history when that was true. Like if this had happened in tw in twenty nineteen or twenty twenty.

1:08:29 Like, yeah, I think that really would have like set Substack back a lot. But by the time it went down, the share of substack traffic that was coming from Twitter had been On a steady decline for years. And I think he thought that

1:08:45 it would be like he sort of had the the ability to to crush us. basically sounds like the only course of action was to just let it pass. There was gonna be it was gonna be painful on a certain or number of levels, but you just eventually would just pass. Yeah, I think once we we did that launch we were sort of we were committed. So

1:09:04 Interestingly now. twenty twenty five when Twitter's fortunes have have turned And Substack obviously is also grown and is successful. He actually I've seen him tweet uh links to Substack. So

1:09:20 Clear clearly not an issue anymore. Um As of the end of twenty twenty four you had it was reported that there were about thirty five million active readers and about four million of those people were paying subscribers.

1:09:38 Um, probably a little bit more now by the time we're we're talking. I think we can say there's over five million now. And paid subscriptions to be totally accurate. And that uh that's bigger than I mean the the Washington Post, the Atlantic, the New Yorker. There there's a narrative that you often hear and I'm sure you've heard from people who really are sceptical of mainstream media organizations and the narrative is look

1:10:07 They lied about the Hunter Biden laptop, they lied about Covid um restrictions. Um, you know, they told us that it was no lab leak. as we see the influence of big media organizations. The C and Ns, the

1:10:24 The New York Times of the Washington Posts Decline. Do you think That Their

1:10:31 partly responsible for that, or do you think that it's just that you know, the business model doesn't work anymore. Or or maybe a combination of those things. I w I would say it is A symptom. of the model, a symptom of the structure, rather than

1:10:46 ideological preferences of these publications and the people who run them. And so while I think social media has created opportunity for the skepticism to arrive, it's actually created a market. for kind of conspiracy theory against the dominant media. I think it's actually more of a symptom of the structure of that. That economy. And that in this dismantling of that structure that social media has wrought.

1:11:08 there is a whole lot of reorganization and confusion and volatility That is waiting for order to be imposed upon it again in a new way. But that's not gonna look like the old system. It's not gonna look like a few central pillars who get to be the ultimate sources of truth. It's gonna look a lot more distributed. Um Sub stack is not yet profitable, which is not um unusual, right? It's g it it's gonna take some time.

1:11:33 Um Based on your experience at Kick. Chris, you know, right, there's Things can always go south, and obviously you don't anticipate it, but it can always happen.

1:11:45 How do you How do you protect the future? How do you build Let's say the proverbial moat. around Substeck. There are competitors you may not consider all the the the companies like Patreon or Ghost or

1:12:00 medium or beehive or you know, some of these other even even HubSpot, uh you may not consider those As necessarily as competitors, but Um how do you make sure that You know, the momentum continues and what happened to Kick Doesn't happen to you guys.

1:12:18 You just worry about it very hard. Well, there's two things I would pitch. One is You know, the advantage of having a business model is you can be in control of your financial destiny. And so we're not running the the company to like turn a profit, but the thing that is true and we've kept true Pretty much the whole time is

1:12:39 We don't need to raise money again. We're not on this clock. We have like we are in control of our financial destiny. You have how many employees now, by the way? About a hundred. Okay, so you're small. I mean it's a small and but efficient, right? Because in terms of the What's generated, it just takes a hundred people to do that. Yeah. But this is part of it, right? It's like y y you wanna be in you wanna be in control of your of your future. You don't want to be, you know, the the best time to raise money is when you don't need it.

1:13:07 And so you want to make sure that you're always in that position where you have a a path to accomplishing your goals that is not Like, you know, if if you're if it's possible to build a business this way, which for us it is, it's better to build it where Fundraising is an accelerant but not a necessity. So my industry, right, podcasting has have changed so much since it began, you know, back in the day where you had to plug an an iPod into your computer and download some weird wonky thing. You know, there's there are people like Mark Maron and Joe Rogan and the early days, Adam Carolla.

1:13:39 Now it's a massive business. And so it's changing, right? The the whole And this is natural, normal. How do you see The sub stack.

1:13:49 model changing. I mean, right now most people they might subscribe, they might pay for it, or they might not, but they're getting a an i thing to their inbox, a a letter There are some people who are also doing audio, some people who are making sort of these videos. So what is the what does it look like? What is a successful like sub stacker gonna look like in you know, five years from now. There's a lot of other

1:14:13 platforms and networks that are built around a format. Right. You know, Facebook does text and Instagram does pictures and Snapchat does disappearing pictures and podcasts are for audio and medium is for like there's all of these formats. Other things are built around formats, SubStack is built around you. It's built around the direct relationship. It's built around owning your audience, owning your work, having your own space on the internet. And so we are already live in a world where you can write, you can make a podcast, you can make a video.

1:14:42 Things that you used to need a studio and special equipment and a team to do are gonna become able to be done automatically. You're gonna be able to make a very high quality audio video thing from the palm of your hand. And you know, the thing that we ex we want to do in subside is just bring all of that power to the people making stuff. Alright, when you guys think about your whole journey, right? And I mean, even the fact that you met, you ended up working for doing some consulting work for K mission.

1:15:10 You were on your way out, Chris, and and And then you started this thing. Um, which really was kinda weird and I don't know if if I think a lot of people were skeptical. They were, as we know, as we heard. But now that you s where you where you've landed, twenty twenty five, you're You know, you're eight years into this thing.

1:15:28 How much of where you are now do you attribute to the the grind and the work you put in and how much do you think had the success of it so far has has had to do with just luck and circumstance. Feels like a yin and a yang thing to me. Totally in inseparable. That the luck has to go with the talent and talent has to go with the luck. And the greatest successes come when those two elements A like a perfectly in a mutual dance with each other.

1:15:52 Yeah. When we're starting the company it was the The Two of us and we got the opportunity to build this thing. And it started to show some early signs of success, I said to Chris, like How come we get to do this? How come like not everyone else is trying to

1:16:09 Like Build this kind of company or takes advantage of this like very obvious thing and these Like Dynamics.

1:16:18 And His answer was actually somewhat to what you said in your question was like Not many people have the ability to do this thing. Even not everyone's happens to be in the right position to do it. Chris?

1:16:30 Is it luck or is it hard work? I think it's mostly a third thing. Which is just doing it. Most people don't do the thing. Once you decide to do it. You need to work hard, you need some luck.

1:16:43 But the most of the the great things in the world that don't exist are not because of a lack of talent or because of a lack of luck, but because of a lack of People. Setting out to do hard things. That's Chris Best and Hamish McKenzie, co-founders.

1:17:00 By the way, SubStack has become the go-to launchpad for a new generation of media brands, including some big ones like the free press and the dispatch. Both sites, not surprisingly, were founded by veteran journalists who left big companies to move to Substack. The latest Former Washington Post column Jennifer Rubin's publication called The Contrarion.

1:17:25 Found it just days. After she quit. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And also, please sign up for my newsletter at guyros.com, or you can find it on Substack. This episode was produced by JC Howard with music composed by Rautina Rablui. It was edited by Neva Grant with research help from Imon Maani. Our engineers were Patrick Murray and Jimmy Keeley. Our production staff also includes Catherine Cypher, Casey Herman, Alex Chung, Sam Paulson, Chris Massini, Carrie Thompson, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

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