# Spotify's Gustav Söderström on Why Product is 100% Science and 0% Art

Why You Should Look at the Competition and then Do Something Completely Different & Why Talk is Cheap and Product Teams Should Do More of it; Structuring the Best Debate

20Product · Oct 12, 2022 · 68 min · 15,422 words
Speakers: Harry Stebbings, Gustav Söderström
Source: https://www.996.fm/episodes/20vc--ep-965f8049/

## Cold open

**Harry Stebbings** [0:00]:

This is 20 product

## Intro

**Harry Stebbings** [0:00]:

with me, Harry Stebbings, and 20 product is the monthly show where we sit down with the greatest product leaders to discuss the art and science of product, scaling product teams, and much, much more. And today was such a special one as I was joined by a dear friend and one of the very best in the business, Gustav Soterstrom, Spotify's Chief Research and Development Officer. Gustav also has the CPO and CTO responsibility overseeing the product design, data and engineering teams at Spotify and is responsible for Spotify's product strategy. Gustav is also an entrepreneur and investor who's founded and sold startups that he cofounded to Meta's Oculus in 2014 and then also his first startup, which he cofounded and led as CEO up until their acquisition by Yahoo. Gustav is also a podcast host with an incredible miniseries, A Product Story. It's one of my absolute favorites. If you haven't checked it out, it's a must. And I do also want to say a huge thank you to Shaq, Daniel Ek, Woody Marshall, Coder, and many more. Some amazing questions, suggestions today really did make such a difference. But before we dive into the show today,

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## Conversation

**Harry Stebbings** [4:05]:

Gustav, this is an incredibly challenging show for me to do with, like, a serious face because I know you socially. I think the world of you socially. And so now I get to put on a professional face and welcome you to 20 BC. So thank you so much for joining me today. Thank you for having me. It's an honor and likewise. That is very kind. I've also been stalking the shit out of you for the last few days professionally. And so this has been great fun. But I wanna start with a little bit on you, Gustav. So tell me, how did you make your way into the world of startups and then come to lead the product org at one of the generational defining companies of our time with Spotify? So I'll

**Gustav Söderström** [4:37]:

try to do the brief version of the history of my life. You've got three to four minutes, so just take a look. Cut. So I'm sort of actually this involuntary entrepreneur. I graduated from the Royal Institute of Technology in Stockholm, sort of electrical engineering, computer science. That was the tail end of the IT crash. So there were literally no jobs to be had. And so I found a group of friends. I wanted to work at one of these big, boring Swedish companies like Ericsson or something, but I couldn't get a job. So I decided with a bunch of friends to start a company because all these investments had been made during the IT era in three g and smartphones and so forth. It was all there, but no one believed in it. So we started this company where you could send text messages over data instead of SMS. And already back then, even though you paid per kilobit, was still $11,000 the cost of sending the same 160 characters over text message. So that took off in a little bit in Sweden and in The Nordics. The problem was that the carriers back then controlled the world, and they were selling SMS bundles. They didn't like that. We ended up selling this company to Yahoo because they had the biggest messenger application in the world, but it was desktop only. And they wanted to go big in mobile because mobile was starting to happen here. And they had all these relationships with the global carriers. I ended up working at Yahoo in Sunnyvale for a bit. And I can tell you it was a troubled company already back then. So fast forward about two and a half, three years later, and I think four or five CEOs later, I was back in Stockholm trying to figure out what to do. And through a mutual friend, I met Daniel Ek, the co founder and CEO of Spotify. And he showed me this amazing application because Spotify already existed as an application on desktop. But what he wanted someone to head up with Spotify Mobile was going to be because this was 2008 and the iPhone had just come out, but there was no App Store yet. I got lucky. I had a moment in time where I knew something, how to develop for lots of different mobile phones that many other people didn't know. So that's how I came into Spotify, starting to head up product development for mobile.

**Harry Stebbings** [6:27]:

Can I interrupt you there? Because there's just two things I wanna pick up on first. Number one is, like, Shaq actually told me about your entrepreneurial early days. One thing I've very much seen the best product leaders is really kind of the founder mindset and that accountability and ownership mindset that they bring to product. How do you think being a previous founder makes you a better product owner and product leader?

**Gustav Söderström** [6:48]:

Well, I do think it is the ownership aspect. I can't help but think as a CEO, even when I'm at Spotify, which can be annoying for maybe for the CEO, for my peers, because you think about everyone else's shit as well. But I think it's important to have an holistic perspective. I kind of have to believe in the whole thing. If I don't feel understand why Spotify should succeed, I can't help myself by asking, like, why are we doing it this way? So I have that mindset, and I think it's more more helpful than not. But I can't really help it.

**Harry Stebbings** [7:17]:

I've known Daniel for the last few years. But Daniel 2008, can you just take me back? What was it about Daniel and Spotify that convinced you that this was gonna be what was now a fourteen year journey that you were gonna commit to? What specifically was it?

**Gustav Söderström** [7:31]:

It was two factors. It was the people, Daniel and many of the engineers who worked at Spotify and had built this amazing product. It really was the product. When I tried it, like everyone else, I just couldn't believe that it was true. I thought it was a fake. I thought they had a file server standing somewhere nearby because it was too fast. So it's obviously the product.

**Harry Stebbings** [7:48]:

Shout was running in the background with CD ROMs.

**Gustav Söderström** [7:50]:

Exactly. And then it was a very technology centric and sort of meritocratic idea based culture. It was like fierce debating and the best idea won out. And I really like that. So those were two of the factors. And Daniel was very humble. I said was. He actually still is a very humble person. He claims himself that he's an introvert even though I think he's actually very skilled these days. But just a very mellow person, kind of personality I really like. Nonhierarchical to kinda debate intensely with him. So those were some of the factors. The other factor was simply naivety. You know how they say that ignorance is bliss. I had no idea about the music industry. If someone had told me, there's no chance I would have started. Statistically, it would have made no sense to join a music startup. But luckily for me, I had no idea, so I joined anyway.

**Harry Stebbings** [8:30]:

You're clearly not a VC because there's no such thing as naivety. It's just insight and wisdom that made me feel Spotify the right thing. Alright. I forgot to phrase it the correct way. I I wanna split the show today into two kind of separate parts. One is you have this incredible podcast series, and there's a couple of core themes there that I love and I wanna unpack. And then the second is really unpacking lessons from the Spotify journey. If we start with your amazing podcast series, which I love, I I actually listened to it on my runs, which is wish it was shorter because I'm getting less and less fit. But my question to you is, you say in it, never fight a macro wind, you will lose. What did you mean by this? And can you explain that to me?

**Gustav Söderström** [9:09]:

Sure. So macro winds are these big societal changes that are sort of bigger than any one individual or any one company. So what is a macro win? Typical macro win would be cheap broadband. It's happening. You're not gonna stop it. It's going to disrupt things. You should just accept it. Another one was smartphones, machine learning. It's another such macro wind. These things happen. I still see a lot of companies and product people who try to fight these things as if you can stop them. This has been true for us as well. We've lived through some of these. I've literally had to learn this lesson. And what you should do instead of fighting is obviously to rethink your position, try to reposition yourself so that instead of having this wind blow in your face and slowing you down, you somehow get it at your back. But the lesson is that the quicker you accept it and reposition, the better. You're just not gonna stop these things.

**Harry Stebbings** [9:54]:

Can you give me an example of a macro win that you went in the face of and then pivoted and decided that it was better to have it behind your back, just so I get a feeling for it?

**Gustav Söderström** [10:03]:

Of course. There are two good examples. One is when I joined Spotify, we had what was then a very profitable business model, which was you give the application away for free on desktop computers because people didn't think they wanted to pay for music. Then they start investing in music, playlisting, building libraries. And then they realized that actually wanted to listen to those playlists on the go on their mobile phones. We charge for the mobile application. So simply put, we charge for mobility. And that worked beautifully for several years, and we loved it. VCs loved it. They invested a lot of money. But then all of a sudden, it turned out that this macro wind was blowing called smartphones, And we started seeing people that not only use their mobile phones more than their desktop and were mobile first, but many users that were mobile only. There was no desktop. So we didn't have a free tier at all for these users. So our business model broke. Now we were not incentivized to want to see that in the short term, and we could see our user growth actually starting to slow down. But when we accepted this and we took the pain and the risk of repositioning all of Spotify, figuring out a way to give away the mobile experience for free, even though that was what we're charging for. So we literally changed the entire business model. We instead got this win at our back, and we started growing literally exponentially, actually. Very clear example. If you look at the growth curve, you can see the macro wind blowing in our faces, then you can see when we figure it out that we got it at our backs.

**Harry Stebbings** [11:19]:

Take me inside the room there. How did you get over the fear of the cannibalization of an existing business model that was also working? You make it free. You could have a lot of the premium users churn and just be ad supported users but free. And, actually, you saw the cannibalization of existing user bases. How did you get over that concern, and what did the internal discussions look like there?

**Gustav Söderström** [11:39]:

So I know precisely when we realized this. It was a deck from Mary Meeker that showed the projections of smartphone growth overtaking desktop growth. And we looked at that and we said, holy crap. So we discussed that a lot. We kind of found the confidence ourselves to do this. But the big problem we had was actually that we have other stakeholders in the labels. And the labels didn't see it. They were not looking at Mary Meeker's slides and they were not so keen to risk the entire business model that they had just figured out. So that was actually the bigger problem and we had to wait all up until we had stopped growing and actually started losing users before they agreed to give us the licenses we wanted. But by then, we had prototyped and researched and AB tested a bunch of different concepts. So when we got the licenses, we actually knew what we wanted to do and had already built the experience, and we launched it almost overnight when we signed the contracts.

**Harry Stebbings** [12:26]:

How do you know whether it's a sustainable fundamental shift that you're fighting against or a unsustainable one? Point being that a lot of, like, consumer behaviors were changed in COVID that have now come back and actually have gone back to original behavior patterns. How much data do you need to know whether something is ongoing and continuous versus actually time bounded and temporary?

**Gustav Söderström** [12:47]:

It's a great question. And I think COVID is the perfect example because you knew that this would actually end. The question was this a fundamental shift in behavior or a temporary shift? And we had exactly this discussion when COVID started. It was much easier with something like the shift to mobile. There was no real model where you saw people going back to desktop computers. Another sort of macro shift is from curation to recommendation, whereas Mike Mignano puts it from social media to recommendation media. That's not gonna reverse. So those are quite easy. But COVID was hard, so we literally had the discussion. Should we model this as a temporary anomaly? Keep investing, for example, in the car, even though we saw car usage dip completely during COVID? Or should we just say no one is ever gonna drive again? Let's reposition for the home use case. We chose the former. We're gonna model this as an anomaly. And we kept investing in the world going back to normal. I can tell you that was incredibly painful because we thought it would be over in six months, then in twelve months, and eighteen months later, it didn't look like it was going go back. It's actually only now that we clearly see it going back to the normal behaviors. Home usage going down, car usage and mobile usage going up. So it's hard, we had that discussion. We try to model the world and make predictions about how the world is gonna work. I love models, basically. It's a structured way of thinking that gives you both predictability, explainability, but also shareability. If you explain your models, then others can use the same model, and you can sort of distribute the way you think about the world.

**Harry Stebbings** [14:09]:

What I love doing about these shows is the flexibility I have with the schedules. I'm with you. I love models too. But I'm also aware that you can't predict markets, and sometimes your model is wrong. And don't try and be smarter than the market. I guess my question to you is, how do you know when your model is wrong and you actually just need to change? Twelve months into your investing in the post COVID, we will go back to normal. Should you wait six months more? I mean, especially as a public company, it's even tougher. How do you know when your model is broken, and how do you know when to change?

**Gustav Söderström** [14:38]:

Yeah. Very tricky question. So first of all, regarding models, there is this famous saying that by definition, all models are wrong. That's why they're called models. If they weren't wrong, they're actually reality. But the whole point with a model is it simplifies reality because reality is too complex. So they are wrong. So you're always taking a risk. In data machine learning terms, you're doing dimensionality reduction. Reality has infinite dimensions, and you're reducing it to maybe five. And if you pick the wrong dimensions, you didn't model the spread of a disease, it's gonna be wrong because that was not a dimension you had. And the real world is multidimensional. So that's the risk. One way to try to avoid it that comes from Berkshire Hathaway and how they think about the world is you should use at least three models with different dimensions. If they all agree, chances that you're completely wrong are much lower. By using one model, and I've done this mistake early in my career, you think you figure out how something works. You're like, that's how it works. And then you just do the same thing again and again. And you're using a single model, and you're mistaking the world for being simple. It's just that you manage the model like a small moment in time, and then it breaks completely. So I've gotten better at using multiple models. There is no way to catch all of it. One of my

**Harry Stebbings** [15:42]:

favorite features in Spotify is the Go to Radio. It is also buried, like, three clicks in, and I didn't know about it until someone told me about it on Twitter. And when I think about the shift from curation to recommendation being so central to the like, future of content discovery and content platforms, why is it so buried, and is that a product mistake? I would love to say that someone else's question, but it's mine. It's a perfect question

**Gustav Söderström** [16:05]:

for me. I'm trying to figure out one answer is stay tuned. You will be happy. Another more telling answer is we made choices between what the main paradigm is. The main paradigm of Spotify was playlisting. That's what Spotify was and what we grew up around, the user curation. And then we started playlisting for you, and we had to decide should we have the radio channel as the analogy or should we have the personalized playlist as the analogy? And they kind of do the same job. A personalized playlist within a certain genre like chill is very similar to starting a chill radio. You will get the same songs, actually. We've struggled a little bit with which user paradigm to use. Older people, they like radio paradigms and younger people, maybe not so much. I'm not calling you older, but, you know That is

**Harry Stebbings** [16:49]:

it's fine. It's fine. I'm wearing a Panama hat and You are wearing a Panama hat. Listening to it. I fit in. You're a very old young

**Gustav Söderström** [16:55]:

person. So we're trying to figure out how we can combine these things. Fundamentally, it's a problem of many parts of the application sort of performing the same job for the user, if that makes sense. Is that not a product mistake? I think it's a product mistake. It's very easy to add features, and everyone is gonna ask for many features. It is incredibly hard to remove features. And this is, like, scientifically proven by, I think, Daniel Kahneman and Adam Tursor, where they gave Harvard students a cup. First, they asked what they would pay for the cup. And to the other half of the class, they gave the cup and asked what they would sell it for. And it turns out people value something they owned 1.5 times as much as they value never having had it. That, I think, is a good product lesson. Like, it's gonna be 1.5 times more painful to remove something than it was valuable to give it in the first place. So we're very careful with that, and that's the reason why we have many of those features in the app that kind of duplicate the same use case, and we're always trying to streamline it and simplify it because there is this invisible cost of the application becoming more and more complex. As you said, it's really hard to find that feature. That's because even though it works really well for some people, that's because it competes with the other features. And if we put that on front, we would get another cost somewhere else. So this is the trick of, like, serving enough use cases but not overcomplicating the experience. The hard thing

**Harry Stebbings** [18:04]:

with Spotify, like Twitter, where users love it, and it is such a part of their daily life. You have very visceral feedback and opinions. As you said there, people request a lot. How do you determine between the customer data that you listen to and engage with ingested into product road maps versus those where you say, I get it. Harry's moaning from London about Go to Radio being a couple of lesbians, but it's not a priority. How do you determine between the two?

**Gustav Söderström** [18:31]:

There are a couple of common tricks. One is you separate new users from existing users. You're going to get very different metrics. Existing users will have a habit. Your metrics may go down for a feature. And then if you try it on new users who never had that habit, you may see that if you're not taught the old paradigm, this is actually better. It's just that you train your user base on another paradigm. So that's one trick to figure out sort of some map, what the truth is, if it's actually better in some global sense. And then you can make the choice. Should we take the pain of retraining the existing audience? Because we know that if you just change the behavior, you will be more happy. Because if you never knew this old behavior, we can see that. That's one trick. The other way is to back to radio, to try to figure out what it is you want to achieve. Do you really want a radio or are you looking for a session that you can tune more easily that can go across genre? What is it that you really wanna do and see if you can present that in a way that doesn't complicate the application by just adding more features.

**Harry Stebbings** [19:23]:

I totally get you. And I find that fascinating between new and existing users. I do wanna touch on competition. We spoke about kind of product decision making there. Sometimes, in many cases, often for startups, competition's roadmap drives a lot of bad roadmap. You've said before in in your show, which is look at the competition and then do something completely different. Always love a contrarian opinion, so this is great. But why do you believe this? Can you explain it to me a little bit on why it's better to do something completely different?

**Gustav Söderström** [19:49]:

I think this is especially important for a smaller company going up against a bigger company. If you assume that the people in the bigger company are smart and competent people, which I think you should assume, what they're doing, their strategy, probably makes a lot of sense to them. They're doing it because it plays to their strengths. Maybe they're leveraging their distribution, their hardware, their user base, their payment method. And so if you think about it, should you as a smaller player go up and try to do their strategy with less people, less budget, and less assets, you're just going to become a lesser version. Mean, that's the likely outcome. So especially as a smaller player, I think you should do the opposite. Try to figure out if there is a position where that bigger player isn't playing right now and ideally doesn't even want to play because it's contrary to their business models. There is some sort of collateral damage or what in strategy terms is called a counterposition. If you're a bigger player, it's a credible strategy to say we see some new behavior, feature, user interface really working. Let's implement it and give it to our user base before they find it in this other user base, and you've seen this play out in the world. That's a reasonable strategy if you're a much, much bigger player. But Spotify has always been and still is a much smaller player than our competitors, So so we tend to try to think about contrarian strategies.

**Harry Stebbings** [20:59]:

Can you walk me through an example where you decided to do something completely different as Spotify to your competitors, where it worked or didn't work, but where you chose to do something completely different with this mindset?

**Gustav Söderström** [21:11]:

Back to mobile. I described earlier this macro wind of smartphones started really blowing hard, and we needed to figure out a free tier for the mobile phone. It was paid only at the time. If you looked around then and you said, who are biggest competitors on mobile free music listening? It was and still is YouTube. And so what was the YouTube experience? Music was and is one of the biggest use cases for YouTube. They have a fantastic experience. That experience is foreground on demand playing with video. That's what you can do on YouTube. So it is amazing for discovering new music. But then when you put the phone in your pocket, the free application doesn't background, so it stops playing. We looked at this, and one strategy would be that is what the market wants. That's the biggest player. We should go and get those same foreground on demand video licenses that YouTube has. But the contrarian approach which we chose in this case was to say, what if we did the complete opposite? What if we licensed a functionality that would work exactly where YouTube stops working? So we actually did the opposite. We licensed a background shuffle tier where you can play any playlist you want in shuffle mode in the background forever, but you actually can't play on demand in the foreground. So it turns out that Spotify Mobile works exactly where YouTube Mobile doesn't work. So we kind of said, okay, let them keep the foreground discovery that they're really good at as long as we get all the background listening. And for us, that's been very effective because it turns out that most of the listening is actually in the background. So that was an example of trying to be as contrarian as possible. Can I ask you a

**Harry Stebbings** [22:36]:

bold question? How does that thinking change when Spotify now has video? I listen to all of my podcasts on Spotify. I love it as a podcast player now, but actually, there's now video. And often I'm listening to it, like, walking, and I'm kind of looking at it. And I'm in London. I'm kind of about to get run over. And that would worry Shaq. How does that change your product paradigm thinking when suddenly you do actually have to worry about user engagement and video, not just background play?

**Gustav Söderström** [23:02]:

So back to the contrarian view, Spotify is the vast majority background application. And so that's what we optimize our music licenses for. First of all, in podcasts, we don't have to license. So we are allowed to play video on demand in the foreground as well. But if you look at what use cases we're going after, because we're mostly a background application, the use cases we're going after are these long, mostly backgrounded sessions. Right? Podcast, typically. We're not going after the foreground sort of silent jujitsu videos that make no sense when you background them because it's just a lot of panting. We're going after the traditional podcast. And so what we did, starting actually with the Joe Rogan podcast, was we built video into Spotify. We didn't know what the usage would look like. But without saying exact metrics, what happened was exactly what you said. People consume the majority of these shows in the background, but they do bring it up every now and then. We are using video mostly for the talking heads format, if that makes sense. There are these famous moments of Elon Musk smoking weed, for example, on Joe Rogan podcast. It turned out to fit very well with us.

**Harry Stebbings** [24:03]:

You disappointed me. I thought we could do the same. You've got some nice garden plants in the background. I'm in Sweden

**Gustav Söderström** [24:08]:

here. It doesn't work that way. I'm in London.

**Harry Stebbings** [24:10]:

It doesn't work that way either. But, no, I get you totally. Can I ask that? Is there a time when actually you sat around the table and you went, oh, shit. We should have copied them. It could be YouTube. It could be any of the other competitors. We're actually doing the different didn't work out.

**Gustav Söderström** [24:25]:

There are certainly tons of things which should have been faster. I think lyrics is an example of that, which we now have. It's very engaging. That was obvious. So we've certainly been super slow for various reasons on these things. In that case, it wasn't really because we had a contrarian view. It was actually, which is often the case, because of how the music industry works. So if you work normally at at Twitter or Google or Facebook or something, you're as a product person, what you do is you try to figure out what the best possible thing is that you could build, and then you try to build that. What you do when you work in the music industry is you try to figure out what the best possible thing is. Then you go to the labels, and you try to license the lowest common denominator of what is licensable. And that often means that you can't build the best possible product. You have to build with much, much narrow constraints. And often, actually, the cost is a constraint because the job of a music label is to take a piece of IP and try to sell it to you as many times as possible. A foreground right, background right, video right, sync rights, all of these rights. You can see that as very annoying as a product person, or you can do what I do and see it as constraints are what makes the world interesting. Can you do something really good even within these narrow constraints? That's actually been the biggest problem. I would say for that reason, if you think about it, there hasn't been that much innovation in music listening. It is search, playlists, and so forth. I mean, we're working really hard, but it's not like other mediums where things change completely. I think the biggest innovation clearly in the last six, seven years has been TikTok, who found, like, a new format of using music for something completely different. How do you think TikTok did that?

**Harry Stebbings** [25:51]:

Sorry. Help me understand that, weird.

**Gustav Söderström** [25:52]:

So it started in 2014 as Musically. There was a lot of trial and error. I've spoken to both the founders, and there was a lot of trial and error. And they sort of happened on this use case, and they didn't start by going on licensing stuff. There is a beauty in being small enough that people don't care, and that's actually a problem with being big. We can't really just try things. We have to license them first, which means we take the cost up front. So back then, they were small enough to try this, and they tried to do something different actually, but they found product market fit. They kind of saw in the data what people were actually doing with these clips was recording dance videos, and they leaned into that. And then later, they started licensing, and then they got acquired by dance and got more distribution and so forth.

**Harry Stebbings** [26:29]:

Final thing on your shows I wanna touch on before we dive into basically a free for all from Daniel Ek, Alex Norstrum, who finally actually responds. Thanks, Thanks, Alex. It's a crucial one, but it's better to be lower on a taller mountain than higher on a smaller mountain. Sounds wonderfully poetic. What did you mean by this, and why is that?

**Gustav Söderström** [26:49]:

When you worked with something for a very long time, whether it's certain type of machine learning algorithm or maybe a certain user interface or a business model, by definition, it's going to be very well optimized because you spend so much time on it. It's going to be very efficient. But that also means that there isn't that much potential left in it because you've optimized it. You're close to the summit of that mountain. And so that's a problem. And most companies get there. If they're good, they get there. So when you're at that peak, the problem is to get somewhere, you have to sort of change something fundamental, which in this analogy is you have to jump to a different mountain. And that may sound a mountain that has a higher summit has more potential. The problem with that is when you jump from the peak of that first mountain, you're actually very likely to land somewhere at the base of the new mountain. So you're actually gonna lose altitude, which means in product terms, your core metrics may go down. And in many cases, you might end up spending millions of dollars in a year just to get to where you were in the old paradigm. And as you can imagine, this is tricky in a public company. Wall Street pressure and many employees and boards and so forth. I've literally had this problem where speaking to c levels and boards where you explain that we spent millions of dollars in a year to get to exactly where we were twelve months ago, people ask, so exactly why is that a success? Right? But then twelve months later, you may have lowered your churn by 30% or something because you've iterated for another month. This notion of first having the guts to move from one mountain to another and then having the patience to iterate your way back up to even control is very tricky. But it happens inevitably, and you can't avoid it because you're gonna die if you don't.

**Harry Stebbings** [28:18]:

Was this the case with the introduction of podcasts? Obviously, we made the shift purely away from just music to obviously podcasts and then also kind of video podcasts as well. Was that the case where actually it took a year to invest to reach feature parity with podcast players? I'm intrigued on that one.

**Gustav Söderström** [28:33]:

For sure. Actually, podcast was mostly additional, so we didn't go down in metrics. Those cases have been when we change user interface, for example, completely, or you change a different recommendation algorithm, or you change something fundamental, your metrics may go down. Podcast was different because it was mostly additional, but it is true that it took a long time. Our internal goal was get the podcast catalog on the service and build best in class podcast player. Feature parity, that was the first stage. And then, obviously, the idea was to pull away. To your point, that took over a year. It was painful to spend that time, but it wasn't the problem of actually losing altitude in the meantime. Where

**Harry Stebbings** [29:06]:

did you lose altitude? If you think back, where was it like, oh, god. We're back at the bottom of this mountain.

**Gustav Söderström** [29:11]:

Fuck. So let's take the same example that we discussed because there's context around it. When we finally launched this mobile free tier that was contrarian to YouTube and that risked our business model, what happened was leading up to that, because fewer and fewer people used the desktop free tier, actually, from the outside, what happened was our conversion metrics looked better and better. It looked like a larger and larger percentage were becoming premium. But that's not because more were converting. That's because the free user intake was going down. Right? So from the industry point of view, the conversion was at an all time high. And what do you think happened when we launched this massive free tier? It just dropped. Everyone downloaded the free app. No one converted for months. Right? The MAU metrics, the growth was very inspiring. That was an exponential curve, but premium conversion was an exponential curve in the other direction. And as you can imagine, many people, labels and investors, were wondering if that was gonna catch up or if this was if we were down to, like, single percentage point premium conversion instead of, like, thirty, forty percent. It did catch up. First, we also needed to invest in ads monetization. So basically, the analogy here is user metrics went up, but monetization, both free ad monetization and paid conversion, that dropped severely in altitude. Are you

**Harry Stebbings** [30:19]:

shitting yourself in this moment? You have your board, like, putting pressure on you. You see single digits conversion. Investors are putting pressure on you. Are you nervous as a product leader?

**Gustav Söderström** [30:29]:

I think you should always be somewhat nervous and paranoid. And yes, I would say this. I had a lot of faith that conversion would go up because we had seen so many years that the core correlation was the more you use the free product, the more likely you are to convert to paid. We call it the more you play, the more you pay, which always made sense to me. You're going to start paying for a product you use and love. You're not gonna pay for something you don't use. Right? So getting it to use it more means you're gonna not want the ads, you're going to want offline, you're going to want speech. I was pretty certain of that. That was my worry. The worry when we launched this free tier was if it was actually good enough, this contrarian hypothesis that we had. It could have been BS. It turned out to be true, but that we couldn't test at scale really. So I was very nervous about that. I think investors and labels are much more nervous about the conversion metrics and the ads metrics. And also, to be quite honest, I wasn't responsible for the conversion of the ad metrics. So maybe other people were very nervous about that. That. But they did a great job and they caught up.

**Harry Stebbings** [31:23]:

It's wonderful when you don't have responsibility for certain things in the pressure zone. It's funny. I speaking to kind of other people within the org, I I spoke to Daniel before the show. The number one thing that he said that I had to ask you was he said, ask him about talk is cheap. I wanna dive into this. What is talk is cheap? What do you mean by this? And how does that come out in how you communicate?

**Gustav Söderström** [31:42]:

Bleed? Ah? It's sort of play on words. I believe deeply in this notion of Socratic debate. And I love debating with smart people, and I fundamentally believe that if we pay these high salaries that we pay in the tech industry for what are supposedly the best brains in the world, we should really maximize the value of that sort of rented brainpower. And yet, I find that most, specifically most US companies, they're quite hierarchical, and very smart people often don't really understand what they're doing or why, and they're underutilized. And if you think about it, that means they're actually overpaid for what they're doing, not because they're not smart enough, but because they're not leveraged enough. In the tech world, for a long time, there's been this notion of talk is cheap and that code decides arguments. So what I decided in order to sort of poke fun at that is to say talk is cheap, so we should do much more of it. In fact, just talking and debating with really smart people who are not afraid of you, importantly, which I think is also sort of a Swedish societal trait that you're not so afraid of authority, is way cheaper than writing code. Writing code is one of the most expensive things you can do. So this thing of code decides argument I never really bought, that you should only do when you're quite sure. Writing and shipping code to millions of people and waiting weeks for AB test is not cheap. And my favorite example of this is the Greeks, and I guess it was Democritus, basically reasoned his way into the atom in fifth century BC. That shows how far you can get with just reasoning and debate. So it's very powerful. I think if you do it right in structured ways with the right people, sometimes you can sort of reason your way all the way to the end of something and literally save years by not doing something. And so that's what I mean with talk is cheap. Instead of having only one once in my teams, I tend to have a lot of quite long meetings with the entire team where we debate something. Even if it's like one person, quote unquote, owns it, inputs and the pushback from the rest of the team makes that person and that idea much better. This is not new. This is what NASA has done forever. But for some reason, it's not that practiced, I feel. People talk more about the opposite, separate swim lanes rather than how to work together.

**Harry Stebbings** [33:34]:

I'm gonna dive in here and put my size tens in, and you're gonna tell me I'm a moron. I think talk is very expensive, especially in early stage companies. It's about speed of execution. It's about getting shit done. And I've invested in a couple of companies where, oh, we wanna talk. We wanna debate. Yes. Let's theorize on the future of privacy. No. Do shit. Learn. It's alright. Go. Go.

**Gustav Söderström** [33:54]:

Go. Why am I wrong? The way to think about it is there's a difference between being fast and being right. You can go very fast to nowhere. You ship code every day. But if you're fundamentally wrong, you're just gonna get to nowhere extremely efficiently and fast. I've found, especially if you're doing a more complex thing, and maybe this is actually because I come from the music industry where building product had to be licensed as the lowest common denominator between three, four majors. The impact of being wrong being three, four years because that's a term of one of these licenses. And maybe we've been trained as a company to be more careful because the cost of being wrong was incredibly high. But I actually think that cost of being wrong forced us to model the world better and longer, maybe because we were afraid of mistakes, but I actually think that grew into skill at Spotify. Of course, you can debate endlessly. You need ownership. You need to make decisions. And Spotify has certainly been guilty of being too unclear in who owns something, and it can slow the organization down. But fundamentally, I think now we have a really good balance where quite a lot of people actually have a fundamental strategic view, and this debate builds a lot of alignment that actually makes you faster, especially if you need to do something that's bigger than your own team. My final one

**Harry Stebbings** [35:01]:

on this is I do like it in many ways, especially for larger companies. Often, more junior people or even middle tier people will not feel the security to express their true opinions against Gustav. You say something and you say it with energy and charisma and conviction. It takes quite a lot if you're new or junior to say, Gustav, I totally disagree with you. How do you think about creating environments of safety where more junior people can have debate and disagreement in a productive way?

**Gustav Söderström** [35:27]:

I saw that shift pretty clearly when we started hiring more, and US people were just used to hierarchy. There were a lot of misunderstandings between Swedish people and Americans in many ways. Swedish people are better at some things, but they're much worse at other things. They do this Swedes do this form of silent disagreement that Americans interpret as actual agreement, but it's not. You're just silent and you disagree. So lots of cultural challenges there. But I think the way to do it is to model the behavior. Back to what I liked about Daniel, is he models that behavior. So in his team, you can debate quite fiercely. You can tell the CEO in a pretty heated voice that you disagree and you don't like that and you're not gonna get fired. I think it starts there. I try to do the same thing, having heated debates with my direct reports, often in front of their direct reports. And sometimes it's a little bit shocking maybe for them. They figure like, oh, now my boss is gonna get fired. And then he or she isn't, and it's fine. And then they learn that, okay, it's apparently okay to disagree. That doesn't mean, to your point of efficiency, that you don't need to make decisions. You need to sometimes disagree and commit. But I try to call people out in a positive way in the meeting and say, like, what do you think about this? And, obviously, the first time someone might be nervous. But if the rest of the people in the room said what they actually think, other people tend to as well.

**Harry Stebbings** [36:36]:

Does Zoom and COVID change the way that you do these sessions and these, like, debates? And do you feel that there is a change in the quality of the debates in a virtual versus a in person world? I've

**Gustav Söderström** [36:49]:

been trying to figure this out. I actually think some of them have gotten better. The notion of seeing everyone on screen and having to sort of mute, it's given a bit more structure because you have the obvious problem that some people would dominate a discussion when it's live. And I have actually seen less of that problem over Zoom. The other thing I've done, is interesting during COVID, is I've simply put my AirPods in and then had, like, remote walk and talks with individuals or with groups of people where you walk for a few hours and sort of group talk. So I thought when COVID happened that what would really suffer was strategy discussions and that kind of ideation, but it hasn't. So I would say one of the things I also tell my teams that I think is quite different from what many other companies do is I find that a lot of executives, they look at their org and they try to split it as much as possible. They try to divide and conquer and cut up the org in as many independent units as possible for the purposes of sort of parallelization. That makes sense from a point of view. I've chosen to do the complete opposite in my organization because even if I have a really big organization with thousands of people, at the end of the day, it's just one user who is going to use this application. They're not gonna care whoever built this. They don't care about who the library team is or who the search team is. The experience needs to feel as if it was built by a single developer for a single user. So when people come and talk to me about swim lanes and how they want more independence and so forth, I tend to tell them that they're doing the wrong sport. We're not doing competitive swimming. We're doing synchronized swimming. It's much harder, but it's also much more beautiful to watch. That's what we want the product to look like. And that means that it's quite different to work at Spotify than many other companies. You're going to have more debate because I'm always trying to synchronize my leadership team instead of trying to divide them. Basically, what I believe in is this old maxim of, you wanna go fast, you go alone. You wanna go far, you go together. Certainly, Spotify wants to go far, so we overemphasize on that.

**Harry Stebbings** [38:34]:

In terms of synchronizing leadership, I'm too interested. What have you done that has worked and what has not worked that you've disregarded?

**Gustav Söderström** [38:41]:

If we start with what has not worked, the mistake you can do in this, not having swim lanes, it's very unclear who's responsible for anything. Everyone is responsible for everything. No one makes decisions often in Spotify because they're too nice. That's actually a bigger problem than people being too aggressive. In other companies, you may have the opposite, that if it's unclear, people are gonna power grab. I've seen the opposite. It's like people don't wanna step on other people's toes so they don't make decisions. So that's a problem with this model. So you still need to make it clear where the ultimate decision or responsibility and accountability lies, and that's a balance. If you go too far, you're gonna create a swim lane and this person's gonna run away and do something and think that everyone else in the company is a moron, and everyone else is gonna think everyone else is a moron. The tricky thing with this is finding the balance of accountability and ownership so you feel agency, but still having a single strategy and having alignment. So I'm kind of forcing, let's say, you own what the end user experience looks like. You actually have to take your strategy, bring it up in this forum, debate it, and defend it. It may be other people disagree and they have to disagree and commit, but your responsibility is to be able to explain your strategies and answer these questions. And if you're there and you can't answer any of these questions, you're probably gonna adapt. If you're there and you can answer all these questions, then it's fine. So it's sort of self regulating. But what I'm doing is I'm forcing people to sort of bring up their ideas and have them not critiqued, but have them debated.

**Harry Stebbings** [39:57]:

We mentioned, like, hierarchies there. Often with scaling companies, bluntly, leadership changes are very normal, and they happen. And they have happened at Spotify as they do in every company. You and Alex, I believe, are the only ones who survived multiple layers of leadership transitions, obviously, with Daniel. My question to you is, and a question from Shaq, how did you have to reinvent yourself with each stage, and what moments did you have to develop the most? So it sounds

**Gustav Söderström** [40:22]:

like it's an episode of Hunger Games, and we're the only ones

**Unknown** [40:27]:

The only ones left. You're gone. Cake or death.

**Gustav Söderström** [40:30]:

Cake, please. So I think there are two pretty distinct moments. One is in the early days coming into Spotify and having done my own startups. Those startups were small. When when I sold them, they were 20 people or something like that. So I had a very distinct leadership style, which I sort of learned in the army, is leading by example. Very simple but very effective. If you want people to do something, you just have to do it yourself first. Right? So if you want your team to work weekends to hit a release, bring your sleeping bag and you sleep on the floor next to your team. If you can't code, then you go and buy pizza for the team or something. It's incredibly effective. And so for small teams, I still recommend that, and I think people underestimate it. But I came to this point at Spotify where it didn't scale. You you can't sleep in that many different rooms at the same time, and I just had to change. And that was quite painful. So I had to change from this sort of leading by example. It was painful in two ways. I ran out of time, too many teams, and also you can't really be that deep on everything. So I had to change my leadership style and instead start to coach other leaders to lead teams. And that was a painful moment for me because I didn't really have any coaching or anything like that. I just had to sort of reason to myself, what is it that's happening? Why am I constantly running out of time? And when you do something that works, you're likely to just keep doing it and keep doing it. So that was one challenge. Another challenge was when deep learning really happened around 2014, 2015, something like that when it started happening. And I had been out of university for quite a long time, so I didn't really code anymore. And I felt that I wasn't deep enough in this to credibly lead this change because it was very clear to me that it was a fundamental change. So I basically had to go back to school and start from the basics, start reading the math, coding, doing all the examples, bottoms up, and implementing all the code. Then this took a long time until I could start reading scientific papers and sort of educate myself on this. That was hard because it cost so much time for me and for my family. But I think it was incredibly important, and it certainly paid off for me and, hopefully, for the company. But that was tough because this was a tough time for Spotify as well to find all that time to reeducate yourself on something rather complex. When something like crypto comes along, if you're going to be a technology leader, you need to understand it deeply. Otherwise, you can't evaluate what you should do. So that was another moment of, okay, it's back to school again. You have to start coding. You have to read. You have to start reading papers. It's hard to keep up with. It's easy to slip into, like, I'm just a manager now.

**Harry Stebbings** [42:46]:

Totally agree. It's hard. You could have hired in. You could recruit ahead of ML. You could bring those skills in house and remain in the same position that you are. Why did you decide to integrate vertically yourself versus add on with an existing talent? I

**Gustav Söderström** [43:00]:

mean, I'm an engineer at heart. I hate working for people who don't know what I'm talking about. If you talk to your boss and you're like, this guy or this girl doesn't have a clue what I'm talking about, I have a hard time respecting them. So that's how I feel. I feel like an imposter if I don't understand what I'm supposed to be responsible for. Second thing,

**Harry Stebbings** [43:15]:

whether it's sleeping in the office with your team, whether it's the late nights running to get the pizza, whether it's going back to school to learn ML, your family respectfully are the ones at home without you. How do you communicate the value of what you're doing to them where they see the importance of why dad's not there?

**Gustav Söderström** [43:32]:

I ask them to listen to the podcast. No. It is a great question. So I've heard many people talk about this. I've certainly felt it myself. You're so engulfed by your work. You get a lot of feed positive feedback from work as long as at least as long as the company is going well. And you try your best to be a good leader and inspiring and so forth. And then at home, you're actually not inspiring at all. You kinda suck. And so my wife, is the one who said this, I need to come and see you at work every now and then so I understand what it is you're actually good at. Because at home, I don't see it. And I think she has a really good point there. Need to be impressed by each other. And remember that because when you see yourself day to day, you mostly see the the not so impressive side of each other. So we try to do that. I try to make sure I see her doing the stuff that she's really good at, and she's made sure that she sees and cares about some of the stuff I do. And then you find this, like, love and respect for each other, and you refine it. That's the best way I've found. I try to do the same with my kids every now and then, bring them along and see what I do. And that helps. But there's no cure for, like, you wanna spend time with your family, and I am quite religious about that.

**Harry Stebbings** [44:35]:

Aasta Perel, who obviously spoke your brilliant minds, and I'm sure you know well, but she says you're most attracted to your partner when they are in their element. When your wife sees you leading a product review, she's like, oof, Gustav, maybe. I'm sure. And likewise, vice versa. I hope so. Final one on on actually just you, and then we're gonna do a near death experience and then wrap up with a quick fire. Do you have any other you know, I've seen you and your wife, and it's this beautiful marriage and relationship. Do you have any genuine relationship advice to me on what it takes to have such a strong and loving marriage and relationship?

**Gustav Söderström** [45:07]:

Tricky question. I actually met my wife when I was 20, 21. She was 19. We didn't marry for many years. We had a very long sort of trial period. It's like a freemium model, right? So when we married, we were pretty sure. So we worked together for a long time before we married. I was working quite hard. I was traveling the world before I started working very hard. She studied and traveled. We lived in different places. So we had a lot of freedom and had known each other for quite a long time before we actually started living together. So I think that was important. Neither one of us felt I need to go explore and feel like I'm missing out. We had done many of those things even though we met earlier. I would also say that my wife and I were certainly different in many ways, but we are very similar in values. We almost never have disagreement on sort of values of what we think about things. Then we are very different in terms of our skills, completely different, and I think that's a benefit. She's fantastic at the things I'm really bad at. We complement each other really well.

**Harry Stebbings** [46:02]:

And we all share a common dislike of, like, loud music and parties. I remember congregating with you in a corner. But no. I totally get you and I appreciate that. Final one on just the leadership. Do have to ask you. You come across as so self assured, confident with conviction. When you review your leadership stagos, Gustav, is there any elements where you're like, I could be better here? That is a weakness of my leadership.

**Gustav Söderström** [46:23]:

I think everyone has impostor syndrome. And certainly, you're fortunate enough to work in a company that grows this much, even if you have the same title, I've been sort of CPO, CTO for several years, it changes every year because first you're a CPO of a tiny Swedish company, then you're a CPO of a Scandinavian company, then of a global company, then of a listed New York company. The job changes all the time and every time you feel like there's no way I can be that person. You're an imposter all the way, I think. I think I've grown to understand my weak spots better with age. I already told you one, which is I sort of have this global CEO perspective, which is helpful. Think it's one of the reasons why Daniel likes having me around because he feels like I care about the outcome of the company. But it is also tricky when you get in other people's shit. That's always tricky. So I have all kinds of of flaws.

**Harry Stebbings** [47:10]:

I would also say elegance of communication. It's tricky when you get in other people's shit. Gustav wonderfully put. I mean, so beautifully elegant. The final element that I do have to touch on before a quick fire. I spoke to Mignano before the show, and he said there are many, like, near death experiences that are kind of wonderfully entertaining slash educating. If you were to choose your kind of favorite near death experience to tell, what comes to mind for you?

**Gustav Söderström** [47:34]:

Well, like Mike said, there are actually a few. I've seen Spotify have negative growth, actually losing users and contracting at least twice. And I I speak to people in the industry. It's very rare. People have seen that, but the company never survived to talk about it. Right? It's very rare to actually see it and survive. But I think the favorite near death experience story that I don't think is widely known quite early on, we talk about the labels and negotiation with the labels as sort of being frustrating, but it's not in a sense because it is their job to represent these artists and try to maximize the value of their IP. And I actually think they're doing a good job of it. It can be frustrating as a product person, but we've developed this really good relationship with the music industry and these labels. But early on, it was different. I don't know that they actually believed that Spotify would work. Maybe they felt that unless you could get access to cheap VC money here, expecting us to sort of belly flop over. And so it was more a tenuous relationship. And they certainly didn't understand that model. And so they were very scared of the free tier, the desktop free tier. And their notion was that if you just make the free experience worse, more people are gonna convert. And I was of the opposite notion, as I said. I think the more you play, the more you're gonna pay. That's what the data showed. But one of the labels sort of put a gun to our head and said, you can't have a free tier anymore. In that case, we're gonna pull our catalog from free and premium. And so for us, we decided it was existential, and we decided to fight it. So we built this thing called the switch, a switch that you could pull that would basically remove, like, I don't know, quarter or a third of the music catalog, will break everyone's playlists, basically, be a horrible experience for both free and premium users, while our competitors would have full catalogs, so probably catastrophic. But we decided to fight it and say, this is important enough that we have to take that risk. So we built this, and I remember sort of being responsible for the one who should pull this switch. And we had a team negotiating the licenses. So we were supposed to pull the switch at midnight and basically take off this catalog, and millions of users would get this message like, your music is gone. Somewhere around half past eleven at night, we were sort of starting to say our goodbyes to each other. Then Panic. And that was a pretty scary moment. And then the call came in not long before midnight that they had backed down, and we could keep this catalog. And so for me, that was sort of our Cuba crisis. I think we were very close to total annihilation in that moment. God, that is pretty terrifying. Why did you decide to fight? I don't think we had a choice. We believed in the strategy we have. We believed that this was the model. At least for us, freemium was the only model. We had seen other players. I think it was like Nokia comes with music and stuff who try to go straight to premium, and it didn't work. People didn't think they wanted to pay for music at the time. You needed a free tier. For us, we had to make sure that this was a credible threat, that we were actually prepared to go down, and we were. We would have. I don't know what would have happened, but we were. Final one before the quick fire.

**Harry Stebbings** [50:11]:

Well, you mentioned the constraints that labels bring and that licensing brings. If labels and licensing were entirely Spotify's, entirely integrated, in a hypothetical world, from a product perspective with the removal of constraints, what would you do in an ideal world?

**Gustav Söderström** [50:25]:

I think what I would do is I would try to make the music experience much more interactive. I think this is what you see with TikTok as well. I think users want to participate in the music. They want to use the music. Today, they can use it to make dance videos, but I think there are so many talented musicians out there, but the licensing world means that they can't use a beat from the song that they love. If you think about coding as an analogy, when you wanna learn to code, what you do is you go to GitHub, and then you have this vast library of of open source code that you can use and that you can look at and that you can start prototyping from and building and learn from. There isn't anything like that in music. There is no GitHub for music. That's probably what I would change, and I think that's the reason why music has actually had very little innovation. The track is sort of still three minutes and an intro and two choruses 100 a years later almost. That's probably what I would try to do, just innovate on the formats.

**Harry Stebbings** [51:12]:

I read somewhere about Olivia Rodrigo and how she has changed the structure of her actual songs to accommodate the changing algorithms of music, whereby choruses are much more brought forward. Is that true? And is this a new music creation process to fit technology?

**Gustav Söderström** [51:28]:

Absolutely true. We've seen small versions of that as well. When you move from the download world to the streaming world, there is, in a financial sense, no marginal cost to try another track, which means you're gonna start exploring more, so it gives more artists an opportunity. You're also going to start to listen to a lot of new music, like sleep music and focus music, whereas if you paid a dollar per three minutes, you probably wouldn't soundtrack your sleep. Entire industries popped up because the business model changed and they adapted the music, but you also see it because people now have shorter attention spans. You can see the chorus moving closer and closer to the beginning of the song. Right? Everyone is trying to optimize for the first few seconds. And I don't know if I think that's good or bad, but it is what it is. Like, incentives and systems drives behavior for sure.

**Harry Stebbings** [52:10]:

Yeah. No. I totally agree. And we see it on TikTok. It's all about grabbing the attention in the first second and a half, which is absolutely smackering when you get to my age, Gustav, and you have to be in front of the camera. But anyway That's why you have a hat. But I wanna dive into a quick fire. I could talk to you all day. So I say a short statement. You give me your immediate thoughts. Does that sound okay? That sounds good. This one was actually from Daniel, which is what is the future of podcast and and audio? Audio? And he added, will future Harry have a job? Which was an unnerving addition.

**Gustav Söderström** [52:38]:

I can't say exactly what it is. That's a secret. But what I can say is that I think it is at least as large as social networking, two, three billion plus. The way I think about it is I think music and actually podcasting is a core human behavior like communication, and that means that the total addressable market should be the same. That's the reason that I keep working here. I think we're far from scale at this business. Not

**Harry Stebbings** [53:00]:

on schedule, but I'm intrigued. Do you agree with Mike Mignano's suggestion of the disregard of The Social Graph and the movement into the media recommendation engine?

**Gustav Söderström** [53:10]:

For sure. Spotify went through this journey, and this is one of the macro winds that we saw quite early. And Mike and I have discussed this at length. Spotify started as a I wouldn't call it social media. I would call it curation media. Different version of the same thing, which means the Internet started with you taking something offline, friends, books, music, and then asking your users to curate it into graphs, playlist, friend graphs. That was the pattern. Right? And that's where Spotify grew up. And then it shifted from curation to recommendation, where users weren't prepared to put in all of that work to soundtrack themselves. We actually had an in between, which was editorial, where we had editors or professional playlisters that helped curate for you. But the natural extension of that is to start combining the editors with machine learning. Right? And now we have many pure machine learning set. So we actually made a bet on the shift from curation to recommendation or social media to recommendation media four or five years ago and rebuilt the application quite drastically. And today, I would say we are a recommendations based company much more than a curation based company.

**Harry Stebbings** [54:05]:

Completely unfair again, but joys of it being my show. Which competitor do you most respect and why?

**Gustav Söderström** [54:11]:

I have a great deal of respect for all of these sort of big tech companies, the usual suspects, the Google and YouTube, Apple, Amazon, Facebook, and so forth. But what I think is interesting specifically and impressive about this set of companies that I think is different from the previous set of companies, I think there's a reason we call them technology companies. And some people say, that makes no sense. Like, car companies were also technology companies at the time. Everything was a technology company until it became old. But I do think these companies are a bit different because I do think they think of technology itself as the strategy. What do I mean by that? I mean that people try to label them. They try to label Amazon as a book company and then as a book and diapers company and as an everything store. Then they started doing AWS and people can't pin these companies down. Same with Google. They were a page on the internet, search page, then they became the start page of a browser and then they became the start page of a browser of an OS and they did email and then they did photos and so forth. These companies, they refuse to be categorized as what they are and they keep changing all the time. And I think it's because they think of technology itself as a strategy. So technology is this gift that is going to present opportunities to you every five years. It's going to be a broadband, a smartphone, an AI, a crypto or something. And the job of this company is not to say like, no, we're a car company. We're gonna do cars. They're saying that we're a technology company. We're supposed to understand and master these technologies very quickly and then figure out how we can change our business model to leverage these things. And that's why they keep changing. And so I think there is some chance that these companies will be around longer because they refuse to answer to the question, what are you? They just say like, I don't know. Ask me tomorrow. They keep changing. And that's how I wanna think about Spotify as well. One It's of the reasons we went from music to podcasts and now to audiobooks. And people sort of wanted to keep us in the, you're a music company. You shouldn't be doing this. And then it's like, okay. I guess you're an audio company, but you definitely shouldn't be doing video. Like, people wanna sort of keep us back, but I don't think there is any stopping. I think you always need to, like, ladder up. And I think of us as a technology company in that sense. My job is to understand technology and how we need to reposition ourselves all the time to leverage this new technology. There's no reason why that we would be at the end of history right now in terms of technology.

**Harry Stebbings** [56:15]:

It's one of the biggest lessons that Shaq taught me, which is people always want to put you in a box, number one. And two, you have to earn the right to do the next thing. But what's got you to where you are won't necessarily be what gets you to the next thing. And, actually, you have to change and adapt. And it's one of the biggest transformations I've had, again, thanks to Shaq. Which product leader outside of Spotify do you most respect and admire?

**Gustav Söderström** [56:37]:

People answer mostly the same things. But to say something unexpected, there is a product that I've specifically fallen in love with over the last year. I actually don't know the name of the product leader. Yeah. I try to learn new stuff every now and then. And after machine learning, I took a break, and then now I'm trying to learn a few new things. So one of them is playing the piano. When you're working at a music company, you should probably be able to play the piano. I've been using this application called the SimplyPiano. You hook up to your piano over MIDI. I really like it for two reasons. First, it's really good application. What you wanna do when you start to play piano, you don't wanna start with these child songs. You wanna start right away with the rock songs. So what they've done is they painstakingly and I have a lot of empathy for this because I work in the music business. They've painstakingly licensed all the popular music. So you literally get your Taylor Swift or whatever it is that you wanna play, and then they've staged it so that you start playing, and you're actually only filling in a few notes here and there. But it sounds amazing. You think you're a full bleed piano rock star from day one. So you're having a lot of fun. It's like a competition. You get scores for hitting the right notes at the right time and so forth. It's like a little game, and it takes, like, maybe five minutes to master a song. And then it gets progressively harder. And at the end and I know because I am at the end, I got this sort of end of year note from them where it said I was the top 1% of their user base as I've gone to the very end. At the end, you're actually playing the full songs with all the chords, the accompaniments, and so forth. That's actually my favorite application right now.

**Harry Stebbings** [57:58]:

The hard thing is, like, often for me as an investor, great products don't always lead to great investments. Fundamentally, a lot of products like that, listen, as great as the products are, unless you get the incentive frameworks right for usage. Point being, it doesn't lead to a great investment often. That's the thing that I find so hard as someone who loves product as much as me, is you have to be more multifaceted. Does that make sense?

**Gustav Söderström** [58:18]:

It does. And actually, I'm glad you brought that up because you asked about, like, insights sort of through my career. I've always been incredibly passionate about technology, even for the sake of technology and product. And I find so much joy in, like, I wonder if we could build this thing. Just see if we can build it. And at the beginning of my career, that means you undervalue the importance of the business model. But what made it click for me, and I think this is true for many, so what I talk to my teams about now is the greatest innovations are when you find a new technology and you change not just the product and how you use it, but you change the business model. Those are always the most disruptive changes. To some people who care mostly about design or product, it may almost feel like making money is something bad and something negative and it's only VCs who care about money. The way I phrase it is, if you want to build the greatest product on earth, it's going to require a lot of engineers. If you have a 20% margin and your competitor has a 40% margin, you both make a dollar, they're gonna hire twice engineers. They're gonna build twice as good a product. You wanna finance that product passion, so you need a good business model. I found that a useful way to get people more interested in how you can innovate on business models as well. My big passion is actually to try to combine consumer innovations with business model innovations. It's much harder, takes longer, but if you can do it, it is the most exciting thing and it tends to have the most impact. Do

**Harry Stebbings** [59:33]:

you think there is a business model innovation? I cannot believe I'm saying this with Web three and crypto.

**Gustav Söderström** [59:38]:

It's a tricky question. I love crypto from that technology angle. I'm a sucker, like many people, for this. This is a true computer science innovation. I'm very excited about the possibilities of trustless cooperation and so forth. But like everyone else, in the very near term, maybe a bit disillusioned with the fact that while the promise is there for trustless cooperation, actually one of the biggest problems seems to be how you trust other people on this network. And you go back to the Web two point world to actually verify who someone is. So I think it's early. I am fundamentally excited about it from a technology point of view, but I don't yet have an opinion on if there is a business model there. I have a feeling that like AI and other things, it will take quite a long while. There's a chance that it becomes a fundamental part of the infrastructure just further down, that it actually powers a lot of things and is very valuable, but it might not actually be on the consumer end. That might be one of the mistakes that consumers don't care so much about cryptography. But if it can solve fundamental problems, like, on the TCP IP level, could be incredibly valuable.

**Harry Stebbings** [60:35]:

Penultimate one for you. What would you most like to change about the world of product? So, like, mine is, like, the rise of, like, operator product leaders. And what I mean by that is the operator product leaders bring in process, bureaucracy. The only word they ever say is alignment, and they do very little. But they bring this red tape and process, and they really irritate me.

**Gustav Söderström** [60:56]:

I did spend a lot of time earlier in my career on frameworks and models to work efficiently. We had some internal frameworks, and we used lots of external ones. I don't spend so much time on it anymore because the company is so big that the different product leaders within my org, they tend to have their own processes. At a sort of higher level, what I would like to change is to try to demystify it. So I'm trying to do through the podcast. People talk about whether product is science or art, and most people tend to answer that it's art. But I think that's mostly for self preservation purposes. It's the it's called the conspiracies against the laity, as Bernard Shaw said. You wanna protect your own profession by making it seem really hard. There are lots of product people who have seen a lot of products, they have good instincts and they can make the right decisions, but they can't explain it. And then it looks like art. I think they're really good product leaders. They can actually explain their thinking. That's much more valuable because then you can share it. So I actually think product is a 100% science and 0% art, which I know is gonna upset some people. I feel like my mission then is to try to demystify it, for example, through the podcast, and make it much more accessible.

**Harry Stebbings** [61:56]:

Sorry. I'm being if you think it's a 100% science, then it is a 100% replicable. And it is not a 100% replicable. It is clear that, like, Tony Fadell, Scott Belsky, the innovations and creativity that come from visionaries like them, and I would say from you, absolutely in the same category. I'm defending you here. You are wrong. It is not because we can't replicate Gustav a 100 times over. That's why you are you.

**Gustav Söderström** [62:20]:

But I think really great leaders, they are able to introspect themselves, synthesize how they think about something. It is hard to do, but it is possible. And then try to scale it. And if you can do that, it makes the entire company much better than you bottlenecking the entire company. I actually don't make a lot of the product decisions at Spotify. I have lots of opinions and I sit in these meetings, but I feel like I managed to build a team that is at least as good and often much better than myself at product instincts. And I think that's because we've spent so much time trying to understand and talk about how we think about the world, instead of just saying like, now my neural network here has a lot of pattern recognition, so I'm gonna say what's right. Of course, great product leaders who have seen lots of product, they're going to make the right decisions because they have pattern recognition. But that doesn't mean that it's impossible to try to figure out why you have that recognition. It's just much harder. And oftentimes, you're like, I just know that this is right. Just trust me. I don't wanna spend the time talking. If you were forced to, you could try to walk through the steps of understanding why. And I think those lessons are the most valuable part. So I wanna argue that it is science. It doesn't mean that science is easy, but I still think it's science. Whether you happen to have very good instincts and then you've just internalized the science, it's still science.

**Harry Stebbings** [63:29]:

What's your favorite memory of working with Shaq, the many years with Shaq? I have many, but I'm intrigued.

**Gustav Söderström** [63:34]:

What I think is special about Shaq and why he is such a core part of Spotify's history is that, as I said, Spotify is from one view a tech company. It kinda grew up in this era of leveraging new technology. And as I said, that's why I think that is our core, trying to always understand new technology. But it is also right in between this world of nerds and hardcore tech like myself and rock and roll. And that's always been really interesting at Spotify when you're sitting and you're writing code and then Connie West comes and knocks on your shoulder. And there are these surreal moments, and Shaq happens to be responsible for most of them. He has this incredible ability. I haven't met a person that doesn't like Shaq, and I think he is the embodiment for me of marrying the technology world with Hollywood and the music world. And it's very hard to find that kind of person in a company like this and to get that person to be able to work in a company like this. As you can imagine, Shaq is not a big friend of, like, product processes and reviews and stuff. But Daniel has managed to to make this work and have Shaq run these special operations for Spotify throughout the years that have been incredibly impactful around our US launch and all these artist relations. He's just a very hard person to describe. Fascinating person.

**Harry Stebbings** [64:45]:

I always say he sees in you what you don't often see in yourself, which is an amazing That's very well put. I've had time to practice it, Gustav. Listen, I've so enjoyed this. This has been fantastic. Thank you so much for joining me, and I cannot thank you enough for today.

**Gustav Söderström** [64:59]:

Likewise. Always great speaking to you and always love talking product.

**Harry Stebbings** [65:05]:

I don't know about you, but I thought that was one of the most incredible discussions. Gustav is one of the most authentic, genuine, and humble leaders in the business. I so love doing that show. If you'd like to see more from us, of course, you can on 20vc.com. But before we leave you today,

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