Eugene Wei (00:00): I certainly think there's something to the idea that humans are wired to be very very conscious of status.

James Currier (00:13): All right. So today I'm so excited to have Eugene Wei with us. Eugene, you've been blogging since 2001, very early. You've been a product person at Amazon, Hulu, Flipboard, and then now Oculus. And about a year and a half ago, you published an article called Status as a Service which was one of those big hit tech blog posts and got everybody buzzing and very insightful. I loved reading it myself. Anyhow, it subsequently made it into the NFX Founder's List audio readout, which goes out to everyone. And just excited today to talk with you because we see things very similarly, you and I. And I want to talk through and unpack some of the psychology of status as a service and as they relate to startups. The audience we have here at NFX is with early stage startups. And I'd love to make sure we keep going back to what early stage founders can learn from some of these key insights. Your Status as a Service essay has made the rounds. You basically break social networks down in that article into three axes; utility, status, and then entertainment. And let's talk about the first two and what lessons that we think startup founders can learn from this. Is there an order of operations when you're building a product, when you're building a network? Are we looking primarily for utility? Are we looking for status? Both? I'd love to dive in there.

Eugene Wei (01:07): I think that in the long run, the ideal is to offer a utility to your user base. It's the most stable sort of long-term competitive advantage that you can have. However, it's also true that a lot of network-based utility only is realized at some level of scale. And so the question is, how do you get to that scale because there are a million networks that died out before they ever achieved that scale. And so I think that's where status sort of comes into me.

<aside> 💡 A lot of networks that struck me as having achieved that super scale had some sort of status incentives or status games built in very early on that helped them to achieve that sort of kinetic energy that you need to achieve some level of scale that then increases your utility.


And I think that's why I wanted to write about that because I think a lot of founders when they come up with their business plan, you're always thinking about the utility, what problem you solve for your end users and everything. But network-based utility is just... Getting to that is a very particular sort of path.

James Currier (02:11): And I think in the article, you mentioned that it's a little bit like people were trying to do with these ICOs a few years back where they would actually pay you in currency to develop the network. And what you're saying is early on before we had ICOs, we were actually paying you to develop the network with ego, with status, with a sort of an emotional payback rather than a monetary one.

Eugene Wei (02:32): And I think one of the things that over the years as a product person I've become more cognizant of is just really how important it is to have awareness of how your product makes people feel. I think we're used to a very sort of clinical economics driven analysis that's very sort of cost benefit driven. Every user as a rational economic actor trying to maximize some amount of benefits. And overlooked in is that a lot of times people use products that just make them feel good. And that is sort of an understudied aspect of product design and product development.

<aside> 💡 I actually think that people in the gaming world have more of an intuitive understanding of how important it is, moment to moment, to track your user's emotional valence. And that's partially because game designers sort of... Games are a continuous interactive experiences. And if the user isn't feeling the right balance of challenged, plus motivated, plus rewarded in a game, they'll churn out.


But I think that same principle can be applied to a lot of other products. How products take off a lot of it is in how they make you feel. If you watch any Apple keynote, going back to the Steve Jobs days, I think he is underrated for having this very intuitive understanding. That part of why people should buy Apple products or part of why they buy Apple products is that it makes them feel cool or it makes them feel hip, or it makes them feel creative. That applies to social networks just as much.

James Currier (04:02): You're saying that a lot of founders miss on the emotional and psychological needs of the users as well. I think that there's some Princeton professor got a Nobel prize for pointing that out in economics as well. That it's not just a rational actor who's maximizing something, it's actually has to do with their psychology as well. And why do you think that is? Why do you think so many founders miss out on this and maybe some of the great ones like Steve jobs are so heavy into it?

Eugene Wei (04:25): That's a tough question to answer.