Episode 640 | Hot Take Tuesday: Recession and Bootstrappers, ChatGPT, Twitter Drama

Rob Walling:
It’s a bird, it’s a plane. It’s another episode of Startups For The Rest Of Us. I’m your host, Rob Walling. Today is another episode of Hot Take Tuesday.
This is our news round-up format where we take the most important news stories of the day that affect bootstrapped and mostly bootstrapped SaaS founders. And we bat them around and we give our hot takes on topics today ranging from whether we are actually experiencing a recession, how to think about that as a startup founder. We dig into ChatGPT, which is the open AI project that is all the buzz right now, and we talk about Elon Musk acquiring Twitter and the drama or lack of drama, depending on your perspective, around this entire endeavor. But as always, we relate it back to bootstrapped and mostly bootstrapped startup founders who are trying to figure out how these events impact us and our companies, if at all. And all the while I tried to keep my guests from derailing the podcast episode.
Our first panelist for Hot Take Tuesday is Tracy Makes on Twitter. Tracy Osborn, welcome back to the show.

Tracy Osborn:
Happy to be here.

Rob Walling:
We got some good topics today. Our other panelist, many of you know him well. This dower gentleman to my left, Mr. Einar Vollset whose Twitter feed is filled with things that only make sense if you are actively watching the World Cup or a Giants game. Einar Vollset, welcome to the show.

Einar Vollset:
Thank you very much. I was upset this morning because it turns out that Aaron Judge is going to stay with the New York Yankees, which is a disaster. See what I mean?

Rob Walling:
I have no idea what you’re talking about. Is that a sports ball team?

Tracy Osborn:
I was going to say my brain just went reeeee.

Rob Walling:
I don’t know who or what. I caught a baseball team in there, I think. The man who is not going to derail today’s episode, Mr. Einar Vollset.

Einar Vollset:
Thank you for having me.

Tracy Osborn:
It’s not going to happen.

Rob Walling:
All right, we’re going to kick it off with the topic that everyone’s talking about this week. Chat.openAI, which by the way, if you forget the name of this and you try to find it via a Google search, I couldn’t because I couldn’t remember it was called Chat.openAI, so I went in for like “AI chat” and “artificial intelligence chat” and a “chat thing” and there’s just all this crap out there. So they need to work on their SEO. I had to actually go to Twitter. Chat.AI hit the scene in the last week. Everyone seems to be searching for things, getting answers. Some are funny, a lot are accurate, some are inaccurate. Are we already tired of seeing people post these conversations on Twitter? Tracy you want to weigh in first?

Tracy Osborn:
I was wondering if you’re going to leave the Twitter part in, because I know that one of our potential topics for today was talking about Twitter in general. And I have not been on Twitter in the last couple weeks, but the sci-fi nerd in me feels like this is the first step to having a computer do-do-do and then it calculates and does things for you. You need to have some sort of crappy AI that’s, I don’t know, being an AI. And so I think that’s on its own, really neat to see this last few months of really picking up on this idea of like, “Okay, this is the first step to something that could be like AI, I don’t know, maybe Skynet apocalypse somehow in the future.

Rob Walling:
Hopefully not. But Einar, do you for one, welcome our future robot overlords?

Einar Vollset:
I do.

Rob Walling:
That’s a deep cut. Anyone, just me?

Einar Vollset:
I do. I totally welcome our new overlords. I’ve been an AI fan for forever. It was one of the topics that I considered doing my PhD in. So I think it’s amazing what they’ve done. It fits the… It’s got the perfect profile for what amazing technology because A, everyone sort of, kind of, treats it as a toy at the moment and the mainstream news hasn’t really picked up on what’s going on. That’s one of the most shocking things to me about this. My Twitter feed is just nonstop ChatGPT. Nonstop. Nonstop. And I read the Wall Street Journal, the FT or The Times or whatever, and it’s like nothing. It’s like it didn’t exist. I’m like, “What is happening here? This is a giant step forward. And it’s like they weren’t even paying attention.” This is the most shocking thing to me. But yeah, I mean I really like it.
I think you’ll gain feed like the sort of mill of people who are like, “Oh no, AI’s going to take over everything and blah, blah, blah. All the jobs are going to end.” And it does do some amazing things with co-generation and accessing APIs or that sort of thing. But I don’t think it’ll be… I don’t think Google will fire all its engineers and just switch to open GPT, to put it that way. I don’t think that’s on the cards. It was one of my portfolio company founders, actually Pierre with Scraping Bee, he was like… This morning he tweeted something. Did you see this tweet? It was like, “Hey, I figured out how Google can have a 90% profit margin. They should just have all their queries ask ChatGPT and they’ll have a 90% profit margin, assuming 10 trillion searches,” which I thought was pretty funny.
But it is interesting because I mean, one of the most interesting takes I’ve seen… So there’s a bunch of stuff we can dive into because I’ve spent a lot of time with it, but one of the most interesting things is like, “What does this do to Google? What does it do to search?” Because people are like, “Whoa, this is actually better than my Google search interface now.” Which is quite something because the way, and it sort of makes sense, because if you think about Google, at least the way it used to be, it’s like it generates value or information from the sort of link graph in the world versus with open GPT it basically builds its intelligence based on the things that are on the internet but it’s not the links. It’s the text and the implications of the text. It’s a very interesting model.
It’s genuinely one of the first things I’ve seen. I’ve been like, “Truly, this could hurt Google. Not immediately, but something like that really could.” And people complain and they say, “Oh, it’s just going to hallucinate facts.” That’s fair, but I’ve also seen it reference its sources. I have a… There’s a tooling that goes in, so instead of just calling, playing in the playground or whatever, you chain all these things together and you give it access to basically searching the web and fetching data from the web and summarizing data in the web and then referencing that data in the response. And that sort of gets rid of that concern because then you know the references’ sources. So yeah, I’m super excited. I really like the space. It’s probably over hyped at the moment. It usually tends to be. There’ll be a trough of sorrow in 18 months when everything is in the crapper. But I think two, three years from now we’ll look back and we’ll be like, “Oh yeah, this underlying technology really enabled a couple of amazing new companies at least.” I’m sure about that.

Tracy Osborn:
Yeah, I have memories. My job, 10 years ago, it was a lead generation for online education and they wanted to get the SEO pages for every, I don’t know, artistic degrees in New York, artistic degrees in Pennsylvania, artistic degrees in blah, blah, blah, blah blah. And so this company I worked with hired a whole huge amount of writers. I don’t know, it was like 50 writers, just churning out all of these little snippets so they can have them on the pages and therefore the pages would rank in Google. Again, this is 10 years ago. And so that whole industry, I guess, of just hiring groups of writers like that is gone and I’m happy for it. It seemed like a pretty lame job anyways for those folks. And I remember, no, they were pretty unhappy too.

Einar Vollset:
Tracy The Content Farm Producer.

Tracy Osborn:
Yeah. Yeah. Exactly. Yeah. Content farms. Yeah, that’s the word for it. So that was my former job of watching that happen and I’m very happy that doesn’t exist. I didn’t really think about the replacing of Google, which is lovely to hear. That makes me even more excited because me and everyone else in the world searched for things on Google now and it’s just like, you aren’t as good as I remember you used to be. Stop ignoring the words I’m using. Stop switching out the… Oh, it’s like Google saying like, “Oh I know what you really want to search for.” And I’m like, “I know what I’m doing. I’m searching for the thing I want.”
And it just drives me… I’ve been just driven up the wall with Google, so that’s exciting. I like this idea that we can have something that will be… Take us back to getting good information from my… If you have a query and you want to ask it. Can we call it Ask Jeeves? I feel like this is a dream of Ask Jeeves.

Rob Walling:
Ask Jeeves.

Tracy Osborn:
Yeah.

Rob Walling:
You’ve just invented-

Einar Vollset:
That’s right.

Tracy Osborn:
It’s what Jeeves promised.

Rob Walling:
Registers.com.

Tracy Osborn:
You put in a query and then you get the answer and we are finally there.

Rob Walling:
Yeah, remember that.

Tracy Osborn:
It just took a while.

Rob Walling:
It’s a trip. 25 years later.

Einar Vollset:
Yeah, I think one of the most interesting things too is, if you think about it, it allows you to give context and expand, in a way that doesn’t really work all that well with Google. So it’s hard for me to do the following, do a broad search on Google and then have a subset of those results and then search within those results, but only those results and do that two or three times.

Tracy Osborn:
Yeah.

Einar Vollset:
But a language type model that remembers state is a much more natural way to interact with a data set in that way. So there’s a bunch of things there that are very interesting.

Rob Walling:
The state is a big deal.

Einar Vollset:
Yeah, I think so.

Rob Walling:
The state is a huge deal. Can you imagine when this is built into our Amazon Echoes and the Google Homes or whatever and you can literally just ask the question and actually get an answer because today it’s garbage. You ask Alexis something and she’s like, “According to blah” and cites something and half the time it’s garbage. It doesn’t answer your-

Tracy Osborn:
And then you get an ad afterwards.

Rob Walling:
And then… I don’t. I must be paying for a premium or something but-

Tracy Osborn:
Oh, some people are talking about getting ads or it’s like, “Also did you know blah blah blah blah” or something. I don’t have an Alexa. I’m just hearing people talking about how they’re trying to throw ads in. Anyways continue.

Rob Walling:
But in order for this to work and replace Google searches or whatever, if I’m in a browser, because I think in terms of voice interaction, this is just head and shoulders above anything we see in the space, once they adapted to that. In terms of actual Google searches, at first when someone started suggesting Google’s in trouble, I see it on Twitter where they type in, “What’s the average rainfall on the Amazon basin” and then it gives a response or whatever. But A, it has to be right. It needs to be at least reasonably accurate and it’s not today. So that’s refinement though. And then to your point Einar, I want to see it reference sources of some kind because that’s important. When I do a Google search and I see 10 results, I’m absolutely looking at those domains. I look at the headline to see the result and then I’m like, “Who told me this?”
So for example, I just searched how many Google searches result in zero clicks because I actually think this is perfect for that, right? Sometimes I want to search and I want to say top websites for this or I want a list of 10 apps that do something because I’m trying to compare them, right? And in Google that works today because I get 10. But there is a portion of time where I literally just want to know a fact. I want to convert Fahrenheit to Celsius, I want to know the average rainfall on the Amazon basin to reference that Farside comic. Once again, I want to know something that maybe is a little plain flight duration from here to there, whatever. And those zero clicks, which they’re around 20 to 30%, depending on how you count it according to Search Engine Land.
So I did that search in Google just now and I saw these numbers and they’re all conflicting and Search Engine Land is a brand I trust or at least it’s a resource that I trust to be relatively accurate. And so that’s what I want is knowing the source helps me have confidence in the results, right? Which I think GPT can add, as you said. The other thing is I thought to myself, “You know what I want? What if I want five or 10 different SaaS apps because I just want to kind of noodle through them?” Well you could ask… What are we calling it?

Einar Vollset:
ChatGPT.

Rob Walling:
Chat-

Einar Vollset:
GPT is the underlying thing.

Rob Walling:
Okay. ChatGPT

Einar Vollset:
That’s why you didn’t find anything. GPT is like the-

Rob Walling:
No, because I was like, “Open AI chat, blah blah blah.” But so if ChatGPT, I could just ask it, “Give me the top 10 blah,” and it could give me the 10, right? That was a mental hurdle early on of like, “Well, I like having a bunch of results in a Google search.” ChatGPT could do that if you just ask it. You just learn how to use the… It’s just a slightly different interface. It’s really interesting.

Einar Vollset:
It allows you to think and really ask queries about over data sets that you couldn’t possibly because you are not Google. Google can figure things out like this but you can’t because they’ve constrained the interface to be this, this is what it does, and the technology doesn’t understand if you query it differently. Whereas with open GPT, really you can query it in different ways. And that’s the most interesting thing because you could have your own special way to talk to the Oracle, whatever, that gives you the data in a certain way that you really want. That’s only the way that you do it. That’s not possible in Google, which is pretty cool.

Rob Walling:
Think about that interface inside a company. We spent so much development time pulling a report for our BI team or pulling a report for the CEO of about metrics and this and that. We didn’t have metrics. Imagine if you had this interface over a sequel database and certain people have.

Einar Vollset:
And they actually still exist. You should look at some of the language models that chain them together where it’s like you basically just describe… So instead of a writing API code and having your code doing it, you have a description that’s just a word description of what this is, what the API does, here is the parameters, this is the kind of questions and answers you can get. Go use this API, which is pretty cool. Then you can chain these things together and you can do honestly what a lot of developers do, which is chain different APIs together and add some secret sauce. That becomes much more fungible and much easier to do and then it can hallucinate facts.

Rob Walling:
Yeah.

Einar Vollset:
Someone said that on Twitter. Again, clearly I live on Twitter, and someone said, “One of these days, very soon, an open AI will hallucinate, basically come up with something that isn’t true and we will just assume that it is and we won’t find out until it’s been considered a fact for years.”

Rob Walling:
That’s going to be one of the challenges.

Tracy Osborn:
I feel like I kind of do that with Google’s Instant results. I just take them by fact too and I’m like, “Oh I trust Google.” But I don’t know, it could have been feeding me wrong facts. The other day I searched for converting so-and-so Euros to USD, which has always worked perfectly, except for last time it decided, I think it took my local location and instead of doing USD, it did Canadian. So I just completely ignored that side of the thing. And I almost grabbed the number before I realized that the little calculator said.

Einar Vollset:
The Canadian dollars are pretty much worthless, right? It’s like two to four or five dollars?

Rob Walling:
Hot Take Tuesday.

Tracy Osborn:
Yep, which is why I wanted to do USD but it was just like even Google is like… I don’t know. It feels like they’re getting… I was going to say getting wronger. They’re getting worse. And it’s just like, “Oh come on.” It says my query has a USD. It’s right there.

Rob Walling:
Yeah. Wrapping up this section so we can move on to the next topic. Tracy, I want to get your thoughts on, it feels to me like a lot of AI is open source slash commoditized. It’s given away. So this is a show about startups, right? About building SaaS companies, B2B in a lot of cases. Is there an approach? What’s the path to bootstrap or mostly bootstrap a great company in this space or is this one of those spaces where that maybe just isn’t likely to happen? I think about VR for example, and it’s hard to bootstrap in that space. You can be a game developer, you can be an indie game developer, but actually B2B stuff, it’s either expensive to build or whatever. So I’m curious to get your thoughts.

Tracy Osborn:
I mean it’s kind of like my husband’s an author of the popularest, whatever word… Of Python open-source project Euro lib three. And it sucks that he built something that’s used in pretty much any system that’s using Python. If you’re using PIP or Virtual End, it’s using those systems. But it’s the same situation where there was a tool that was created, it was opensource, people did it for the love of the everything. And then it is being used in companies that are now the startups that can do more because they have these open source tools. So there’s the same thing when it comes to AI and it sucks that there’s probably a lot of work, just like in open source, where a lot of people are putting out a lot of hours at their time, they’re not being paid for those hours of time, and then it’s going to be used in other places where the companies are going to be the ones creating revenue.
So it’s the same situation as the open source world and the open source world is constantly doing conversations about how do we fund open source creators? How do we support them? And they usually surround foundations and grants and big organizations like Google paying out for those, some of the largest ones. And possibly that’s what’s going to happen with the AI, right? Where it’s like how do we, I don’t know, support the development of this? But then there’s going to be this whole other layer of startups that are rebuilding, utilizing these tools.

Rob Walling:
And we at TinySeed have backed at least two AI focused companies. So it’s all B2B stuff. You can look it up on the portfolio page. So we think there’s some opportunity there. But I’m curious, as we wrap this topic, Einar you have other thoughts on that, about whether there’s opportunity here or whether it’s going to be an uphill battle due to the hotness? Is it so popular everyone’s going to jump in?

Einar Vollset:
Yeah, I mean unlike Tracy, I’m not an open source communist.

Rob Walling:
Hot Take Tuesday.

Einar Vollset:
No, no, I’m only kidding. But I think I actually worry less about like, “Oh, is this open built and open source and then commercialized.” I understand that take. I think one of the more bigger challenges is, let’s look at right now, what is the best tool out there? Large language model. It’s open AIs, whatever, blah blah blah. That’s a commercial tool. I think what’ll happen is people will experiment with this on an open source or closed source free version, get to where they want to do and then they’ll realize, “Okay, we have to train our own models.” I think that becomes a key thing. I think if you’re going to do an AI startup, eventually you’ll end up at least fine-tuning or if not building your own models from scratch, obviously using libraries and things. The way that I think a ChatGPT is, like I said, it’s similar to Google.
Do you build a startup on Google? No, not really. You don’t sort of… You can’t build that into as the foundation and then build on top of it. You can build alongside it, you can build competitors, you can use tooling, whatever. But I think it’s the same thing with Open GPTs, it’s sort of an amazing tool. I think it’ll be hard to have a competitive moat if you don’t have your own language, if you don’t have your own training sets, if you don’t have your own model. I think that will be true.

Rob Walling:
Right. Because otherwise it’s a commodity. It’s kind of like forking an open source project and just trying to sell it without-

Einar Vollset:
Yeah, I do think some… There’s opportunity certainly for people to write, who use this or you can license or do this kind of thing and then customize that interface to whatever work situation makes a lot more sense than just an API call or a chat interface. I do think that makes a lot of sense for people. But for example, I don’t think everybody… And this is already going on. The best example of this is all these copywriting AI companies. Basically you could do whatever it is that they do using open GPT and it’ll be much cheaper than their interface. But the fact is their customers don’t care that much. They just want the value from it. And so if it’s 25 times more expensive but it’s more tailored to their use case, maybe the model’s tuned a little bit, that makes a lot of sense.

Rob Walling:
Our next topic is the worldwide economic climate. Case in point, when I go to Google and say, “Is the US in a recession right now?”, the top result from forbes.com says, “Yes.” We entered it in summer of 2022, the next result says, “No.” And that’s from another relatively reputable source. So my question to you, Tracy, we see a lot of companies across our portfolio. Do you have thoughts on whether… Are we seeing evidence of recession across B2B SaaS companies or, I don’t know, in your everyday life?

Tracy Osborn:
I want to note that there’s like a layering of hot takes. Because when you’re looking at Googling and reading these results, then it’s like one is a hot take saying, “Yes we’re in a recession” and then one is a hot take saying, “No we’re in a recession” and then here we’re hot talking and hot taking on the hot takes. Anyways, just noted that. Company wise, I don’t know. I am not an economics person and so I feel like there’s scientific things around a recession. There is people talking about having trouble closing enterprise deals. I think Einar probably can speak more towards that in terms of people not wanting to spend right now, they want to save and maybe punt on some of the big deals that could be going through. There are a lot of people who are doing quite well. So I don’t know, you guys probably can speak more about what the difference is between those two companies.

Rob Walling:
And the way I’ve been describing it is between TinySeed and my own stuff I’m invested in, I think it’s like a 125, a 127 companies. And at any given time, just in normal times as things are growing, there’s always a chunk, 15, 20% who are growing really well. There’s a certain number, maybe 15, 20% who are really struggling. And then there’s this whole middle that is growing decently but not amazingly. And they’re figuring things out and those numbers aren’t exact, but you get the idea.

Tracy Osborn:
They haven’t quite shifted, right? It feels like it’s been relatively the same.

Rob Walling:
No, I feel like it has shifted. I feel like they’re… If it’s normally 15, 20% are seeing slower growth, I think that number maybe is like 25 to 35% right now. It’s not everyone, but I think the number is larger and this is… There’s a bit of gut feel here. I mean we can look at the graphs and such, but that’s kind of my sense of it. And I’m definitely hearing more… I’m hearing more chatter about that from companies I’m invested in. Now I also wonder if sometimes that-

Tracy Osborn:
Is it kind of like a loop? I mean, I’m not saying that-

Rob Walling:
The cycle.

Tracy Osborn:
There’s things that are definitely happening right now, but once people start talking about it and more people start talking about it and then everyone gets worried about it. So again, I’m not actively tracking this.

Rob Walling:
Yeah. Einar, what do you think?

Einar Vollset:
I believe that I saw in the sort of May, June timeframe, July, definitely a spiking churn. I think around that time is when a lot of companies were like, “Okay, we’re definitely heading into recession. What software aren’t we really using? What should we cut? What should we renegotiate?” That sort of thing. I think that played out. I saw a number of portfolio companies reporting. I mean some that had never had churn being like, “Oh crap, we had our first churn. Somebody canceled. Hopefully they’ll come back.”, type thing. So I think that’s true. I do think that too is right.

Tracy Osborn:
Yeah, a lot of you people saying big accounts are dropping. Do you think it’s… Is there a difference between the big accounts and small accounts?

Einar Vollset:
I think I see more churn in… I think I saw more churn in the smaller accounts.

Tracy Osborn:
Okay. Yeah.

Einar Vollset:
I think the bigger accounts. I think what happened is I see that enterprise sales cycles are lengthening and I see that the churn is increasing in the smaller accounts. I think certainly there’s so much uncertainty that I think a lot of the stuff that I’ve been hearing has been like, “We thought this thing was in the bag. We’ve been negotiating for nine months and now they say they’re going to do a budget review and get back to us next year.” I’m hearing a lot of that on the enterprise side and I think that’s true.

Rob Walling:
To wait and see.

Einar Vollset:
Yeah, and it’s funny because some founders, they going into this year or during the year, they were like, “How can we increase our prices to make sure that we make up for inflation?” And I was always like, “Yeah, how about trying to keep the customers at the price that you’re doing right now?” Yeah, but I think that’s what I’m seeing. Lengthening enterprise cycles at a bump in churn. I think churn has come down a little bit. I think we definitely had a situation where a lot of people were canceling things that maybe would’ve been spread out over the next six to nine months when they realized that we’re not really using this thing. And so maybe it was sort of front loaded in, sort of, that May, June timeframe. So I’m hoping that’s the case. But certainly on the enterprise side, longer sales cycles and like, “Hey, let’s talk next year on things that people just assumed were in the bag.”

Rob Walling:
Prediction time. We are recording this in December of 2022. Tracy, six months out, let’s say June of 23. Are things better? Are we starting the upcycle again? Are things worse or are we still kind of bumping along where we are right now?

Tracy Osborn:
I mean it’s hard not being an optimist. I think it’s my role here is always to be the optimist, to be the foil to Einar’s pessimist sometimes.

Rob Walling:
Hot Take Tuesday.

Tracy Osborn:
I just want to have hope for the future. So, I mean what? A lot of the recession is probably lingering effects from the pandemic. And the pandemic is at a point now, I think, of things are truly now starting to return back to somewhat what was going on in say 2019 and things are wobbly, but that by June maybe we’re in a better place. So I feel optimistic. Einar is probably more scientific about this. This is all gut feelings for me.

Rob Walling:
I think it’s all gut feelings for all of us. It’s a prediction of the economy. No one knows what’s going to happen.

Einar Vollset:
There’s more science on my side.

Tracy Osborn:
I mean he reads Financial Times and Twitter.

Rob Walling:
And they’re just making guesses too. Einar, what are your thoughts here, six months from now?

Einar Vollset:
Yeah, so I think a couple of different things. I think that depends on who you’re asking is it going to be better for. I think consumers are still working through a cash cushion that was excess savings from the cash injections that came during COVID. So I think there’s a lot of people… You see that with credit card spend versus savings, that sort of thing. I don’t think that’s really played through the markets yet. And I think those type of things will be reflected and will start to hurt more consumer facing companies. But by June, do I think the stock market will be further down? No. I went long on the S&P 500. So maybe that’s the jinx that means we’ll go out with another 20% now.

Rob Walling:
Oh no, you doomed us.

Einar Vollset:
But I don’t think the stock market will be worse off. I think some of the uncertainty will have played out. I think some of the expectations, particularly if you’re looking about investment side, I think finally some of the founders will realize that valuations have been reset and you can’t… You’re not going to be a billion-dollar business with three million ARR. That’s not a thing anymore.
But yeah, I think there’s consumer hurt coming and more through that timeframe and I think as a result more consumer facing companies will be hurt more. I think B2B SaaS will be relatively insulated and honestly I think most of the pain that Python in that sphere is done. I mean you look at the B2B SaaS, public B2B SaaS companies, multiples are way down. From 21 times forward looking revenue to six or five or whatever it is now. I think that’s too low. I think… And you know can just look at the cloud ETFs, they’re down 60% from the peak, type thing. Do I think they got further down to go? I mean maybe, but I think they’re going to come back faster than people expect.

Tracy Osborn:
One thing on the consumer side, don’t you think that consumer hurt is already here and you think it’s going to get worse, because the inflation stuff? I know that my cost of living in Canada, I mean probably everywhere because of inflation, but in Canada things have skyrocketed. So do you think that consumer… You think it’s going to get worse from what people are already affecting right now?

Einar Vollset:
Yes. I think consumers are being cushioned by the pain of inflation by their savings, still. And I think that’ll run out sometime in the year and that’ll then impact earnings on the consumer facing company side. That’s what I think.

Tracy Osborn:
Interesting. Okay. Yeah, I’m hearing a lot of chatter. Just again, it’s my local area.

Einar Vollset:
This is sort of what you need. You basically need… This is how you get inflation down, is pain. People are… I don’t understand politicians who are like, “What are you doing? You’re causing unemployment whether you’re raising your rates.” I’m like, “Yeah, that’s exactly what needs to happen.” You need to increase-

Rob Walling:
It’s a cycle.

Einar Vollset:
Yeah.

Rob Walling:
We have to have down cycles to have anything and-

Einar Vollset:
You got to do it. This is literally what they’re trying to do. It doesn’t make any sense to complain that, “Hey, don’t you know you’re causing this?” I’m like, “Yeah, that’s exactly what they’re trying to do.” Yeah, it’s not going to be super nice but I think on the B2B SaaS side is relatively insulated.

Rob Walling:
That’s the thing to think about. It’s so interesting to ask that question from a consumer perspective, from a large business perspective, from a public company perspective, from a SaaS company or a startup that was three million ARR and raised it a hundred million or 500 million valuation. Each of those will have a different outcome. And the people who raised big buckets of money at these outsized valuations have a hell of a lot of work to do because multiples have collapsed so far that they have to 5x revenue, 10x revenue to get back to the valuation that they got two years ago. So that’s a whole different story.

Einar Vollset:
There were SaaS companies. In 2021, there were SaaS companies doing three million ARR that were raising in a billion dollar valuations.

Rob Walling:
Bananas.

Einar Vollset:
There’s a lot of things. With the public market, multiple… I can’t even do the math in my head. 300 times ARR or something insane. Now a public company is trading at six times. There’s an awful lot of things that have to go right for you to get even close to that.

Rob Walling:
Yeah, and so that’s where the resilience of SaaS in general, especially B2B SaaS, but also companies with unit economics that actually kind of make sense. And look, there are absolutely venture backed companies that are growing fast, that do have decent unit economics. We hear the news stories about those that don’t because they often implode, but the majority of the MicroConf, TinySeed, bootstrapped, mostly bootstrapped ecosystem by definition has to be pretty capital efficient. And so I do think there’s insulation, even if there’s headwinds depending on your space, right? Because we can each industry, if you’re servicing schools versus government versus SMBs versus large… Each of those is reacting slightly differently. But across the board, I agree with you, I think I’m a fan. B2B SaaS.

Tracy Osborn:
That’s why we do what we do.

Rob Walling:
Before we move on, I’m going to weigh in. I think that within six months, same question I was asking the two of you. I think it will be about the same unless some world event happens and the longer we’re in kind of this bumping along, the more likely something is to happen because it’s just time. And I mean by someone invading another country, heaven forbid. Bad things that have happened that have sent us into recessions before. There’ve been black swan events, terrorist attacks, pandemics, whatever. Again, I’m not predicting nor desiring any of those, but if one of those happens, we will see another big drop. And if that doesn’t happen, I’m probably just in the middle. I’m neither bull or a bear on the next six months.

Hello listener, this is Rob. Chiming in about a week and a half after this episode was recorded. I wanted to intro and perhaps caveat this next segment where Tracy, Einar and I discuss Twitter, and Elon Musk, and all that. And the challenge with recording on news topics like this is that sometimes these stories change so quickly and certainly the Twitter story has unfolded over the last few weeks. This episode was recorded before the journalist were suspended. It seems like the verdict is still out on what is going on with that. But I just wanted to put a caveat in here to realize that our opinions expressed in this episode were from news as of a couple weeks ago and as things unfold in the coming weeks, I imagine those opinions might change. So with that, let’s continue the episode and dive into the next topic.

Last topic of the day, Twitter. Elon Musk. This is truly a topic for Hot Take Tuesday. Tracy?

Tracy Osborn:
We have the two opposite sides. The court, Tracy and Einar.

Rob Walling:
I don’t know. We’ll see, right? So Tracy, Elon, obviously I don’t need to… He took it private, everybody knows this. He’s making changes. You can pay eight bucks to get a blue check. There’s stuff happening. He’s trolling people with his tweets, etc. A, are you still on Twitter, and B, do you think Twitter is better or worse given that Elon is running it?

Tracy Osborn:
I have been trying to kick the Twitter habit for a long time and I stayed on it because it was useful for my career. It was useful for me to get information from other people that are in my space and get early information, I would say, as eventually people write blog posts and whatnot. But that was truly the place where to find what people were actively working on. It led to a lot of speaking opportunities in my career. I’ve been on Twitter for 10 years, but for me, it was devolving into going on there and going, ugh, because there was so… It was incentivizing. This is pre Elon. Twitter was already going in the direction of incentivizing a lot of Hot Takes and a lot of knee jerk reactions, a lot of negative negativity and whatnot.
And for me, personally, my life is stressful enough already. And so I will open it because I’m like, “Oh, I should do this for my career.” And then I’d be like, ugh, and I close to move on to something else, the more… I’m kind of moving into more private communities and that kind of stuff.
So the Elon thing was like, “All right cool.” I have the reason, I have the perfect motivation to just be like, “I don’t have to be on here anymore. At least until the dust settles and maybe evolves into something different.” And it’s a little depressing at being such a fan person of Twitter for so long and then utilizing it so heavily for my career. It is kind of disappointing to feel like, “Oh crap, now I’ve lost this opportunity that I had in the past that… I don’t feel like… Feel exists at this current moment.” And it is funny, when I do click on… I sometimes accidentally click into it and it’s like, “You have 25 notifications,” and I click onto the notifications tab and it’s like, “You missed these tweets from Einar Vollset.” It really wants me to read it.

Einar Vollset:
That’s what you get.

Tracy Osborn:
It’s all Einar.

Rob Walling:
Cursed.

Tracy Osborn:
Every single one I think. So…

Rob Walling:
The algorithm is doomed.

Tracy Osborn:
Really. I’m missing out on all the tweets of Einar and it’s really reminding me every time I load. But that’s my personal thing. I want to say one other thing in terms of that’s my personal tick. There has been something I’ve been seeing with TinySeed because I follow all the Twitter companies that if someone is accepted into TinySeed, the TinySeed account only follows folks that are in our ecosystem. So generally our founders and their companies, if they have Twitter accounts. And that has been decreasing in number and the more… I’ll find accounts where they’re inactive, they’re not really being used. So, company wise or for TinySeed, as a company account, it’s also becoming less useful because the folks it seems like that we are investing in and the folks who are probably applying are using it less and less. I don’t like LinkedIn.
Kind of feel like that’s LinkedIn now. And I have to figure out how to investigate that because I am years of hatred of LinkedIn, just again that’s on a personal account. But I have been noticing this trend as I’ve been running the TinySeed Fund Twitter account and that the folks that are apply… People either don’t have accounts or the accounts are not used very often. And there are some people who do have accounts and that’s really great. But overall it’s kind of become less useful for TinySeed Fund. Still going to use it for TinySeed Fund and stop using it for personal stuff. Of course, we’re still running our accounts for TinySeed Fund because I think it’s a really great. It’s still a resource to find those folks, but just overall it feels like it’s different than it was in 2019.

Rob Walling:
Einar Vollset. Same question.

Einar Vollset:
Yeah, yeah. I’m still on Twitter. I don’t see myself leaving Twitter. That’ll be crazy. It’s half my life. I have the completely opposite view, I think. Well, so I think first I will say this, I don’t think the algorithm really impacts me because I don’t use it. I have it set to the latest tweets and when I switch it to whatever Home is, aka, the algorithm, I see a lot of crap. And I think in general, for a long, long time, both Facebook and Twitter and whatever their algorithms were basically just optimizing for the most engagement, which a lot of the time ended up just being rage. So that’s unrelated to Elon, but that’s sort of how I interact with Twitter. And I think, honestly, I don’t think I’ve seen much change on Twitter. It isn’t different to me. It doesn’t matter. And I think that combined with the fact that I think the news media has completely lost their mind when it comes to Elon Musk. For some reason he’s become the big bang.

Tracy Osborn:
It’s the trash fire everyone wants to follow.

Einar Vollset:
And it’s completely insane to me. I’m like, “What did the guy do?” Let’s just calm down, stop hyperventilating and think about what he actually did. Did he buy a company and fire a bunch of people? Yeah, sure. But so does a lot of people. I think it’s telling to look at the way in which these news organizations have been treating the way that Elon Musk legally bought Twitter and was forced to do so and wanted to back out. But the board forced him to go through with it and then he fired people and people are trying to get him to fire… Stop advertising, get companies to stop advertising.
He’s like, “Well then he has to fire more people.” Then you’re using that as a bad… He’s such a big bad man. Compare that to how they been reporting on SPF. I think it’s disgusting. I think the way that somebody who’s been portrayed in the news media, if you just read the main news media about Elon Musk and about SPF, you would think that it was Elon Musk who stole billions of dollars from people and was just waning about in The Bahamas. But it’s not. That to me is completely insane.

Tracy Osborn:
Elon Musk is also… He’s been spending months. He has years of being on Twitter, being a troll in lots of different ways. It’s not like, “Oh random CEO took over Twitter and is making changes.” It is a very controversial person who has inserted himself into the conversation in crazy fat manner.

Einar Vollset:
But he doesn’t… Don’t follow him then. Turn the algorithm off.

Tracy Osborn:
But that’s the media. He brought the media to him and then he can’t complain about the media then following him to Twitter and then reporting on his things because he’s been doing this service to bring the media’s attention and everyone’s attention on him.

Einar Vollset:
Yes, I don’t mind them reporting on it, but if you look at the angle, it’s like every day it’s like, “Oh, Twitter.” It was only three weeks ago, Twitter was supposed to go down. Sourced in the big news. NBC was saying goodbye. We’re giving up and this is going down anytime now. Well sourced, sources. Complete as usual. Honestly, to me, people have completely lost their mind here. If you didn’t know that Elon bought it, if you didn’t read in newspapers and you didn’t follow Elon, you wouldn’t know. That’s my Hot Take Tuesday.

Rob Walling:
Hot Take Tuesday. This is where I… There’s a nuance to this because I don’t like… I’ve seen some tweets of Elon’s that I do not, I do not agree with. I do. They are trolly, but I have always respected him as the Tony Stark of our day of an industrialist who’s getting done in a way that no one was building rockets. And he figured it out. No one was doing electric cars and he figured it out. So I have this push pull of, I have respect for things that he’s built, but I also don’t. He and I don’t agree on a lot of things and I wouldn’t represent myself in that way. I have made predictions, so many predictions about Twitter over the years. We used to do prediction episode at the end of each year, and in 2017 I predicted Twitter would have major issues continuing a decline.
And in 2019 I predicted that they would be acquired. And much like the person who predicts eight of the last two recessions, I feel like I should be vindicated that I finally, they did, they lived up to this. My take on whether it’s better or worse at this point is TBD. I don’t think it’s better for sure. I mean the blue check mark, whatever. I don’t know that I’ve seen other changes. Like you, Einar, I don’t really use the home feed that much. I use it a little bit, but not much. I do think that the circus, the media circus around it is not helpful. Now we can blame the media for that. We can blame Elon for that. We can blame both of them for that. And that’s the way I’m thinking about it. I think that’s detrimental to the whole situation because it’s just a bunch of noise. And as we just agreed, if none of that was being reported on, would we have noticed much of a difference. Tracy, any closing thoughts?

Tracy Osborn:
I mean, the Elon thing is funny because I feel like he’s a kind of bull in a China shop and it just was something we weren’t really seeing with his other companies. And now that he’s in a company itself that is a media communications company and then firing a bunch of people and then that all those people are going to be already using that service to talk about those things and blows up. I feel like this thing was kind of happening at other companies like Tesla that we just didn’t see. I mean there’s a lot of-

Rob Walling:
Do we know that or are we… Because I haven’t looked into this, but I haven’t heard that. So I hate to speculate and act like…

Einar Vollset:
The problem is for me to say… I want to say I’ve read that, but I can’t have a proof right now. And I do say that there is… I’m in the market for an extra car and I’m not getting a Tesla, not because of Elon, but because there is a whole subreddit just talking about the quality issues. They’re having huge QA issues right now with Tesla. So it’s one of those things where they’re like… I’m happy that they’ve started and they really started that trend of electric car companies. I’m at this point where I’m just like, “I’m not going with Tesla because they’re having major growing pains right now because of the way that they probably had to start up because they were the first, and that’s why I’m going with different car.”
But I’m just like, “It’s interesting about how he obviously has a management style and that management style was perhaps the same in these companies and perhaps it was less visible because it wasn’t on a media company.” And it’s kind of interesting to think about what effects happened when someone who has a certain management style but goes into something that is public or so wildly talked about publicly.

Rob Walling:
See, it’s interesting for me because one of my sons came to me a couple days after the Twitter acquisition and he said, “Yeah, Elon Musk bought Twitter.” And I said, “Yeah, I know.”
“And he got rid of the board.” And I said, “Yeah, I know. If I took a company private, I would too. That’s what you do.”
“And he fired all the execs.” And I said, “Yeah, that’s what I would’ve done too.”
“And he’s going to do layoffs.” And I said, “That’s what I would do too.” To him he… And at school it’d have been presented like, “Oh my gosh, this guy did this stuff that’s so unpredictable.” It’s like, “No. No. No. If I had bought a company like that, I probably would’ve done all the same things.”Again, Elon and I do not agree on a bunch of stuff, but if I’m going to buy a big company that’s over-

Tracy Osborn:
I was going to say, would you do Friday 2:00 AM code reviews? I think that’s more the astonishing thing.

Rob Walling:
No, no. And that’s why I’m saying, but that’s a detail. Yeah.
I’m not saying, “Oh, everything Elon did was good.” I’m saying these top level bullets that my son brought are like… I was like, “No, that’s what you do when you buy a company.” But no, 2:00 AM code reviews or the “get it done by this or you’re fired” or whatever. There’s a bunch of stuff. It’s like, would I run a company like that? No, I wouldn’t. So let’s talk about the.. That’s kind of what I told him. I was like, “Everything he’s doing is not right. But the four things that you just mentioned, I actually think are what any sensible person would do.”

Tracy Osborn:
I mean, everyone else’s going on layoffs, Google, Meta. Everyone else too, and they’re not being reported on the same way.

Rob Walling:
Exactly.

Tracy Osborn:
But it is like the, “Ooh, look at this Twitter- tweet of this person holding up a stack of papers talking about, “Okay Elon, I’m ready for my code review.” And everyone’s like, “That’s ridiculous.” And then it just goes viral. That kind of stuff is not helping.

Einar Vollset:
But again, think about why did you see that? Why did you see that? You saw that because the algorithm surfaced it for you.

Tracy Osborn:
I follow Leah Culver too. Who was the one that did it.

Einar Vollset:
I didn’t see it. Because I don’t follow people who are in that drama thing.

Tracy Osborn:
Leah Culver is an old friend.

Einar Vollset:
Yeah, I just don’t follow those people. Again, so it doesn’t come up because I don’t follow the algorithm. I mean, honestly, my honest to God view on this, and it may be deeply cynical, is that I think what has happened, the reason why there’s so much heat and so much drama around this is because to journalists Twitter’s very, very important and they had a very special status under the previous regime, and they’ve lost that status and they’re losing their…

Tracy Osborn:
I mean, worthy. I thought that was the best part of Twitter is when that we moved into this world of having news access, easier access to folks and easier access for information to come out from journalists and governments and companies and support teams and all that. Now it feels like those are the things that I care about the most and they’re going to go away in favor of people all the time.

Einar Vollset:
I only use it for posting, so this is great.

Rob Walling:
Oh, wait a minute. This is-

Tracy Osborn:
I know.

Rob Walling:
Ladies, gentlemen, folks, listen to this episode. That is why we have Hot Take Tuesday, is that we can get opposing viewpoints, sometimes agreeing, sometimes opposing viewpoints on the topics of the day. If you want to follow our panelists, Tracy Osborn-

Tracy Osborn:
Follow her on Twitter, who’s not on Twitter’s on anymore, but I’m on Twitter at Tracy Makes.

Einar Vollset:
@Tracy @Mastodonsocial.

Rob Walling:
Oh yeah. What’s Mastodon? @Mastodon.something.

Tracy Osborn:
Oh, my God. I’m not giving you a response. I don’t use Mastodon either. I’ve decided I’m done. Oh, God. There goes my camera.

Rob Walling:
No, that was a table flip.

Einar Vollset:
No.

Tracy Osborn:
Actually it looks better now. So that’s great.

Rob Walling:
@Tracymakes on Twitter.

Tracy Osborn:
I’m shaking my computer so much that my ring light fell down. Tracy Makes on Twitter. Thank you. Follow me with not responding there. Follow Einar and you’ll get spams with all of his tweets.

Einar Vollset:
That’s right.

Rob Walling:
Einar Vollset on Twitter if you want to hear live tweeting of sporting events. And of course, as always, I’m @RobWalling. We’d love to connect with you. Thanks everyone for listening and we’ll see you next time. Thanks to Einar and Tracy for taking time to join me on this pod today. As we enter this holiday season, I hope that you are having a restful time, or at least looking forward to having a restful time over the next few weeks. This is a great time of year to take a step back, to reflect on the last 12 months, the progress you’ve made, probably the hurdles that you faced and even the progress that you didn’t make that you wanted to. It’s a time of year to take a minute or an hour or a day, if you can, and look back and look ahead and reflect on things that you wish had gone differently, things that went amazing, and look ahead to think about things you want to get done in the next year. As always, thanks for joining me today and every episode. This is Rob Walling signing off from episode 640.