Shark Tank’s Kevin O’Leary Explains Donald Trump’s Success

understanding the entrepreneurial
journey is not for everybody but for
those that are pursuing it they’re
extremely interested you practice a kind
of former you embody a form of
capitalism and entrepreneurship with
without romance you say you know what
are the numbers you’re dead to me
you know I want money where does that
come from I’m a little right-wing of
Attila the Hun and I believe that
business the DNA of a business is to
provide to its
constituents clearly customers come
number one number two employees
somewhere in there are the shareholders
and lastly you who started it you’re the
last but when you try and shift a
business’s true purpose and say that
it’s going to save society you will fail
not some of the time 100% of the time
saving baby whales is not what
businesses do and now as people trying
to contort them to do that they will
find out and we have this debate I teach
a lot of graduating cohorts of engineers
and business students and this is the
primary debate we have is when you go
out into the world if you think your job
is to solve all of society’s problems
you will get fired unless you start
delivering value to customers and
shareholders and employees the rest of
the world that’s not your problem your
problem is taking care of your business
we’re speaking at Freedom Fest in Las
Vegas an annual convention you’re here
to debate John Mackey with it looking
CEO and yeah of holder he talks about
conscious capitalism and and the model
he puts for it he’s very successful as
well what what’s wrong with that idea of
conscious capitalism where he seems to
talk and and now that I actually the way
you’re talking man he talks about
multiple stakeholders but he also says
you know profit comes first because
without profit there’s nothing but
what’s wrong with a kind of fuzzier form
of capitalism in fact if you read
Mackey’s principles the four pillars
that he espouses much of what he’s
talking about our important management
skills and I agree with him on that
where he gets lost and well we’ll have
the core of our debate today is in the
greater purpose because think about this
problem you have a phenomenally
successful business that is global and
you’re you decide that you have a cause
that you want to be an environmentalist
or you want to save a certain part of
society or there’s some medical disease
you want to give to as a CEO why does
the constituency where headquarters
matter why doesn’t the customer base in
India or in China or if you are trying
to do something sustainable that may be
irrelevant to customers in Cambodia and
so that’s why it becomes really
difficult to pursue mandates that are
outside of the core principles of
growing profits and the
or you take shareholders from capital
and redeploy it away from their pockets
the higher your cost of capital is going
to be because shareholders and I’m an
investor I covet managers that deliver
me high returns with low risk that’s
what the whole core of capitalism is and
when you try and say it’s something else
not only is it dangerous
but you’re 100% wrong that’s not how it
works we have 200 years of proof that
that’s how it doesn’t work are you are
you anti philanthropy or it’s so it’s
more that you make your money in
business and then when you have your
causes or your wealth you can help with
that let me give you an example let’s
say I can invest in two financial
services companies and one of them
decides the CEO decides that he wants to
support a charity and he wants to give
100 million dollars to that charity
across four quarters now it’s not my
charity my family supports multiple
charities but none of the ones that I
support he is supporting my message to
him or her is you deliver me my profits
I will decide which charities I want to
support you have no right to do that on
my behalf I don’t agree with you
I don’t
care what you like you should take your
portion of your salary or the stock you
own and the dividends you get and you
deploy it the way you want the core of
the business is to deliver profits to
the shareholders who then will redeploy
it in any way they wish and when you
lose that mandate when you when you
misunderstand that I’ll fire you if I’m
a shareholder that’s what I want to do
in preparing for this I’ve read a and
watched a bunch of energy’s with you you
are a big defender of capitalism what
what is the best defense of capitalism
as a economic and cultural system it
provides a standard of living for
society in a way that has never been
done before in the history of mankind
there was a time when the majority
people on earth were illiterate and they
were starving and capitalism changed all
of that and certainly John admits that
in his own writing sure and now we’re
trying to do capitals in 2.0 when
there’s nothing wrong with capitalism

volatility is inherent in a capitalist
society there are haves and have-nots
there’s those that are very good at
entrepreneurship and get end up with
more because they solve more problems

and some people have a problem with that
but the capitalism can’t fix that
there’s nothing you can do anytime you
attempt to redistribute wealth outside
of the bounds of the capitalistic
mandate countries like Canada are
flailing as a result of that socialism
doesn’t work we know that already
you could end up like Cuba but are you
are you then are you like Ebenezer
Scrooge and we’re you know are there no
poor houses when you say redistribute
what what’s the limit of do you believe
in a social safety net
I do actually I think it’s the role of
government to provide basic services I
look at all the different models I
travel the world I’m particularly fond
of what they do in Switzerland where
they basically have multiple tiers of
things like health care and and support
for those that are poor but what they do
is they’ll say ok if you’re a wealthy
Swiss citizen in the canton of Geneva
and vole and you want to get an MRI
because you want one tomorrow morning at
ten o’clock
you’re going to pay for it they’re gonna
take the proceeds of that and they’re
going to redeploy it into purchasing
more MRI machines so that the social
safety net for those that aren’t as
fortunate can get free MRIs I’m a big
advocate of that in Canada where they
try and make everybody equal a dog gets
an MRI first before a human it’s absurd
people wait months for hip replacements
for cataract surgery it’s a disaster if
you have had you have catastrophic
illness there yes you jump to the head
of the queue the only other way you can
get medical services to buy it in
basically an illicit scheme which I
think is outrageous so to me I’m a huge
advocate of social nets the British have
a good one the the Danish the Finnish
the Swiss the Germans have done well do
you think the American social safety net
works it’s under stress right now
because it manifests itself in in
ever-increasing federal debt and so
there has to be a modification to the
health care system here
and there’s met there’s multiple ways
this can be achieved
I think digitization of medical records
in a true form will help a lot I think
it’ll be the focus of the next cycle
whoever ends up being president is gonna
have to deal with it it is not perfect
but not nothing’s perfect but as a
society and a market for entrepreneurs
there’s no place on earth like the
United States so capitalism is really
under attack right now and it’s from
from right-wing populists like you know
Tucker Carlson and Fox News who says oh
well it’s good at building new iPhones
and game consoles but really what what
purpose does that serve and then you
have people democratic social or Donald
Trump who is anti free trade he’s
anti-free speech which is a part of a
free economy then you have Alexandria
Kaiser Cortez and her social justice
squad that is attacking and are you
worried about capitalism survival no I’m
not inherent in capitalism is not only
volatility of asset prices but
volatility of political mandates and so
in an election cycle that is as visceral
and partisan as we have now I mean you
have a circus going on and it’s just the
nature of what Washington is turned into
by the way I think it’s a carnival freak
show not a circus is a circus sometimes
it’s fun well I I enjoy the rhetoric
it’s very entertaining it’s not mean
enough for you though I mr. wonderful I
want to bring back I was I’m a huge
history buff and I really enjoyed
history throughout my entire education
and I had a great history teacher when I
was very young in high school and she
taught me something very very important
that I’ve never forgot in my in my
career and I’ll give it to you here
great politicians great leaders great
CEOs are phenomenal entertainers
back to the days of Alexander the Great
Napoleon Bismarck they used to hold
counsel at night have big dinner parties
or sit around the fire with their camp
with their with their men and tell
they would tell stories of great defeats
great battles great loves and that would
spread through the troops you know the
leader told us about this this maneuver
in the Nile yesterday and it would
capture the hearts and minds of the
Donald Trump is exactly that he is a
great entertainer
he smoked the
competition by eating 101 percent of the
airtime in the last election unfortunate
for Hillary she was boring on television
and like Obama was it was a different
time she didn’t see that it was time to
be entertaining the best ever
coverage she got was the debates with
Trump where it was so mesmerizing I
actually watched that instead of
football I remember sitting with a bunch
of guys golfing and we turned that on
instead of a football game and I said
wow he’s Alexander the Great
what do you but you’re also you you’re
critical of Trump in various ways and
what do you tell her great entertainer
and that allowed him to become the
leader of America and maybe the free
world if we still talk about things in
those terms but you you know looking at
you you had thought about running to be
the head of the Conservative Party in
Canada you’re um one of the things you
were talking about and obviously you’re
off Canada now you don’t like it as much
well that’s not true well yeah okay but
you you know you’re in favor of more
immigration you are in favor of gay
rights and trans rights and legal weed
you are non interventionist generally in
foreign policy what do you think of
Trump substantively you know you have to
differentiate and my take on Trump and
his his cabinet is I don’t watch the
circus or the freakshow whatever you
want to call it I look at the policy I’m
a policy wonk
and I have this unique index I should
share with you I have interests in
almost you know it is over 50 it’s over
50 private companies now all practically
every state very few states who know I’m
interested in now
I get the monthly cash flows of every
one of these businesses because most of
my deal structures or royalties as you
know or venture debt or preference
shares or converts and I have lots of
companies around cash flow I have never
in my life seen an economy like this
this is even better than the 60s it is
phenomenal and I think primarily because
of deregulation not tax reform my
companies in California in Texas in
Florida in Illinois in in the municipal
level and the state level have been set
free what is the nature of that
deregulation give me an example give an
example in California had a deal that
converted strip malls
you know retail space it failed 12 min
square feet and turned it into a place
where you could paint and drink wine and
very successful business called wine and
design you’ve got a painting lesson you
sip wine with your friends you enjoy
yourself for four hours you do a
painting the regulations to actually
allow people to do that included such
absurd regulations for example a frosted
glass window had to be within 21 feet of
a back door that did not have frosted
glass but had bars across it and all
kinds of absurd regulations have been on
the books since the 50s well Trump swept
all that garbage away how did he do that
where they he basically anything that
has a federal mandate he just ripped it
up and some of these regulations were
federally mandated and others were
stripped away by states watching
businesses leave and saying wait a
minute if they’re deregulating that for
Texas federally I’m going to do that in
the state basis all of a sudden I can
open up stores all across California
where I never could just like that and
so this has been a really interesting
time over the last thirty six months and
I see no slowdown I just saw last
month’s numbers Wow
I mean I’m just so now you’re making me
think it’s the fall of 1929 I don’t know
it’s like no I think I can only keep
going up I’m very optimistic about the
domestic economy we could have trade war
issues with the sp500 because 46 percent
of their sales are international but
I’ll tell you this about Trump here’s my
assumption the chance he doesn’t get a
my view is zero and I’ll tell you why I
don’t recall in modern times when going
into a second term at full employment
the incumbent of any party has ever lost
their mandate ever how important to you
and I want to come to Canada in a second
but as in a leader like trumpet but
entertaining etc but then the rhetoric
is not just bilious I mean it’s racist
it’s extremely divisive and of course
you know people on the other side are
giving him the same does that kind of
stuff trouble you at all or is that just
a kind of epiphenomena that doesn’t
matter you know I met Trump because we
both worked for Mark Burnett and he was
on the apprentice we were just starting
shark tank we used to meet up when we
were selling the forwards in New York
he’s an advertising for the network’s in
many ways his his style is to 50% of the
population his style is difficult he I
don’t believe he’s a racist man I don’t
think I don’t believe that at all I
don’t think he’s a sexist man I don’t
believe that at all even though it’s
interpreted I think he’s a family man
but people don’t get that all he’s had
several families he he’s a and that’s
not gonna change is my point
this won’t get better for people who
don’t like him I ignore all that stuff
and you know I get in in my in my family
the night that he got elected I told we
were all sitting around it was you know
culmination of all that entertainment on
me of the election cycle and my daughter
wept and I said Savannah this is a
really good thing that just happened you
just don’t know it yet
she said how can that man be elected how
can you know it was a very divisive
moment in my family so we have in my own
family people that are dining
discussions that you know Sunday night
dinners are about politics I love
politics and I keep trying to sell them
on the merits of his policy and I
realize it’s never gonna change their
opinions America is like that too like
my family is just like the average
American family
so with younger people in particular
there’s a ton of polls out there showing
you know that Millennials are people
under 40 Americans under 40 have a
positive view of social
some in some polls a more positive view
of socialism than capitalism how do you
change that because you know they are
gettin there’s already more Millennials
than baby boomers though they’re gonna
be voting at some point where are they
wrong and how do you reach them not you
know to convert them to capitalism I was
a socialist when I was 18 years old – I
was left-wing I tell I got my first
paycheck and I saw something called tax
on it
everybody’s a socialist when they’re
young until they start working and they
start realizing how tough it is out
there and they start realizing how much
money government wastes when they take
half their income in taxes and that’s
when you become a conservative the older
you get the more realistic you become
and a majority of those people make the
transition in their mid-20s that’s what
happens I never worry about you my job
today is to teach young people about the
entrepreneurial journey to make sure
that those that can’t handle it don’t
try it I tell people this is what it’s
like I’m gonna give I’m gonna do a
two-hour lecture I’m gonna walk you
through what your life is gonna be like
if you pursue this and maybe some of you
should be great employees because not
everybody in this room is gonna make it
as an entrepreneur it’s that way about
life and I think the natural cycle is
the worlds that come by our place when
your parents are paying for everything
for you and then you get out of the
house and you’re on your own and you go
wow it’s tough out here I read an
interesting story about your childhood
and about your mother you’re of Lebanese
and Irish descent and when your mother
died you found out that she had been
investing yeah what was the lesson that
you know that you learned from that and
you know should everybody kind of adapt
that or at least take it seriously the
lesson I learned was that she she had a
fierce desire for financial independence
she had been married twice and she
didn’t want a man to rule her life
financially ever and she was a very
shrewd investor she had a portfolio of
23 large cap dividend paying stocks and
telco bonds and over a 50-year period
that portfolio beat every single manager
I’d ever hired she just believed in
owning securities that return capital
shareholders and she would only spend
interest and dividends and never the
principal and the principal over that 50
year period appreciated wildly and you
know what what it taught me was to focus
here’s how it manifests itself in my
life today
not some of my returns 95% of them in
this 11 year 14 year journey on Dragon’s
Den and Shark Tank have come from
companies run by women they are very
very good at mitigating risk and my
mother was like that so now I’m almost
sexist in the sense that even the
producers have to say to me you gotta
invest in some guys I said why
they don’t make any money these women
made me all this money look at all these
deals I’ve made so much money and why
should I take risks with men who can’t
dope who have testosterone sales targets
they never had and all the rest of that
stuff so I’m very biased about people
that understand financial independence
that’s women mitigate risk that’s women
know how to manage time that’s women set
reasonable goals have very sticky
cultures in their business that’s all
women so I’m telling my guys now every
year we do a big conference in South
Beach I bring all my companies together
50 60 70 people in that room and I say
this is what these women did this year
and this is what you guys did now why
don’t you exchange ideas here because I
want all of you to succeed I’m aligned
with you I’ve risk capital with you go
figure out what they’re doing you at
times and flirted with what I would
consider Canadian exceptionalism that
Canada was a great country and that it
was doing a lot of things rights you
know according to various kinds of
indexes of economic freedom Canada is in
many ways more free than the United
States but you’re really off Canada you
you pulled all your money out of Canada
you’ve left I mean you’re I guess you’re
are you still a Canadian citizen or both
Irish and Canadian okay and so what
happened was in the last election I’m
always willing to give a politician a
chance regardless of where they came
from or how they got their mandate and
in Canada they have the parliamentary
system and so when the current prime
minister was elected I’m like everybody
else and I wished him the best of luck
and hope that when you saw him wearing
that horrible neighbors
or whatever and well his mandate has
been an unmitigated disaster and not
only because of his lack of managerial
skills but he put in place in a
parliamentary system the mandates of
Foreign Affairs or infrastructure
spending or military procurement or
finance are really important because
there are little mini Prime Minister’s
the men and women that get those jobs
and he brought in a covenant he was a
very interested in in in providing a
broad diverse but never put competency
in any of his metrics of measuring who
should get these jobs for example he put
in place a journalist in the role of
Foreign Affairs what’s happened never in
Canada’s history have we upset so many
partners Saudi Arabia Japan Russia China
United States all our prime trading
partners in the last few months and I’ll
give you an example and why I was so
happy to have taken my money out when
they started to realize he can’t manage
anything the worst countries who have
invested in in the last four years has
been Canada of the g7 a disaster
you will anywhere else would have been
better including Europe the Canadian
dollars collapsed it’s gone down for
parity down to 73 cents so you’ve lost
you twenty four percent right there but
let me give you an example that because
it brings together the idea of
understanding negotiating tactics and
managerial skill when Trump decided to
ramp up the trade war with China when he
really wanted to slap on that second set
of tariffs he was I’m speculating here
but I think I’m right he was really
worried that all of a sudden the Chinese
would cut off trade in agriculture trade
and resources trade and energy trade in
wood where would they all go up to
Canada that would have been a huge win
for Canada what does he do he realizes
he calls up the finance minister in
Canada says the huawei CFO the daughter
of the founder he’s going to be in
Vancouver for 32 minutes transferring to
Mexico City arrest her
he totally played Trudeau in the end the
Foreign Affairs Minister like a fiddle
and screwed the country when the Chinese
heard that happened within hours they
cut off ties with Canada
honing threatening to kill two Canadians
that are prison over there
no pork sales anymore no energy no coal
no nickel no steel no wheat nothing
going out of Canada to China
what a brilliant move except if you’re a
Canadian citizen or an investor are
Canadian you know taxpayer you realize
you just got snookered by a really smart
guy and a really incompetent finance
minister it’s not her fault she’s a
journalist she never she was never a
diplomat the poor woman I feel sorry for
her she’ll be gone in a few weeks that’s
what I did you mentioned before that
capitalism is volatile one of the risks
and this is the economist like Joseph
Schumpeter would talk about this this is
the whole idea of capitalism is built on
creative destruction and there’s you
know industries rise and fall with an
individual’s lifetime individual
lifetimes and why not that creates a lot
of anxiety and a lot of social
instability people worry you know I’m
working here in this business it might
not be around in five years or this
whole sector might not be do you worry
about that or what are the ways that
capitalism and capitalist societies
free-market societies can mitigate that
kind of dislocation so that you don’t
get calls from Democratic socialists to
say we need Medicare for all we need
universal basic income we need a social
safety blanket that covers everything
and smothers entrepreneurship the best
way to dissipate fear is study history
this is why I do it to this day I keep I
keep going farther back and back with
the writings of great leaders from the
past and if you look at history in as
capitalism over the last 200 years has
destroyed many industries and reborn
others 40 years ago you couldn’t have
ever dreamt that someone who sat in
front of a screen and wrote code would
make half a million dollars a year in
their first job that didn’t exist today
it’s engineering it’s it’s probably the
best job you can get and in 40 years
from now or 20 years or 10 years they’ll
you know talking about robots replacing
pizza makers or cooks and all that
I hope it happens because there’ll be a
new sector that emerges as a results of
this men will never and women will never
be replaced by machines because they’ll
always be finding new purpose in new
problems being solved and I trust in
destructive capitalism to do that I
don’t fear any innovation at all
I fear regulation I fear burdensome
government I fear that a third of every
dollar raised by government through
taxes is wasted in every capital society
Canada it’s 50 cents on every dollar
United States is about 33 the less money
you give government the better your ad
gets there’s new cancer therapies that
starve tumors very effective and very
interesting research going on they’re
starving government of funds would be a
good thing
so you mentioned before that in America
you know it’s that the system isn’t
where the social safety net isn’t
working that well but it doesn’t stop
the government from just spending more
money and borrowing more money we’re 22
trillion dollars in debt why is the debt
a negative why is the debt a problem and
how do we how do we reduce the debt or
so you know because we’ve been starving
the beast in America for my entire
lifetime but the the Beast this seems to
have a credit card that never gets cut
off well as a percentage of GDP the debt
has been manageable and also we’re
moving to a world of zero interest rates
which we already have in Europe then you
think that’s no idea around I mean like
yeah why why we haven’t any pressure in
the last 10 years that’s been a straight
decline of the tenure cost of money the
reason that we may get out of this mess
is that through innovation and
entrepreneurs and technology and a
really robust economy we keep getting
more productivity we keep inventing
things like the internet and the cloud
services that make productivity continue
to perform we keep getting better at
what we do and as a result the economy
continues to grow in terms of its total
size and GDP you know or debt to GDP
remains constant even though the absent
debts going up so I can take and you can
take a little bit of solace in that now
do I like the fact that government
wastes a third of every dollar and
that’s my number we can debate it till
the cows come home no I don’t and and so
I’m into this mode of saying how do you
starve government of money because that
is an interesting idea basically the
money’s not going to worth staying in
the economy people are reinvesting in
creating jobs which is way better than
what government does all the stupid
things they waste money on because they
have no accountability and I think in
the next 10 years 15 20 years we’re
gonna solve for that in Switzerland it’s
illegal to have debt in your Kent on you
go to jail for that they solved the
decades ago Swiss don’t run deficits
they don’t provide services they can’t
afford and every time they want to
provide a new service they actually do a
vote of the entire country and ask for
8.2 million people it’s profoundly
efficient we could learn from them do
you worry at all about the authoritarian
capitalist model that uh you know a
number of people in the in the 70 or I
guess in the 80s people were talking
about how Japan had figured out how to
manage capitalism in a way you know
growth with that end that ended poorly
for Japan not so much for the US China
now is seen as a model you know and they
figured it out and it’s an authoritarian
capitalism do you think China can
continue to lock down or try to try and
screw down more and more parts of the
economy or is that kind of doomed to
failure over the long run if it remains
in its constant model it’ll look good
it’s doomed to fail if you’re you know
leader for life over there which she’s
hoping is you need to morph yourself
into a global participant that plays by
the rules I do a lot of business in
through manufacturing there most of my
companies we’ve moved a lot to Vietnam
in the last three years not because of
trade wars because Vietnam became a lot
cheaper not some cheaper 30% cheaper so
we’ve moved quite a few there and that’s
been happening for years now but China
wants to play with the big boys and in
order to do that two things are going to
have to happen it’s going to be painful
for them to get
there but I need the ability to protect
my IP in the legal system there because
I need to be able to litigate when when
my IP has been stolen I need an easy
path to stop it as we have here Chinese
investors have come here use our legal
system to raise capital they and stop
you know IP loss we need the same and
the other one and this is why the market
doesn’t correct even as Trump raises the
heat on China the middle class there is
like investing in America in 1930 it’s
going to be phenomenal do business with
with middle-class Chinese people I have
so much stuff to sell them I can’t wait
until this thing gets resolved because
it is going to take US companies to the
next level there’s so much they want
from us from entertainment media and
content right through all the technology
we have once it’s protectable we’ll be
selling it to them that coexistence is
going to be very powerful up leg and
save China it’s going to save China it’s
going to make it a not an emerging
economy anymore it’s going to make it a
mega powerhouse and I believe in the
next 20 years
it will outpace the American GDP but
only if it opens up and becomes more
transient it will it will because they
actually can’t afford what’s happening
there now there’s they’re really
starting to suffer particularly as
companies say I don’t want to go through
all that headache of tariffs I’m just
going to delay my capital expenditure of
China so the government has to do it all
that’s a very dangerous I’d say they’re
gonna come to the table in the next two
years we’re gonna leave it there thank
you so much thank you and we’ll enjoy
we’ve been talking with Kevin O’Leary of
shark tank this has been reason TV I’ve
been Nick Gillespie

Forget about Growth. Here’s the Metric that Really Matters.

The growth vs. churn quadrant
Let’s start by looking at when each of these metrics matters more during a product’s lifecycle


1. Low growth, high churn
Whatever you’re doing, it’s not working. You’re hemorrhaging users while failing to add more, so it’s pivot time. Given the goal of righting the ship, growth is a better metric to focus on to see if you’re effectively changing the dynamic by offering and promoting new features and functionality.

2. High growth, high churn
You’re onto something, but execution is the issue. New users signing on means your messaging and value propositions are cutting it, but users aren’t sticking with the solution. The company can’t afford to keep spending money on user acquisition if those people don’t last for long as paying customers. It’s time to take a deep dive into user behavior analytics, surveys and interviews to uncover what’s leaving them cold and causing them to abandon ship, so churn takes priority.

3. Low growth, low churn
With a loyal customer base, there’s a strong foundation to build on strategically. Product development efforts can be selectively chosen to experiment with growing the appeal to new pools of users. Marketing activities should also be reevaluated, and the spotlight can shift to growth.

4. High growth, low churn
The holy grail is in your grasp! New users coming in, old users staying put, revenue solely headed in a good direction. Assured that you’ve got a winning combination, do you double-down on growth or try and squeeze that churn rate even lower?

When it’s churn’s turn
Once a product and its growth campaigns have reached maturity and are both performing well, product management can be more strategic and less reactionary in its prioritization. Product market fit has been achieved and glaring problems or shortcomings in the product have been addressed. This is the time to focus on churn.

Let’s look at the numbers. If a company charges $10 per month, each new user means an extra $10 in revenue, and every lost customer means a loss of $10 in revenue. If it was just as easy to add one new customer as it was to retain an existing customer, then it wouldn’t really matter whether a company focused more on growth or reducing churn.

However, there is usually a cost to acquiring each of those new customers. If it costs $100 on average for each new customer, the company doesn’t even break even until month 11. So now the goal is not only to add new customers, but to keep them around for at least 11 months to even consider that customer profitable—and that assumes there is zero incremental operating cost to adding and maintaining each customer.

This illustrates why it is so important to reduce churn, and why each saved user is more valuable than each new one. Even when the acquisition cost is only $20, it’s still not until at least Month 3 for them to become profitable, and every customer who doesn’t last represents not only a $10 per month loss in revenue but also any unrecouped money spent on acquiring them.

“Focusing on just one year, if you have a churn of 5% of customers a month, you need to grow a staggering 45% in a year just to remain stable,” says Dave Martin of Tes. “In absolute numbers, starting in January with 2,000 customers suffering a monthly 5% churn and acquiring no new customers, results at the end of December in only 1,080 customers… But with a 1% monthly churn this product can celebrate annual growth of 715 customers, or 36% growth. ”

Churn means more than lost revenue
Aside from the purely financial impact of a customer unsubscribing, shedding customers has other negative repercussions. If a customer quits—particularly when it’s due to a negative experience—they are potentially a negative growth agent if they share their unsatisfactory experience with other potential buyers.

This can manifest itself in negative online reviews, poor recommendations, or even industry headlines in an enterprise setting. Definitely not helping your Net Promoter Score.

Additionally, as internal executives and outside investors evaluate the company, higher churn rates can raise a red flag about long term viability. There’s always a ceiling for growth, so stakeholders want to see that even when growth plateaus the business is truly sustainable. If users are consistently canceling their subscriptions, slowed growth can lead to a net negative in monthly revenue over time.

A lost customer is worth more than a new one
The older a customer, the more their departure hurts. New customers are less likely to be a good fit for your product, as the earlier someone adopts the more pressing their need for your solution. Plus that old customer had already paid off their acquisition cost and was a true profit center, while new customers need time to pay that off, plus the amount to acquire them likely was higher as it was more recent.

But you can also learn something from that lost customer, namely why they left. Were they drawn to a competitor? Did the value your solution offered fade over time? Was a missing key feature causing them to bail out? Answering these questions can inform what should be done to retain your current stable of paying customers and attract new ones.

Pay attention to pre-churn indicators
Many people don’t cancel subscriptions the second they stop using them; they might be lazy, want to avoid confrontation, not realize immediately that they’re definitely not using a product anymore, or simply aren’t sure if they’re really going to give it up forever.

Regardless of their reason for putting off cancellation, eventually those people will pull the trigger after seeing a credit card statement or being asked by their boss why they’re still paying for something they never use. So even if customers aren’t immediately heading for the exits, there’s a chunk of users (or potentially non-users at this point) that represent an imminent cancelation.

There are three reasons to pay attention to this cohort. The first is that if you can recognize the tell-tale signs of a user in wind-down mode they could be eligible for revitalization from customer success or account management. Knowing the indicative metric in this case can prioritize those customers for follow-up.

Is churn ever a good thing?
There are cases where losing a customer is a win in the end. They typically come in three flavors:

  • Too high maintenance—SaaS businesses succeed with scale, so when a customer needs constant hand-holding and special treatment or customizations, they may not be worth their monthly or annual fee.
  • Clinging to the past—When a customer leaves because you no longer support an outdated technology they still want to use, it’s the price of progress, but generally one worth paying.
  • Relics of a previous era—Businesses evolve and their new strategies and models may not work for early adopters who signed up for a markedly different service. While you don’t want to leave loyal customers hanging, if it’s a small enough cohort it’s probably best to say goodbye.

Shedding a few old-timers and getting a fresh start with only customers interested in the current offering can avoid distractions and help cull your backlog of irrelevant items.

Seven Fixes for American Capitalism

Ideas from the Right, the Left, and across the Atlantic to mend what’s broken in our economy.

Antitrust Pivot

Many of the U.S.’s biggest economic ills—rising inequality, stagnant wages, low productivity growth—stem in large measure from corporate consolidation and monopoly power run amok. That’s the message from a new breed of policy wonk urging a return to the trustbusting days of the early 20th century.

The movement—labeled the New Brandeis School by its proponents and derided as Hipster Antitrust by its critics—is looking to ditch the Chicago School approach that’s dominated antitrust enforcement since the late 1970s. The Chicago School hews to what’s known as the consumer-welfare standard, which finds mergers anticompetitive only if they raise prices.

The new model takes its inspiration from Supreme Court Justice Louis Brandeis, who emphasized the need to restrain big companies and the concentration of economic power. Lina Khan helped galvanize the movement with a 2017 paper she wrote as a law student at Yale that made the case that Inc. is a threat to competition, even though it’s lowered some prices for consumers.

Any ambitious government-led project to reshape the U.S. economy usually runs into the same objection: We can’t afford it. One school of economic thought says that’s all wrong.

Modern Monetary Theory, a once-fringe set of ideas now getting some mainstream attention, says governments borrowing in their own currency have more room to spend than they think. The U.S., for example, can run deficits without having to worry about going bust, because it creates the dollars in the first place. The real constraint only kicks in when there’s too much spending relative to a limited supply of goods and services—in other words, when inflation spikes. And there’s been little sign of that in America for decades.

MMTers argue that their system isn’t so radical; it’s the way things already work, at least some of the time. Presidents, including the current one, haven’t balked at measures to boost the military or cut taxes, even when the resulting deficits run into the hundreds of billions. And emergencies, such as the 2008 financial meltdown, typically push concerns about balanced budgets deep into the background.

Now there’s a different sort of emergency on the horizon: climate change. Since the threat is arguably greater than economic depression or even war, it requires action on a suitably vast scale, argue Democrats who’ve picked up on the issue.

And MMT offers a key to unlock the financing. That’s why freshman Representative Alexandria Ocasio-Cortez, one of the first U.S. politicians to talk publicly about MMT, is also at the forefront of the drive for a Green New Deal. The maximal version of that program includes shifting the U.S. to 100 percent renewable energy within 10 years. If that wasn’t ambitious enough, the plan also calls for the government to guarantee a job for everyone who wants one—an MMT favorite that’s also a throwback to Franklin D. Roosevelt’s New Deal.

“Clearly, the environment matters more than entries on balance sheets,” says Randall Wray, a senior scholar at the Levy Economics Institute of Bard College and one of MMT’s most prominent proponents. “The environmental thing is real. It’s not financial.”

MMT’s detractors say government spending on that scale could trigger the kind of inflation that would wreck the whole economy. America’s national debt has already ballooned since the Great Recession, they warn, and adding more will erode the country’s creditworthiness and undermine the dollar’s role in global finance.

While those warnings are still frequently heard, there are signs that they’re losing their impact as the debate leans left. Several renowned economists who aren’t MMTers have recently tried to downplay the risks attached to deficits and debt. They include Olivier Blanchard, former chief economist at the International Monetary Fund, and Obama administration heavyweights Larry Summers and Jason Furman. Bank of England chief Mark Carney has made the case that action on climate change represents an economic opportunity, not a burden.

Ocasio-Cortez didn’t manage to garner enough Democratic support for her first attempt at actual legislation, a proposal to set up a Green New Deal committee. But there’s broad sympathy for the idea in principle, including among several of the party’s presidential candidates, and many of them have also endorsed a jobs guarantee. —Katia Dmitrieva

Tech to the Rescue Inc. Chairman and Chief Executive Officer Jeff Bezos wishes there were a trillion human beings in the solar system. With room for that many people, there would be “a thousand Einsteins and a thousand Mozarts,” he told the Economic Club of Washington, D.C., in September. The world’s richest man is funneling $1 billion or more a year into a company, Blue Origin, that he hopes will help make extraterrestrial settlement a reality, creating places to live for all those Einsteins and Mozarts.

Bezos and others argue that innovation is the essential ingredient in human betterment. They have a point. Life would be pretty awful without the advances made by past generations, such as indoor plumbing, vaccines, refrigeration, and telephones. Bezos even asserts that freedom itself, not just material well-being, depends on technological progress: “I don’t even think stasis is compatible with liberty,” he told the Washington audience.

In the view of the tech-to-the-rescue crowd, innovation can solve just about every problem humanity faces. Global warming can be fixed with better electric cars, solar cells, wind turbines, and batteries. Income inequality can be solved by educating or retraining workers for the high-tech jobs of the future.

The Information Technology & Innovation Foundation, a Washington think tank founded in 2006 to propagate this philosophy, argues that using antitrust law to break up or discipline the big technology companies can backfire, discouraging innovation and harming consumers. Robert Atkinson, president and founder of the ITIF, co-wrote a 2018 book with Michael Lind called Big Is Beautiful: Debunking the Myth of Small Business.

The techies welcome a prominent role for government in paying for education and conducting or supporting research and development. But the movement is split on trade. The nationalists want to keep the U.S. in the tech vanguard and are willing to resort to tariffs and subsidies to preserve its dominance. The globalists, including some heads of multinational companies that earn lots of their profits abroad, are happy to see other countries advance technologically, figuring that the benefits of breakthroughs—say, a cure for cancer—will be shared by all of humanity regardless of their origin.

The common theme is that prosperity depends on a robust tech sector. “We’re in a 10-year productivity depression” that’s hurting living standards, says Atkinson. “Tech is really the only way we’re going to raise productivity growth.” —Peter Coy

Tariff Truthers

If there’s one thing most economists around the world today can agree on, it’s that tariffs are bad. Protect one domestic industry with an import tax, and you hurt a swath of others. Tariffs reduce choices for consumers and push up prices for goods. They stifle competition and deter innovation. And they invite other countries to retaliate, leading to the sort of tit-for-tat behavior that’s left U.S. soybean farmers watching crops once destined for China rot in their fields.


Devotees of small government were stirred by candidate Trump’s vow to “drain the swamp” and pull U.S. troops out of foreign quagmires. But President Trump, with his tariffs and deficits, has proved to be “the opposite of a libertarian,” the Libertarian Party declared in March.

Still, the free-market purists aren’t giving up the fight. One of their bugbears is the Federal Reserve and its cheap money—a distortion of the market’s natural efficiency, according to Austrian economist and libertarian idol Friedrich Hayek. When Ron Paul, America’s highest-profile libertarian, ran for president in 2012, he pushed for the Fed’s abolition and a return to the gold standard. “If you want to restrain government, you restrain the power to create money,” he said. “That’s what gold does.”

The Fed can probably rest easy. Americans aren’t exactly clamoring for a return to gold, while hyperinflation and other disasters predicted by libertarians in the easy-money decade since 2008 haven’t come to pass.

Some libertarian ideas are finding a larger audience. Among them are the call for stripping back zoning rules, because they limit the construction of affordable housing, and their criticism of patents that lock in profits for Big Tech or Pharma and licensing requirements that insulate professionals like doctors from competition. A common theme of such critiques—that the economy is rigged in favor of big and established actors—commands growing support among mainstream economists.

And beyond the realms of U.S. policy, the world is evolving in ways that give libertarians hope. Those who deplore the “tyranny” of central banks are rejoicing at the explosion of cryptocurrencies. (The Libertarian Party accepts donations in Bitcoin.) Recreational marijuana use is already legal in 10 states and backed by more than 6 in 10 Americans, according to a poll by the Pew Research Center.

Paul, who outperformed most expectations during his own tilt at the presidency, says a popular Libertarian candidate could well emerge in 2020. It’s a stretch to say he’s cheerful about the wider outlook, though. “It’s a bubble economy in many, many different ways, and it’s going to come unglued,” he told the Washington Examiner. —Andrew Mayeda

Davos: A Family Reunion for the People who Broke the Modern World

For the past several decades, world leaders, CEOs, tech titans, billionaires, philanthropists, and celebrities have descended upon Davos, Switzerland with the goal of “improving the state of the world.” Anand Giridharadas, author of Winners Take All: The Elite Charade of Changing the World, says they are part of the problem.

Trade wasn’t working for everyone.

Dynamic scheduling, underpaid, contractors, fight minimum wage, more flexible labor, tax cults for the wealthy anti-inheritance taxes, evade existing taxes, rewards offshoring, expresses no loyalty to communities. (5 min)

I don’t think arsonist need to attend at a firefighter’s convention.

Poor people are very accessible. They want someone to bear witness. They don’t have publicists.

You can’t understand inequality without understanding rich people and the systems they use to justify themselves (10 min)

Today’s elites are among the most socially away, yet also predatory

I don’t think we have free markets, we have a capitalism of monopoly, and rent seeking

Jane Meyer’s Dark Money: how we got here.

Business didn’t have power (Nixon started the EPA) and worked to understand it. They used an alliance with evangelicals and philanthropy to build power.

History is life a mob boss: we can do this the easy way or we can do this the hard way.  It can go down like the civil war or women’s suffrage.

82% of new money was in the 1 percent’s hands.

It’s going to require many to become traitor’s to their class.  If Gates devoted as much to pushing an estate tax, he could have a bigger impact.

I think things are changing.  There aren’t going to be as many Goldman Sachs and McKinsey people in the next administration.

For Trump, Failure Is the Only Option

that they raise it to 4 percent of G.D.P., much higher than the bloated military spending in his own budget. He then claimed, falsely, to have won major concessions, and graciously declared that it is “presently unnecessary” to consider quitting the alliance.

Was there anything our allies could have done that would have mollified him? The answer, surely, is no. For Trump, disrupting NATO doesn’t seem to be a means to an end; it’s an end in itself.

.. While Trump rants about other countries’ unfair trade practices — a complaint that has some validity for China, although virtually none for Canada or the European Union — he hasn’t made any coherent demands. That is, he has given no indication what any of the countries hit by his tariffs could do to satisfy him, leaving them with no option except retaliation.

.. So he isn’t acting like someone threatening a trade war to win concessions; he’s acting like someone who just wants a trade war. Sure enough, he’s reportedly threatening to pull out of the World Trade Organization, the same way he’s suggesting that the U.S. might pull out of NATO.

.. Whatever claims Trump makes about other countries’ misbehavior, whatever demands he makes on a particular day, they’re all in evident bad faith. Mr. Art of the Deal doesn’t want any deals. He just wants to tear things down.

.. The institutions Trump is trying to destroy were all created under U.S. leadership in the aftermath of World War II. Those were years of epic statesmanship — the years of the Berlin airlift and the Marshall Plan, in which America showed its true greatness. For having won the war, we chose not to behave like a conqueror, but instead to build the foundations of lasting peace.

Thus the General Agreement on Tariffs and Trade, signed in 1947 — at a time of overwhelming U.S. economic dominance — didn’t seek a privileged position for American products, but instead created rules of the game to promote prosperity around the world. Similarly, NATO, created in 1949 — at a time of overwhelming U.S. military dominance — didn’t seek to lock in our hegemony. Instead, it created a system of mutual responsibility that encouraged our allies, including our defeated former enemies, to see themselves as equals in preserving our mutual security.

.. anything that weakens the Western alliance helps Vladimir Putin; if Trump isn’t literally a Russian agent, he certainly behaves like one on every possible occasion.

.. Trump obviously dislikes anything that smacks of rule of law applying equally to the weak and the strong. At home, he pardons criminal bigots while ripping children away from their parents. In international relations, he consistently praises brutal strongmen while heaping scorn on democratic leaders.

He may complain that other countries are cheating and taking advantage of America, that they’re imposing unfair tariffs or failing to pay their share of defense costs. But as I said, those claims are made in bad faith — they’re excuses, not real grievances. He doesn’t want to fix these institutions. He wants to destroy them.

.. Alternatively, you might have thought that big business, which is deeply invested, literally, in the existing world order would protest effectively. So far, however, it has been utterly ineffectual. And while talk of trade war sometimes causes the stock market to wobble, as far as I can tell, investors still aren’t taking this seriously: They imagine that Trump will bluster and tweet for a while, then accept some cosmetic policy changes and call it a win.

But that kind of benign outcome looks increasingly unlikely, because Trump won’t take yes for an answer. He doesn’t want negotiations with our allies and trading partners to succeed; he wants them to fail. And by the time everyone realizes this, the damage may be irreversible.

5 Skills a Modern Product Manager Must Have

There are essentially three ways on how product managers work:

  1. They escalate every issue and decision up to the CEO, and in this model he is just an administrator. The majority of companies are in this category.
  2. The product manager calls in a meeting with all the stakeholders, gives them a couple of ideas and let’s them fight between each other. In this case, the PM is just a roadmap administrator.
  3. The product manager gets shit done. In this case, the PM is a winner.

My intention is to convince you that the 3rd way is the right one.

You know your customer better than anyone else

You know your business like the back of your hand

You are the go-to guy to learn about your industry and everything that’s happening in it

You know everything about all the trends, technologies, customer behaviours and expectations. You are so good at it that you could write a book about the job you are doing.

Competitors? You know everything about all of them, but you never let that distract you.

If I ask you how many people left or subscribed today, you know the answer

Today some companies and startups expect PMs to be comfortable with data and analytics. He should have both qualitative and quantitative skills. A big part of the data you need to know is — “What your customers are doing with your product?”

Most PM’s start their day with 30 minutes or so of studying the data of what happened in the past 24 hours. They are looking at: sales, usage and customer satisfaction analytics, results of A/B tests. And this is an important point that you must not delegate to the analytics department or an assistant. Why? Because you don’t want to miss important details of your customers. You must know everything to draw a bigger picture.

You are a risk taker and inventor

There are trends in our industry, such as machine learning, AI, VR, AR, voice. These are not just fads, but they are here to stay. So you have to be able to adapt, experiment, take risks and not be afraid to fail when trying something new.

If you are not excited about learning these new technologies and exploring with your team, then you need to reconsider if this a career for you. That’s why having a passion for products is essential. It is something you can’t teach. You just have it.

Are you sure this not the description of a CEO’s job?

And that is true. A product manager is like a CEO but for the product.

Where is empathy and communication in all of this?

I have touched on this topic a little bit in the beginning but did not include it in the list because I consider this as something that should come by default. You should remember that having peoples skills is something crucial with all the technology that is happening.

Communication and empathy skills will define the success of a PM that in no way it will come without the help of their teams. This way it is essential to establish strong work relationships with your key stakeholders and business partners. You have to convince them of two things:

  • You understand their constraints
  • You will bring them solutions that will work within those constraints

.. Work very hard to build and nurture the strong collaborative relationship with your product team. Because, as your family, they will be your support along the journey.

.. With Internet access, you can get these courses online at: Skillshare, Coursera, Udemy, Udacity, EDX and Khan Academy.

Bethany McLean on Microsoft: “The Story Almost Did Me In”

Bethany McLean—and the first ever Rewrite Q&A! She discusses how she reported her article and tells the guys how she found sources inside of Microsoft, how she landed interviews with the likes of Bill Gates, and why she rarely records her interviews.

.. Burt Helm: This is a massive company and a sensitive story. It’s not like you can just phone up the board and get a bunch of candid interviews about the search. So how do you start a story like this?

Bethany McLean: This was honestly one of the hardest stories I’ve ever done, if not the hardest, for a couple of reasons. First of all, Microsoft people don’t talk. And second, I’m just not a technology reporter. I’d never written about Microsoft before. I frankly didn’t even understand their business when I started. If you would ask me what Microsoft’s business was, I would have been like, “Computers?” It was enormous amount of work to get up to speed.

.. It wasn’t just about the board and about the difficulties in finding a CEO, it became really about Ballmer’s legacy, about what actually happened inside Microsoft, about the feud between him and Gates. It became a much richer human interest story as I worked on it.

.. Because after years of working in business journalism, I have enough sources who know things that I can call them up — in this case it was investors — and say, “Do you have somebody I can talk to about Microsoft, who can just help me really understand it?”

.. They may not be willing to state to you on the record or to be quoted, but they can steer you in the right direction and give you a good overview of what the story actually is, and then you try to work your way in from there.

.. Analysts and institutional investors, that sort of thing — they are a source that people who haven’t been business journalists sometimes overlook. Those people can then offer a roadmap. Then you can read the 10-K, and the terms are familiar. That’s how I usually start.

.. the most sensitive question you could possibly ask: “Are Gates and Ballmer really having a feud?”

Max Chafkin: How do you get to that question?

Bethany McLean: I generally start with questions about the business. That offers a way into conversations that shows that you’re serious and you’re not just trying to write a hatchet job or a personality play. And I never do that as a pretext—it’s genuine. My stories always have kind of a business backbone to them. The analytical backdrop helps explain the human nature part of the story.

.. Burt Helm: By doing that you meet them on the topics they care about. ..

.. People may not talk to you about their feelings about Steve Ballmer, but they may talk to you about their feelings about what Steve Ballmer did or didn’t do for Microsoft. Because the company matters a lot to a lot of people, right?

.. Burt Helm: I was fascinated by the part of the story where Ballmer says, “The low point of my career as CEO was Longhorn.” But Longhorn, of course, was the thing Bill Gates ran.

Bethany McLean: Right. It’s a confessional, but it’s a confessional with an edge.

.. Burt Helm: How far in your reporting were you when you got these guys to be so candid?

Bethany McLean: You have to be a long way in. I genuinely believe that there is no way to get people to open up to you if you don’t know a lot already. I mean if you know the story already and you can say, “Well, this is what I know,” people are far more likely to say, “Well, that’s right or that’s wrong.” If you don’t even know enough to ask the questions, there’s no way people are going to help you.

.. If Ballmer had picked up the phone the first time I tried to get to him, I probably wouldn’t have asked as good of questions as I did by the time I did.

.. I have this basic rule about investigative journalism that people are either inclined to talk to you or they’re not. If they’re really inclined not to talk to you they’re really not going to. The little bit of wiggle room is knowing a little bit more. The people in the middle of the road can be convinced to talk to you because you know something.

Max Chafkin: I’m imagining spending hours trying to craft the perfect email to Ballmer. It sounds like you’re more fatalistic about the result.

Bethany McLean: Well, I spent an enormous amount of time on the email and I tried to be as thoughtful as I could be, but I am somewhat fatalistic about the result.

.. I feel like I am always dead honest. I would never say, “Well, of course, you’re going to like the story if you talk.” The absolute worst thing for me would be for anybody to say they were misled. I genuinely want to understand your point of view—I like nuance, I’m not a black-and-white person. I want to paint an accurate, nuanced picture of what actually happened rather than this black-and-white, good-guy-bad-guy thing. That tends to dominate when people don’t give their side of the story.

..  So I say instead, “I’ll do my best to be fair whether you talk to me or not. But if you talk to me, I think it’s going to help. I think then there won’t be any surprises for you and I think I’ll understand where you’re coming from.

.. Max Chafkin: Tell us about Microsoft’s PR. They’re probably not super-jazzed about a story about how the Microsoft board is having a difficult time replacing its CEO.

.. Bethany McLean: I did. At first they were very nonresponsive. They became slowly more responsive over time as I tried to show that I was serious about doing a nuanced and fair piece. I think that they were great example of how to do PR in the sense that they realized the story was going to happen, and what made the most sense was to cooperate, because the new CEO Satya Nadella has a great story. They realized what was in their interests, and they did it. There was total fair play. I never felt like I was lied to. I think that it was actually sort of a model example of how to do PR in a weird way.

.. a lot of detail that ended up being cut because we had this whole other story to write as well. So in the end, I think it was indisputably the right thing for them to do.

.. Max Chafkin: It kind of gives you a sense that the power dynamics are a little bit confused. I mean just the fact that they’re putting the CEO and the founder together in the room…

Bethany McLean: But you can learn a lot from that. Why would you ever say no to that? It was a) the opportunity to meet Bill Gates and b) the opportunity to watch him and Nadella together, and see what they say and what they don’t. I thought it was fascinating.

.. Still, it was very scripted, right? I had half an hour and so you have to be really careful with your questions. Gates is incredibly media-trained at this point. He knows how to give the non-answer and he knows how to keep the non-answer short so he doesn’t ramble. I knew he was going to be a hard guy to get anything out of.

The most interesting moment to me in the interview actually came when I started asking well, “Who’s in charge, what happens if you disagree?” Gates gave this example and the language is in the story where he says, “Well, if I want X number of people on a team and Satya doesn’t want it, I bet I’ll get it—but it’s his decision.” To me, that was one of those things that a very close reader of the story would be like, hmm, that’s interesting.

But I also thought that Nadella knows how to work with Bill Gates. He really does. He knows how to manage this guy. It was fascinating to see that —to watch him differ when it was better to differ and not differ when it wasn’t. He’s a guy who knows how to manage people, which I think is a compliment. I don’t think that’s an insult.

.. Bethany McLean: I try to be general but pointed with questions so that I try not to have an idea in my mind of what the answer might be. I try to start out with questions that are business-oriented, I guess, so that people see that I know and care about the business aspect of it. You just get a feel for people and what they want to talk about, and then you try to move in the direction that they want to talk about. I don’t tape my interviews anymore for various reasons, but I used to tape them and I would listen to myself and listen to the number of times I interrupted.

I try really hard not to say anything. I feel like the less I say in an interview, the better.

.. Max Chafkin: Why don’t you tape interviews?

Bethany McLean: I don’t tape them because once I started doing serious investigative work where you had to beg people to talk to you, the last thing you want to do is sit down and be like, “By the way, can I turn on tape recorder now?” Even over the phone—when you live in Chicago you have to tell people you’re taping them. So if you really work to get somebody to talk to and then the first thing you say is, “Can I turn on my tape recorder?” It’s off-putting.

.. Max Chafkin: So how do you take notes? Do you have a classic reporter’s notebook?

Bethany McLean: My pad is bigger than a reporter’s notebook because it’s easier for me on a bigger sheet of paper. I’ve developed my own forms of shorthand so that words people say a lot can be notated with just a symbol.

Burt Helm: So what’s an example in this one?

Bethany McLean: So Microsoft might be M or board of directors might be BD just so that I can very quickly note.

.. Max Chafkin: You have half an hour with Bill Gates and Nadella and you’re not going to tape that? Come on!

Bethany McLean: So that’s an example of a really bad call on my part. Had the Microsoft PR guy not taped the interview, I would have been in trouble because they talk fast. They were both lightning fast and I would not have gotten down half of what they said. So it was actually one of those moments where I was like, this needs to be a flexible strategy. If the Microsoft PR guy hadn’t taped it and sent me the transcript of the interview, I would have had a quarter of it.

.. I wrote a story with Bill Cohan for Vanity Fair on Jamie Dimon and JPMorgan and Bill taped all his interviews, and I was struck by the quality of his quotes versus mine. He had more context and sort of rhythm in his quotes than I did.

.. Max Chafkin: I thought you were going to say he was bogged down with all these hours of tape and I knew I’d made the right decision.

Bethany McLean: No, no. He’s actually got a great system where he pays to have people transcribe them and that’s when I was like, you know, maybe I need to change that. But then every time I think about being on the phone with somebody and say, it feels incredibly awkward. Maybe I’m overly sensitive. I don’t know.

.. Max Chafkin: I think it’s all about your ability to—for me, anyway, to connect with the person. Sometimes I find taking notes can be obtrusive because it forces you to scribble extra hard when they say something sensitive.

Bethany McLean: Here’s the weird thing that’s made me anti-taping. I actually can’t stay with the interview when I’m not taking notes. If I’m taking notes, my focus is right there. I guess the other way I think about it, there are some people in a story that you want to quote at length and in this case, with Gates and Nadella, I should have taped. But in most cases, especially when you’re doing a long form story where nobody is on the record and you’re going to talk to a hundred people for 7,000 words story, or maybe not a hundred but 30 or 40, you’re not going to quote most of them. So wouldn’t you rather not even take the risk of them giving you filtered information?

But I’m also meticulous about going back to people and saying, even on background, here is the quote I want to use from you, here’s how I got it done. Is this what you think you said? So I check.

.. Bethany McLean: In my experience there’s not a lot of use in pestering people who don’t get back to you unless you have something new to add. So if somebody doesn’t return a call or doesn’t return an email, I’m probably not going to try again unless I have some new fact. And generally I’d say it took two or three conversations when they did speak, maybe.

.. My first book, I worked with a guy name Peter Elkind, who I think is the best investigative journalist I know. Peter would literally call people 20 times until they call back and that worked, actually. I think you have to be true to yourself when you’re a reporter, as well as true to the story. I just can’t hound people unless I have something new to ask.

You have to play to your strengths and I think my strengths are that actually I’m genuine. But I can’t call 20 times, I just can’t do that. I grew up in the Midwest.

.. Bethany McLean: I don’t think that I have the typical DNA of an investigative journalist. But I often think two things shape my view of the world. I was a math major. I have this analytical backbone where if things don’t make sense to me, I will keep going until I figure out why it doesn’t make sense, what the missing dot is. I can’t stand things that aren’t logical. I don’t think I’d be aggressive enough to keep calling somebody over say, hearing that they had an affair. But if there’s a missing dot in A to C, I’ve got to find B. I just can’t stand it otherwise.

Burt Helm: What were the missing dots in this story that got you going?

Bethany McLean: Figuring out what Gates’s influence on the company was even after he left was this whole missing piece. Once you realize the guy was there until 2008, you’re like, wait, Ballmer’s tenure is a little more complicated, isn’t it?

.. The other thing that shapes my view is that I got burned earlier in my career at Fortune by just writing the stories that people brought to me. I did a column called Companies to Watch, where I was supposed to pick three stocks every two weeks. The idea was to find stocks that were going to double or triple or quadruple in value in the next six months. There was no shortage of people who would come by Fortune and pitch these stories, and I would write them up only to watch as the stocks usually went in exactly the opposite direction.

I got tired of feeling suckered. I got tired of feeling like I was putting things out there that weren’t true. So I think I became a lot more skeptical. I realized I had to ask questions and dig a little more to figure out the story, because what you’re handed on a silver platter is rarely true.

.. Bethany McLean: Completely. A great source of mine had a great line about the financial crisis. He said it’s a mixture of self-delusion, venality, and a little bit of outright corruption. It basically applies to almost any story of business gone wrong. People believe their own bullshit. They really do. They’re not trying to lie; this is the world as they see it. That mixture is to me what makes this stuff so interesting.

.. I always feel like structure is the hardest part of a story. Once you find the right structure, the writing tends to flow. When you’re in the wrong structure, you can’t make the writing work. The only way I know it’s wrong is that I can’t write and it feels trapped somehow.

.. My editor, Doug Stumpf, said, “You don’t understand who Nadella is and why he matters unless you’ve read the Ballmer stuff first.” So Doug actually switched it. You don’t care about Satya Nadella and why he was a different CEO unless you saw how hardcore and tough and perhaps destructive the Microsoft culture had been beforehand.

.. Do you outline or do you just start writing?

.. Bethany McLean: What do you think, given that I told you I was a math major? I outline. I always view writing as sort of sculpture—that I’m carving something out of a lump of clay. For me to start writing, I have to have that lump of clay. The lump of clay is an outline with every conceivable thing I might want to include in every section.

.. Max Chafkin: Like quotes?

Bethany McLean: Like quotes. Sometimes it will be paragraphs of an interview with somebody. It might be like a 30,000 word giant lump that is not English. It’s just fragments of ideas here and there, and then I slowly sort of start figuring out what I think. I sort of whittle away basically.

..  I also think I don’t think in details, I think in chunks. So for me to get the flow of a story I have to think in terms of big picture ideas to find the flow of the story, I can’t think from sentence to sentence. And then to manage the anxiety about losing something or not remembering something, I have to fill in the chunks with every single bit of detail I might possibly want to include. Then I figure out over time—well, what’s the best detail? What really makes this point? Sometimes I end up feeling like the chunk doesn’t go here or the chunk actually doesn’t belong in the story at all, but I have to start there. I’m not sure it’s very efficient.

.. Bethany McLean: The way we all think is really, really weird. Part of being a writer, I think, is letting go of your inner fact-checker and finding the flow of the narrative.

.. Max Chafkin: Your “inner fact-checker” meaning, what?

Bethany McLean: I mean not being so beholden to the facts that you’re afraid to find a narrative. Writing is about two things, finding the structure, and finding the words. I feel like people get in their own way. But you may need to let go a little to find the narrative. I can’t both be worried about the words and the narrative at once.

.. Bethany McLean: When Bryan Burrough and I worked together on the story on SAC Capital. I sent Doug, my editor, my note file for a section instead of the final draft.

.. Bethany McLean: I was like seriously, you guys, you didn’t even think that that she might have sent the wrong file?

.. Bethany McLean: I think the two most normalizing experiences for me were watching other writers who I thought were better writers — and who I still think are better writers than I could ever be — turning things in that don’t work. Some stories are really hard and it’s an art, not a science. Even the people who have been doing this for decades can’t make it work sometimes and get it wrong.

.. Bethany McLean: No, but the Microsoft story almost did me in.

Burt Helm: Really?

Bethany McLean: Yeah. It was really stressful, because there were periods of time where I thought, “I’m not getting anywhere. No one is calling me back. I’m not going to be able to pull this together.” There are a couple of paragraphs in the story about the state of Microsoft’s business. It took me a month of reporting to be able to write those paragraphs about the cloud and how disruptive it was to Microsoft’s business, because I was starting from square one. I didn’t understand.

..  when I write about finance I generally feel like I’m two steps ahead of whomever I’m talking to. I know exactly how to take apart what they’re saying and think about what the next question should be. On technology, I felt like I was missing every third word.