•debate35:00
The 17 percent CFO, McKinsey's 900,000 phones, and the wrong way to size a market
In 1999 Gurley recruited a public-company CFO into OpenTable, who shortly announced he was quitting because his model said the business would never work. The model froze penetration at 17 percent in every city, a number carried over from retail, where no business the CFO had worked with exceeded that share. Gurley's answer was that because he believed the network effects, they were going to 99. The CFO left. Gurley generalises with two more cases: McKinsey sizing the global mobile phone market at 900,000 units, and an NYU valuation professor capping Uber at two or three billion by taking the taxi market as the upper limit — which prompted Gurley's rebuttal, How to Miss By a Mile. His verdict is that TAM conservatism costs an investor more than it protects them.
- OpenTable's CFO quit over a model with penetration frozen at 17 percent.
- The 17 percent ceiling was a retail benchmark imported into a network business.
- Gurley's counter was 99 percent penetration, and the business validated it.
- McKinsey sized the global mobile phone market at 900,000 units.
- Damodaran capped Uber at the taxi market; SF Uber was already 20x SF taxis.
- A 10x better product grows the pie rather than dividing the existing one.
“so we look at the model and I dive in and he has frozen penetration in each City at 17”
“I wrote a reply called how to miss by a mile”
#tam#market-sizing#forecasting-errors#uber#network-effects
•debate1:22:00
Twelve years on the Second Life board, and why Gurley thinks Meta's premise is wrong
Gurley read Snow Crash on release, thought it was the best thing he had ever consumed, and was knocking on Philip Rosedale's door when Second Life started. He served on that board for 12 years, giving him unusual first-hand data on immersive worlds. His conclusion separates gaming and escapism, which work, from the idea that people want to live ordinary real-world experiences virtually, which does not. Young people role-play; a handful of adults do too. But many of the most engaged users were seeking escape, sometimes from mental health difficulties or a hard patch — and both Snow Crash and Ready Player One were dystopias. They ran in-world board meetings, and Zoom is simply a better substitute, which is a Porter-style substitution argument. He estimates that shutting the VR effort would double Meta's stock.
- Gurley served on the Second Life board for 12 years after reading Snow Crash.
- Gaming and escapism work; virtualising ordinary real-world activities does not.
- Heavy immersive users often skew toward those seeking escape.
- Snow Crash and Ready Player One were both dystopian, which is the tell.
- Zoom is a superior substitute for the in-world board meeting.
- Meta spends five to ten billion a year on VR; Gurley thinks stopping doubles the stock.
- Sunk-cost and pot-committed bias make a reversal unlikely.
“Zoom is an amazing substitute which is one of the Frameworks from competitive strategy”
“I think if they shut down the VR effort not only will the profitability would soar because they're spending real money like five to ten…”
#metaverse#second-life#substitution#sunk-cost#meta
•debate1:54:30
Be less tribal: the billboard, and the intellectual-consistency test
Given a billboard for billions of people, Gurley writes: be less tribal. His claim is strong — he cannot imagine an activity that turns off more brain cells than tribal affiliation, and he rates political bias as more powerful than confirmation bias or sunk cost, despite all the Nobel-winning work on those. He has friends across the spectrum and insists the failure runs both ways. His examples are deliberately symmetric: gerrymandering is horrible and both sides do it; regulatory capture on one side means banks and big pharma, on the other credit unions, teachers' unions and police unions. If he were teaching it, he would start by showing people the documented cognitive biases, then push the consistency test — if a behaviour is unacceptable when the other side does it, name your actual principle.
- Gurley's billboard message is simply: be less tribal.
- He rates political bias above confirmation bias and sunk cost in strength.
- The critique is symmetric by design, with examples from both sides.
- Gerrymandering and regulatory capture are his paired illustrations.
- A lecture would start with the documented catalogue of cognitive biases.
- The core test is intellectual consistency: what is your actual principle?
- He notes tribal people tend to view their own side as near perfect.
“I would put be less tribal be less tribal”
“I can't imagine an activity that turns off more brain cells than tribal affiliation”
“why does anyone want to be intellectually inconsistent if you think it's an ends to a means then you're just in a fight”
#tribalism#cognitive-bias#intellectual-consistency#politics#critical-thinking
•debate2:05:00
Regulatory capture: the TED talk he would give instead
Barred from venture, investing and career advice, Gurley says his TED talk would be regulatory capture, underpinned by a belief that capitalism and democracy will eventually destroy one another. The mechanism: in heavily regulated industries the incumbents end up writing the legislation, locking themselves in and building a moat — Porter again — through law rather than product. His flagship example is the 44 billion dollar programme paying doctors to implement EHR systems, designed with Epic's CEO on the healthcare advisory board, followed by another 20 billion for a meaningful-use phase paying people to actually use the software they were already paid to install. He points at pharma, banks and telcos as the most broken sectors, notes UK faster payments landed 17 years ago while ACH still takes three days, and describes being told to assemble 15 donors with maximum cheques just to meet a congressman.
- Incumbents in regulated industries write the legislation and build legal moats.
- The 44 billion EHR incentive programme was shaped with Epic's CEO on the advisory board.
- A further 20 billion meaningful-use phase paid firms to use software they were paid to install.
- Pharma, banks and telcos are Gurley's most-captured sectors.
- UK faster payments arrived 17 years ago; US ACH still takes three days.
- FedNow has sat on the books for a decade against bank and Visa lobbying.
- Access required assembling 15 people with maximum donations, three separate times.
“probably regulatory capture okay I have this core belief that capitalism and democracy who eventually destroy one another”
“the incumbents typically end up being the ones that write the legislation and typically lock themselves in build competitive Advantage build a moat back to…”
“they all need to bring the maximum check that they can donate”
#regulatory-capture#healthcare#lobbying#payments#policy