Episode 817 | Bootstrapping in the Age of AI with Jason Cohen

Rob Walling:
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He has started two unicorns, including WP Engine, of which I was an angel investor. It was my first ever angel investment back in 2011. And Jason has just been a longtime supporter of MicroConf and now TinySeed. He has given several talks at MicroConf, including one that is widely considered to be the best talk ever given at a MicroConf, and I think it’s the best talk ever about bootstrapping startups. And we talk about that in this episode. I actually struggled to title this episode because we talked about so many topics, including mistakes founders make in the early days. We wrap it up with a discussion about AI and where Jason feels like the opportunity would be if he was starting over today. But in the end, we cover some meaty topics and Jason is just so thoughtful and deliberate in his thinking and so clear in his thinking. 

I have infinite respect for him and it was a pleasure to have him on the show today. Jason’s actually going to be speaking at MicroConf US and Portland in just a couple months. Tickets are selling fast and we will sell this event out. MicroConf.com/US if you’re interested. And the promo code you’ll want to use is Rob 50 for $50 off. And with that, let’s dive into our conversation. 

Jason, Cohen, welcome to the show.  

Jason Cohen:
Hey, thanks for having me. It’s always great to talk.  

Rob Walling:
It feels criminal that this is your first appearance on startups to the rest of us.  

Jason Cohen:
I know. I don’t understand. Maybe because I was busy the last 15 years. I  

Rob Walling:
Don’t know. Yeah. What have you been up to, man, growing another unicorn? No, it really … I mean, you and I talk often enough that I just … And you’ve spoken at MicroConf so many times that it just feels like you’re a staple in the ecosystem. And when producer Ron and I were talking, it was like, how has Jason never been on the show? It’s not great.  

Jason Cohen:
Well, I mean, you’re an angel investor in WP Engine, so you’re probably happy that I stayed focused on that instead of doing podcasts.  

Rob Walling:
Heck, yes, man. That bought our house, paid cash for our house. It was great. So a lot of folks will be familiar with you as the founder of WP Engine, as well as SmartBear, which was the software company. And before that, both are unicorns at this point. And you’ve been a longtime blogger at asmartbear.com. Hundreds of essays, if I were to guess. But what did I miss in that intro? How else would you like folks to know who you are and what you do?  

Jason Cohen:
I think that’s good.That’s my best work.  

Rob Walling:
Well, that’s your best work in the rear view mirror. I want to call people’s attention to hidden multipliers at hiddenmultipliers.com. It’s your first book that you have for pre-order right now.  

Jason Cohen:
That’s right. Yeah. So I’m not here to promote it. Although maybe we can do another one where I am there to promote it. I don’t know. But yes, I’ve been writing for 18 years, like you said. But one of the things I felt was I’ve been writing on all these topics, but there’s no central idea. There’s no central framework. It’s just a bunch of random stuff. And so when things would come up in conversation or online or whatever, and I would say, “Oh yeah, I wrote about that over here. I wrote about it. ” It’s so scattered. And people would say things like, “Do you have just stuff about marketing?” And I’m thinking, “Yeah, kind of scattered over a million things.” It’s not very accessible. So the purpose of the book wasn’t just to take every idea and make it organized, but rather I thought, I wonder if I do have any central concepts. 

Do I have a philosophy? I don’t even know. And so for maybe a year, I just thought like, “I don’t know. I don’t know that if I have one.” And so I didn’t want to just write an anthology. But then there was this common thread I found in at least a lot of the things that I think, which is that there’s these small things that make an inordinate difference in companies. And of course, every company’s different and all that, so all those normal things apply. But there’s some things which are systematic and mechanical about how companies work or how people buy things or how human nature is, how teams work, something or even about AB testing and the math behind that, like certain things which are true because they’re built into how it normally works and that’s why these things where a small change can make a big difference. 

That’s why that’s so, I don’t want to say universal, it’s not, but so common because it’s based in some systematic fact about the world or how things work. And then another criteria I found that was interesting is, of course, if you can raise money or apply a lot of new money and teams to something, there’s many possibilities and that’s good. Maybe you should do that. But most of the time we have a team, we have a budget and we need to do things within that team and that budget. So if the feeling is, “Man, I’m not growing as fast as I want or I’m not as profitable as I want or I’m not getting this or that goal that I want. ” Usually the answer is not, “Oh, I got to go raise bunch of money.” Almost always, even if you have raised money, that’s usually not the answer. 

Usually it’s like, but we have people doing stuff, even if it’s one person and surely we could be doing something a little bit better. So this was this extra criteria that I thought was interesting to add on top of this small things make big effects. It’s systematic so it’s usually true. You can pretty much rely on it. And this idea of, I’ve got to do it with my current team and budget. So it has to be doing something differently, but not some kind of big investment or something like this. And I found that there were these things which fell into this category. So that’s how I defined this idea of a hidden multiplier, multiplier being this notion. And then hidden is another funny word. Sometimes these things are hidden just because you didn’t know it. Sometimes you did know it, but it’s on a to- do list with 10 things and you didn’t realize how important it was. 

So it’s hidden in that sense. I once had a great strategist tell me, a lot of times what’s wrong with a strategy is not that we didn’t know something, it’s that we didn’t realize how important that thing was. So these can be like that. Or maybe you did know it, but you didn’t know what to do or you were scared to do something about it. So without an explanation of what do I do, it just sort of hangs out there. And the form I see that in is people will say, “I already knew that. ” And then you look at their actions and you’re like, “Well, you’re not acting like you know that. ” So it’s like effectively you don’t know that, right? And so that’s what I mean by hidden. Somehow or another, you’re not taking advantage of it. So that’s what this book is, is like 10 of these hidden multipliers, one per chapter, just going in great depth, of course, about what is it, motivating it, proving it with examples, and then saying, of course, what to do.  

Rob Walling:
And I was surprised to hear that this is majority new material that you obviously use some concepts and ideas from your blog, but you’ve been hammered on this original work for what, a year now.  

Jason Cohen:
Yeah. I didn’t want it to just be an anthology or mix or rehash of the blog. But obviously there’s some stuff in there that is in the blog because these are … I’ve had certain ideas in the last 18 years, some of them are good. And so that’s only natural. But yeah, I didn’t want it to just be a rehash.  

Rob Walling:
There are a lot of founders out there that are successful and they never, but they aren’t public about their thought process or their mental frameworks. And maybe they don’t have any. Maybe they just figured out in its instinct, maybe they get lucky, whatever. Then there are folks that are successful and they are public about what made them successful. And then there’s two camps there. I’ll see someone do a talk and they’ll say, “This is why I was successful.” And you’re like, “No, it’s not. ” You’re full of shit. Either you’re lying to yourself or you’re lying to me, like you’re delusional. But then there is this small, small camp of folks, and this is all arbitrary designation based on my opinion or your opinion, who have found success and think critically about what they’ve done and try to extract higher level learnings that go beyond just their end of one or two and that tend to … When you hear what they say, Paul Grahams, one of these guys, Joel Spollsky, yourself, when you hear what they say, you’re like, “Yeah, no, that generally tracks. 

That’s a really unique insight that sounds obvious in retrospect, but no one has said it in that way before.” So I totally put you in that bucket and it’s very rare. There are not thousands of these people in the world in the startup space. Maybe there are hundreds. I don’t know if we were to quantify it. So I guess I’m just wondering how you got there. Have you always been a critical thinker analyzing your own behavior and what’s going on around you and trying to framework things or did this kind of evolve for you as you were starting companies or like, “Oh, I’m learning a thing and I should just share that with the world on this blog that you started in what, 2007 or 08?”  

Jason Cohen:
Right. For me, writing is thinking and I have this drive to teach. Both my parents were teachers. I think it’s literally in the DNA. And of course, we all know that if you want to learn something the best, you teach it. On the other hand, can you teach something you’ve never done? A lot of people do. This is just not me. So I think that’s another reason people like it is at least this came from experience. And so what generally happens is I’ll have a thought either because I observe it in some other company, I observe it in our own company, we’ve learned something, something went wrong, something went right, and that’ll give me an idea for a thing like maybe it’s a framework or a concept or a story or something. But in writing it out, I often find, wait, maybe that’s not right or maybe I don’t even agree with myself and I haven’t even published it yet. 

Or maybe I do like it and I’m just even more excited about it because, oh look, I’m finding other examples. I don’t know, I could get more excited. So I mean, I have hundreds of things in draft that I’ll never write because I don’t actually believe it or I haven’t figured it out well enough. I haven’t sorted it out well enough for myself to put it out there. So a lot of these things are, oh, it seemed to be right. We wrote it down, then we tried it at WP EngineSay, especially if it’s a framework. We probably, I mean, I can name them where we did, we tried it and then we iterated on that and we tried it again with a different team and then we iterated. And so the result when it comes out, it’s like, wow, this seems really thought out. It’s like, yeah, that’s because we actually did this and iterated on it and I tried to explain it as best as I could. 

And if you write for a long time, maybe you’re better at writing, hopefully, right? So okay, now I can do that. So yeah, often that’s where that comes from. Having said that, I don’t think the goal, at least not for me, is to convince everybody that I’m right. It’s equally valuable if someone reads an article of mine and says, “This is total crap. I don’t believe this at all. I believe the opposite. No, it’s this. ” That’s perfect because what’s happened is you’ve gained greater clarity on what you do believe, what is your philosophy or your values or how you operate or what’s important or how you … Something important you’ve now gotten greater clarity on because I was a foil that was not what you thought and that led you to what you do think in greater relief and that will make you better, make you stronger and clear in whatever direction you’re going. 

So to me, the goal is that, this kind of like, “Ooh, now I think X or now I’m clear on Y.” That’s the goal, which is not the same thing as agreeing, right? So that’s fun. Obviously there’s like, I don’t know, a constructive and not constructive way for people to say that online, you get both. But I love it when people have the opposite view. Also, we all know that for every piece of advice or observation of business, the opposite is true of some companies are successful and both it and its opposite are true of companies that fail. We know that all four of those are populated with companies, populated with examples. And so once again, there’s no way I’m going to think that that means I’m right all the time. But again, if someone can get clarity, that’s really useful. So how do you do that? 

You have to say something useful, something real, something specific, hopefully in a way that’s relatively well put so that it’s enjoyable to read. And by doing that, hopefully someone will get something out of it.  

Rob Walling:
I’m curious, a lot of this stuff that you write about has to come from firsthand experience because you’ve started four companies, two are unicorns, but you’re also an angel investor and an advisor. Were you kind of a founding member of Capital Factory in Austin? Am I remembering that correctly? So you’ve been exposed to dozens, if not hundreds of startups. Do you feel like more of your knowledge and information that you share comes from your firsthand experience or from the experience with other companies advising on the internet or otherwise?  

Jason Cohen:
I would say when it comes to specific things like this decision framework or this prioritization or this workshop, that’s coming from WP Engine. That’s coming because we tried things and this seemed to be something that worked for us or for some teams. And so that seemed worth sharing. When it comes to more strategic or high level long reaching things, some of that’s experienced my own experience, but a lot of that is like, oh man, I’ve seen this like 20 times, which obviously doesn’t mean I saw it in my own one to four examples. So the 30th time you hear someone pitch something and you go, “Oh my God, that’s coming from a breadth.” So I would say where personal psychological stuff obviously starts from myself, but a lot of that is in talking to other founders where there’s certain kinds of things where 80% of the time that I share, “Oh yeah, I felt like this or I felt like that. 

” And almost all the time the other person’s like, “Oh my God, I thought it was just me or I can’t believe you’re admitting that. ” And that again is some kind of, not universal, but pretty useful, good truth there. That’s coming from talking to other people, right? That’s the only validation that it’s not just me.  

Rob Walling:
So you have what I believe is widely agreed to be the best microConf talk that’s ever been given. And I know I make you blush when I say this, 

But that you mic dropped with this talk back in 20, I don’t remember if it was 13 or 14, but it’s called Designing the Ideal Bootstrap Business. And I was in the room when you gave that talk. And I was holding my head, I was like, “Oh,” as you were giving it, and then you got done and I turned to whoever was next to me and I said, “I don’t think I’ll ever give a talk that good. That’s the best talk I’ve ever seen.” It was huge and I’m serious. And it has lived on and I still believe I was trying to pull it up on YouTube right now, but I believe it might be the most popular talk on our … Yeah, of course it is. On our entire, what used to be the MicroConf channel has now been renamed to Rob Walling, but 510,000 views.  

Jason Cohen:
That’s awesome. Here’s something funny about that, which should be inspiring to you or to the listener and to myself when I’m thinking about things like my own book, which is I thought that that talk was haphazard. It didn’t have a good arc, it didn’t have like a narrative arc. I felt like I did have a good personal emotional close to it, but I didn’t feel like it came for full circle. I felt like it was a shotgun of different ideas rather than like a conceptual framework, a tree with branches. Instead, it was just like stuff everywhere. So I felt when I made it, I am confident that the individual ideas here are useful. So I think this talk will be useful. I just don’t think it’ll be good in … I mean, literary is too strong a word, but good in sort of these other kind of structural ways like a Seth Godin talk is, for example. 

So I was like, “Oh, well, hopefully being useful is good enough, especially for this audience, which I think it is. ” And yet, as you say, people loved it anyway. And so one of the lessons for me about that meta fact about it is I think when it comes to things that are more on the art side of things, going with what you just feel, what you are passionate about and the things you’re excited about, that’s actually good. That’s what people are here for. Probably every single idea in that talk you can read a blog post about somewhere. So that’s not really about everything’s a brand new invention. Although there were certain things in there that I, at least at the time, I hadn’t seen elsewhere, but they probably were elsewhere. I just hadn’t seen it, but it was more the exposition. So when I think about my book, there’s certain things like maybe it’s too long. 

Maybe I go into too much detail about certain things. I don’t write like Hemingway. I use long sentences and semicolons and M dashes. I don’t have tiny little sentences and I don’t write for a fifth grader and all that stuff. So is that bad because quote unquote, that’s what a business book should be, unquote, right? Well, I don’t. And so I think on that artistic side of things, I’m comfortable saying, “Well, I’m going to go with what I am.” And that talk is a good example of that for me.  

Rob Walling:
Yeah. And it’s inspired a lot of folks. I mean, I hear people mentioning it on podcasts and on Twitter to this day. So if folks haven’t watched that, it’s on YouTube and they should go find it. But I kind of want to contrast that or attach that to an essay you wrote called, Excuse me, is there a problem? Because in your talk about designing the ideal bootstrap business, there’s some filters for kind of finding an idea and finding the right type of business for bootstrappers, right? But if someone has a business that checks all those boxes, it’s recurring revenue, it’s a good market, there’s maybe no enterprise sales. If folks are solo, in your essay, excuse me, is there a problem, you show that maybe that’s still not good enough.  

Jason Cohen:
Yeah, it’s not. I mean, there’s so many things that have to go right for any company to work, right? And you’re right, that talk doesn’t cover them all and maybe it’s too hard to. But yeah, what about, it has to be possible to get to the customers. Even if there is a problem to be solved, can you find them and can you find them cheaply enough in the noise that is the internet? And then when you find them, can you convince them to buy you instead of the other 20 alternatives they could buy? What about your own psychology? Are you going to be able to last three years or are you going to crash out? So kind of no one article, I think, maybe a book length thing could do it, I don’t know, but no one article is going to capture the many things that have to go right. 

And so what do you do with that fact that many things have to go right? How should you react to that? So I think first of all, whatever is the weak link or one or two weak links, you really have to decide whether that’s okay and you have such overwhelming strength in some other areas that you can survive anyway or whether you really need to do something about it or it’s even a deal breaker. So let’s say the overwhelming weakness is the market’s very small. There’s only a hundred people that have it. Okay. There are certain overwhelming other things that could still make that okay like, well, it’s only just me, so I only need a couple of customers and those few people pay insane amounts of money. And I’m okay with the fact that if I lose one customer, the company might be over. 

And you can go down the line. And I already know who all hundred are because my co-founder has worked in the industry and literally knows 70 of the hundred people already to call. So there could be this overwhelming other thing that makes it okay. So again, there’s no absolutes in this business, right? But if there is a dramatic negative, there had better be some kind of … The question is, what else is true that makes this okay, that makes this still viable? And if you can’t really answer that, you’re like, “I don’t know, we’ll have good features.” It’s like, okay, then that’s not an answer.That’s what everyone says. So another thing is to tackle that thing first. So let’s suppose you’re like, “Well, I have this great idea for a product that would be really cool, but I’ve never done marketing before, so it’s hard for me to get customers.” Well, the typical thing an engineer does is go work on the product because it’s fun and you know how and it’s kind of why you’re doing this in the first place and all that. 

It’s exactly the wrong thing to do because the limiting factor here is, can you find customers? And if you build the product, you will have made no progress whatsoever on the question, can you go find customers? I know you can build a product, you’re an engineer. I just assume you can build a product. So doing so doesn’t help at all. It doesn’t de- risk the company at all. It doesn’t eliminate one of these at all. So instead you should be going and finding customers. You can then interview them and find out better what to build. And anyway, prove out to yourself that this weakness is not so much a weakness after all, and it won’t be a deal breaker after all because it’s not as bad as it seemed like it was. So there are a couple of things. It’s not the only things, but those are a few things you can do with this fact that it takes many, many things that are all an and. 

So probabilities that get multiplied, and that’s very bad because even if the probabilities are reasonable, like 70%. Yeah, but if you multiply 10 of them, the probability is really low. And by the way, a lot are not 70%. They’re like 10. And so why do a lot of companies … Why do most companies die? That’s why because all these things have to go right. And okay. So again, can you tackle the low things first and de- risk them or see whether that really is a deal breaker or not? Can you overwhelm some with outrageous other things? That’s good. Niching down is another one because it starts making the answer to some of these better. Am I the best product? Well, if the market is enormous, almost for sure not, but if I said, yeah, but for this exact customer, oh, maybe you can make literally the best product as defined by the customer if you’ve niched down enough. 

So that’s part of why you and I and many people say niche down because it allows you to be the best in fact and make some of these numbers and things get better. The market size gets smaller, but some of these other factors get better. That’s good.  

Rob Walling:
Yeah. In terms of niching down, I get asked the question, when should I niche down? How do I know if I should niche down? What are factors that you think about when a founder’s trying to be like, should I be horizontal? Should I pick a niche? Should I pick three verticals to start with and see what’s your framework for that?  

Jason Cohen:
With the caveat that of course it has to depend on what’s going on. I think you should always be focused on as narrow of a ideal customer profile as you can. But I think when people hear that, they think, “Oh, but that means I’m selling only to them and the rest of the market is off limits and that’s too limiting.” And I don’t believe that. In other words, when people say niche down, I think they either think, “I can’t talk to anyone else or I can only sell this market.” And that’s not how I observe it actually works. The way it actually works is you find this niche and you find this ideal customer and you talk only to them. And because you’ve been so specific, you can be so compelling with things like your advertising and your homepage message and what the price is and which features you choose to build because it’s so clear who you’re building for because you’ve narrowed it down so much that you know how to thrill them. 

So the first thing that happens is at least those people when they hit your website, they’ll know. So you can at least sell them.That’s a start because if you’re not that specific, you never get that benefit. That’s not good. But what else happens is most of us are not the ideal customer for any product and yet we buy them. So what’s happening? What’s happening is we see the product, there’s things that we consider to be strengths of weaknesses, which by the way, other people disagree what’s a strength and what’s a weakness. So you can’t even just say a low or high price is a strength or weakness. It depends on the observer. If I’m a consumer and it’s a high price, I probably don’t like it, but if it’s a luxury brand, I only like it if it’s a high price or a business may not want to buy a cheap piece of software because they just assume it won’t do what they need or the company will be gone. 

They’re only happy if it’s cost more. So is a high or low price of weakness. Again, it depends on the observer and that’s just true of almost everything. So what’s actually true is that your ideal customer sees the things that you are as strengths because of who they are and the things that you think are weaknesses they either don’t care about or they even are happy about it like a high price is sometimes like a good thing. So that’s the ideal customer, but everyone else, they’re still going through some sort of pros and cons or trade-off analysis and many of them will still pick your set of trade-offs. And because you are so specific about what you are, the trade-offs are clear. And when the trade-offs are clear, people are more willing to accept the weaknesses. And there’s data on this, which is very interesting. 

For example, products that have negative reviews that are specific about what is negative about the product have higher sales and fewer returns than other products with the same rating like 4.1 stars or whatever. Why? Because you were able to see what the weaknesses were and you can either decide, well, then I’m not buying it, which is fine, but if you do buy it, you already knew what it was. So when it comes and it has this thing you don’t like, you knew that. You already decided it was okay, so you don’t return it. And the fact that you know what it is instead of just like, geez, I don’t know what’s good or bad about this. The fact that you know what it is gives you more confidence to move forward. So that’s just all a long way of saying, wow, if I’m very specific about what I am, then my ideal customer will definitely buy, which is already a reason to do it, but like a hundred times larger market than that, will see that specificity as a reason to buy your set of trade-offs, even though they’re not quote unquote ideal and they buy anyway. 

So that’s a very long way of saying, that’s why I think everyone should niche down in this sense of having this narrow view of who you’re perfect for and staying focused on that because you won’t just sell there. So not niche down in the sense that that’s the only customer you’ll ever accept. That’s not what I mean. It’s the best way to get more customers. Now, of course, over time, you can expand what that is. When WP Engine first started, we were only for like small business, maybe medium sized. A lot of times it was going through freelancers, sometimes direct. And sure, four or five years in, we saw some more appetite from larger companies, but not for their homepages like it was for small and mid-size companies, it was for like campaigns in some country or something like this. It was a different use case for them. 

And it was large enough that we thought, oh, let’s actually spend tens of millions of dollars over a couple of years on sales and marketing and this and this and that to actually enter that with this other message and it was successful. But that was years later and it was an intentional thing and it was because, right? So of course you can expand that as you scale and you can apply more things to it. So you can do that. But even to this day, we have specific types of things that we focus on and we have more of it, but that’s because we have a thousand people and we can do that. We have the capacity to have a few things. So that can be in your future, but that’s why I say yes niche down, but maybe not the way you were thinking where you’re super limited by it.  

Rob Walling:
I mean, you started talking about WP Engine and I want to go back to the early days when you were starting it because you basically built a billion dollar company in what we might call a commodity space of hosting and you’re hosting WordPress, which is an open source thing. So anyone could have spun up exactly what you were doing with WP Engine.  

Jason Cohen:
And they did.  

Rob Walling:
And they did.  

Jason Cohen:
There’s like 20 or plus competitors easily.  

Rob Walling:
Yeah. So how did it work? How did you get ahead? How did you beat out all these other people who had the same idea or who were copycats or whatever? And part of this is that these days, if I were to start a startup right now, if I were to build a SaaS company, you know that you could at least half ass vibe code that in a few weeks, right? If I only spent a few months building it. So it’s this thing of like, well, the tech is not a moat and your tech was not a moat at the time, or at least the underlying hosting and such. So how did you win? How did you do so well with this?  

Jason Cohen:
Yeah. I mean, and as we were just saying earlier, it can be hard to tell. And I think one of the reasons why I’m somewhat credible in how I write is I’m never quite sure, is this really the reason? Did we win in spite of this or because of this or was it just that … And I also don’t know. And in fact, I’ve even written about how I don’t know. So it’s all like on offer as things that seem good, but the listener will have to decide for themselves what fits in their own mind and feels good. But my best idea is the following. The idea of managed hosting, which means it’s 10 times as expensive, but it’s also like multiple faster … The site loads multiple faster, like four times faster. We used to have a shirt. My blog is four times faster than your shirt was our first marketing swag. 

And things like security and service were also like really good compared to the cheap shared hostings, and it still is. So it was pay more, get more. And a shared hosts are just not designed for that. So to this day, they don’t really have that. But a new company could be … I think one of the things that you can do is when other people think it’s dumb or impossible, but it’s actually is possible, that’s usually … It’s not a moat because anyone could do it, but they don’t. So it’s a funny kind of a moat. We think of moats as it’s impossible for someone to do it, but there’s also like they just choose not to for various reasons. It could be ideological, it could be cultural. So the fact that we had great human support is something that like no VC wants you to have that because that’s expensive and it comes out of your gross margin. 

Maybe it means you’re quote unquote not a software company because your gross margin’s less than 70%. So an emphasis on service is something that like a funded company doesn’t want to do ever. In fact, if you look at our funded competitors, none of them have that. So the fact that we did do it, it’s not that they couldn’t have copied us, it’s that they wouldn’t have because it wasn’t in their nature, their culture, et cetera. In competitive analysis, we often think about their business structure or their features or their architecture and that you’re right, but the culture and attitude does matter too. Let’s not forget that companies don’t change that very often. And if they try to change it, they often fail to change it, right? Whether you want to call that a mode or not, I don’t care, but it’s a thing that prevents that kind of competition. 

Another thing is we were really, really good at execution. Now, traditionally, you don’t consider great execution a moat because again, you can’t stop someone else from having great execution. So it’s not really a mode. On the other hand, if you have great execution and most don’t in your field, that’s a reason to win. And there are certain fields where that’s not the case because everyone’s really good But like AI, in hard tech AI, everyone’s pretty good. So it’s not true that, I don’t know, Clog can simply out execute open AI.That’s not how you would think about it. But there are other fields and hosting was one and maybe grocery stores is one where you don’t want to say nobody, but almost nobody has any kind of innovation or will to do that or ability to do that or the culture to do that or whatever you want to say. 

And so if you execute really well, I mean, there just isn’t other people doing that. And so that was one of the things. So when you have, oh, I’m a first time entrepreneur, I want to stay small. I don’t really know what’s going on. And then this is my fourth company and I’m going really fast and I’m hiring really good people. And then when we raised money, which wasn’t for two years, because originally the idea was to bootstrap it again, it was the fourth bootstrap company. But even then we only raised a million dollars. It was not exactly like earth shattering quantities of money. And the next round after that was only two. Again, so eventually we raised a lot when we were a lot bigger, but at first that’s not what was going on. But still a million dollars is a lot more than nothing as every bootstrap will agree immediately. 

And so if we were just better at this and we have great people and even just a million dollars of working capital ahead, and if we put that to good use and we’re not dumb about it, yeah, we can probably simply out execute people. And that can matter in this field where there wasn’t good execution. So another thing we really nailed in 2012 was the pricing. The pricing was already pretty good, but we had some revelations talking to customers and hearing some stories. We had some revelations where we reset the prices, not dramatically, just like certain things in 2012. And that’s when we really took off. That’s like where the growth curve turns, bends and starts shooting up and never stopped shooting up. And so there was like this resonance that you might say with the pricing that was just exactly right. Now you could say it was a coincidence because other things, it could be. 

Again, even I don’t know in retrospect because I can’t rerun it holding other variables constant. So I don’t know. We were also going to word camps and talking to people maybe, and that certainly helped. So I just can’t really know, but we were reacting to what people said about pricing. So I have to think that has at least something to do with it, if not the majority effect. Yeah. I think this combination of things is why we just did really well and surpassed the sort of immediate competitors or even people that came later who couldn’t grow as fast and therefore never got close in terms of the size. And I’m not trying to say that size is what matters. It’s not true. In our case, that’s what happened. Well, at SmartBear, I wasn’t interested in making a unicorn. So I myself don’t always have that goal. 

In this case, that’s what we were doing. So I know I keep saying that, but it’s not like I think that’s the only thing that matters and far from it.  

Rob Walling:
And I want to ask you about brand and when you feel like brand starts coming into play, because some folks, you’ll see them online, you see them on Twitter, whatever. They’re startup founders and they’re like, “Ooh, I want to build a brand from the start and I want to do all the fun design and the this and the that. ” I’ve always taken the tact of, we might say this podcast has a brand or TinySeed or MicroConflict. When you say those things, people have a picture in their mind. But I didn’t go out to build the brand. I wanted to deliver a really interesting product that served the needs of people that then they loved it. And so then the brand comes out of the execution for me. And in the early days of MicroConf, there was no brand because they’re like, “What the fuck is Micro? 

Well, what is this thing?” But by the second or third year, it starts to have a meaning to people, right? So with all that said, I’m curious to hear your take on brand, if you thought about it in the early days, how you built it, and when do you feel like that momentum? Because at a certain point, there’s a conversation, oh, kind of higher end or really good WordPress hosting, what are they? And at a certain point, the list is two or three companies and WP Engine has always been on that list. And to me, that’s a really strong sign of brand. So what are your thoughts on all that?  

Jason Cohen:
I think even when you think about people who have a great brand, like personal brand online or like you just said, isn’t the origin story always that they were obsessed about some topic and they talked about it and they got good at the exposition and that’s where the brand came from. I mean, even like Mr. Beast or I don’t know, whatever your favorite YouTuber is on any topic, did they set out to create a brand that they now have or were they just … Sure they wanted viewers and stuff. They wanted to become known, but weren’t they obsessed with a topic or a thing or teaching physics or teaching? I think that a genuine place is where it comes from. And we see corporations try to build brand all the time and it always fails, right? Anytime they rebrand, everyone hates it. So that wasn’t so good. 

So that doesn’t seem like you can manufacture brand so well. Is brand a moat is an interesting question. I think the default answer is no. And the way you can tell is every company has a brand and it’s not true that every company has a moat. Just because it’s your identity doesn’t make it a moat. How do you tell when brand is really starting to matter either competitively at all or maybe a moat as opposed to just the identity of the thing, like a handle of the thing, is when customers are making buying decisions because of it. It doesn’t have to be the only reason, of course, but it has to be like top three reason. Everyone knows this, but like the classic, no one ever got fired buying IBM. That’s an example where the brand is a moat because the fact that you might buy IBM, even though it’s more expensive, it doesn’t have the features you want, it doesn’t this, it doesn’t that. 

And you bought anyway because of the brand. Okay. See, to me, that means the brand really is at least a competitive edge, if not a moat because even when you’re losing on dimensions, customers also care about, they buy you anyway.That’s what I mean by the brand mattering. So today Apple is like that. And even back in the day, Apple was like that. It was like an identity statement to have a Apple product. So that’s not just a brand, that’s like a statement and therefore it surpasses that. Again, I don’t know if you want to call it mode or not. It’s certainly a thing that you have that others can’t take away in that sense and it’s competitive. In that sense, it’s a moat. We don’t have to try to have a razor accurate definition of mode, I suppose. But if you call it like a semi-permanent competitive edge that others can’t remove, then that level of brand is a mote. 

But the general level of brand is not a moat. Just having a logo doesn’t make it a moat.  

Rob Walling:
WP engine has a brand, a strong brand in the WordPress managed hosting space. And it has since 2012, 2013. How did you do that? Was it execution first, people then loved you?  

Jason Cohen:
Yeah.  

Rob Walling:
That’s what it was.  

Jason Cohen:
Yeah, that’s it.  

Rob Walling:
Just got enough customers and enough people talking about it and they loved it and yeah, okay.  

Jason Cohen:
Yeah. And a good way to see that is like, let’s suppose our logo was different. Would our trajectory have been different? I don’t know, but my strong feeling is no. Okay. So that means the physical brand didn’t matter. It’s not like we picked the right color or something, right? We did need a consistent logo and color so that something was indelible in someone’s brain. Something was memorable. Something was a handle, right? So it has to be consistent. So to me, it’s sort of like the old thing about white space and braces in code. The studies show that the specific style of where you put the braces and stuff does not change readability or legibility. But the fact that everyone uses the same does. If different files have different styles, then people have a harder time or a slower time reading the code. So the main thing that’s important about a coding style is that you use one, but what you put in there doesn’t matter at all. 

It’s like pure art, purely like whatever you feel like. And so I feel like a brand is like that. You need consistency so that you have an identity, but the details of that are unlikely to be terribly useful. I mean, linear is a great product. It’s starting to beat Jira in a lot of ways because they’re design decisions and they’re focused on an ICP, by the way, laser focus on that. And it’s the user, not the buyer, which is super interesting. But if it weren’t called linear, it was called something, I mean, what does linear mean anyway? That actually sounds bad. It sounds like a bottleneck or something. So again, it just doesn’t matter. The fact that they’re super opinionated in design and that it’s fast, that’s what matters.  

Rob Walling:
So I want to wrap us up today by asking you a little bit about AI and specifically AI and how it affects founders who are starting new companies today because you’ve been building stuff for 20 years, 20 plus years, but as you look at AI, if you were to start your next company, how would you think about it as an opportunity? Is it a feature? Is it, would you build a wrapper? How would that impact your ideation and your, I guess your thought process and where the opportunities are and where the pitfalls are?  

Jason Cohen:
Yeah, it’s a big topic. First of all, I separate how I use AI operationally to do stuff like write code or right marketing from AI that’s in the product that the customers use, whether directly or indirectly. So first of all, take all that operational stuff. Let’s set that aside because I don’t think that’s what you were asking, but I find that in conversations, sometimes people start confusing that. It just makes it more difficult to deal with an already complicated or complex question, right? So let’s just ignore that. It is true that corporate budgets now are heavily biased toward things that are AI, whatever that means. And it’s a fuzzy thing. The companies themselves are not clear on what that means, so we have to be fuzzy. That tells me that whatever I do does need an AI component somehow because that’s where the budgets are. 

It doesn’t tell me what to build, but the idea of like, well, I just won’t have AI at all. It’ll just be a typical thing. That could be a good idea, by the way. But I would worry that I’ll be fighting a budget battle and an attention battle. And so that doesn’t feel like the easiest path. Okay. So however, the wrong way to think of it is I need an AI product. That may be how the budget is. So that may be down the line, sometimes how you talk about it. But this is another thing I see people doing wrong constantly, which is thinking of AI as if people want AI as the problem they’re solving. So let me put that differently. People have the same problems today as they’ve always had. Marketers want more leads. Sales wants to convert more leads to a sale that stay. 

Customer service wants to have good customer service and get good results from customers. Engineers want to write code that doesn’t have bugs, that’s manageable, product managers want to build. Okay. Everyone wants the same prop that they’ve always wanted. What you don’t say is like, “I need AI in sales.” What you do say is, “If I could 10X my outbound volume with the same conversion rate, that would sure be nice.” So people talk about AI like it’s part of the problem to solve or that people want AI false. AI is part of the solution space. How is it that I can deliver more of what they already wanted because of AI? AI has made something possible that was previously impossible that they already wanted. So as soon as it’s an AI voice thing, I’m like, “I don’t know what that means.” Whereas if you said, for restaurants, we take over their phone tree because we can do the menu, we can do the ordering, we can do hours, but we do it on the first ring and in 40 languages. 

Now, behind there is voice AI. Otherwise, that’s not possible. But the thing you’re solving is your phone. Your phone calls are now automated and awesome. And so I think when you stay focused on the problem that already existed and AI is why you can do something that was never done before or better, that’s the right way to think of it. So I’d be thinking about AI as the solution space, not as people say and they even say in their pitch decks as the problem space. Another thing I would do is I would say, look, AI doesn’t really work. I know it’s like, but when it does, it’s amazing. Oh, I know. When it does is a pretty big qualifier. When I research stuff for the book, I would say at least half the time it’s simply wrong. Even when you do the deep summary, deep research, it sounds good when they say it and then I go read the primary sources and it’s like completely wrong half the time. 

And so what do we do with that? Because people say, “Well, over time will get better.” All right, but you’re building a company now. And people have been saying that for years, and they’re right, but you’re building a company now. So here’s what I do with that information. To me, there’s three kind of categories of AI products right now. One is AI that the incumbents are inserting into existing products. So this is like notion, and you can talk to Notion and sheets and you can talk to sheets. That’s not going very well. It’s not very useful, right? Yeah. Okay, whatever. But of course they’re doing that. What else are they going to do? I would do it too, but okay. The second kind is AI for experts. I’m already a software developer. Here’s AI that helps me write code. I’m already a marketing writer. Here’s AI that helps me write articles or do social media or something. 

I’m already a designer, here’s AI that helps me design. So AI for professionals. Bad news is that you’re selling to only those professionals, not like the whole world or something, and you’re up against the incumbents. Okay, but if as a startup, that’s what you are. The good news is it’s okay that the AI isn’t perfect because it’s an expert. So when the code is wrong, the expert can fix it when the writing’s bad or wrong, the marketer can fix it and so on. So it handles the fact that the AI is not perfect. This is why I like this category. The third category is AI for newbs or AI from muggles, I like to say. I’m not a software engineer. I want to make an app. I’m not a writer. I want to write a book. I’m not a designer. I want a website. Now, that’s good. 

I’m not saying that’s bad. I get it. It’s empowering. It’s good. I’m not against it by any means when we’re talking about what business I would build. And the problem here is you get 70%, 80%, and then you’re stuck and as a newb, you are actually stuck. When I vibe code the SaaS and I don’t know anything about code and I’m like 80%, I can’t build a SaaS company and I don’t. There’s a lot of, “I did this. ” I know, but it’s not a SaaS company. If that’s what you were going for, that didn’t happen. And you can go down the line, like if you’re not this or that, it’s not going to … And you can’t fix it. You can’t take it downline, you can’t because you’re stuck. So the good news is that the market’s bigger because there’s 100 times or a thousand times more people that want a website than people that can build a website. 

So hooray. But here’s the biggest problem is that the fact that AI doesn’t really work is like a massive hindrance, possibly a 100% hindrance. So that’s okay. If that’s what you want to do, take that. If you like that trade-off, go for it. I’m not judging. I’m just saying what I think the trade-offs are. For me personally, I’m always a problem solution sort of a entrepreneur. Everything I’ve done is like, oh, I can make this better, whatever. There’s this corporate thing that needs to be done or could be done. I can make it better. The typical B2B mindset. So that’s what I have. So they’re this center part of AI doesn’t work yet, so let’s give it to people for whom that weakness is not a deal breaker. So if I were doing a company, I would be solving a real problem that already existed. 

Of course, that has budget, probably budget for AI. Okay, fine, I get it. I would use AI to make something possible that was previously impossible, and I would do it for experts so that the fact that AI didn’t work well, what did not mean the product was useless or bad. Another thing is, and this was also true of WP Engine actually. WP engine from the beginning and even now, we say like, “Oh, we make your site fast.” And of course, a fast website is good, search engines rank it higher, people don’t bounce off of it as much. There’s data that shows e-commerce sites that are fast, convert better. Media sites get more hits, which means more money. Perhaps it goes without saying, but I just said it, my fast sites are better and literally make more money for people like e-commerce and media. So okay, that’s good. 

But if your site is 30% faster, is that enough to motivate someone to care, to search, to migrate their site, to not migrate away later? Is that good enough? I don’t know. It’s pretty weak. The reason we said four times faster is we had customer after customer where they had literally data showing that. And anyway, when it’s that much faster, you can just feel it. You can just see like, “Holy crap, what the hell’s going on? ” If that’s the reaction, that’s all you have to know. So when it’s not just quote unquote better or faster, more efficient, cheaper, but five times better, three times cheaper, da, da, da, da, right? Where you could measure it, but you don’t even need to to see like, holy crap when it’s that much. Then something mundane and commodity like hosting and how fast it is, how security is. 

Even a commodity thing, if it’s not 30% but three, five, 10 X, it’s no longer a commodity thing. That’s now a substantially different thing busting you out, differentiating, earning a higher price and et cetera. So I say that in general, that’s part of why we went in the commodity market and WP engines because we had a couple of things like speed and scale and security and service, which were like that. But it’s also, I would bring back to the AI conversation. When the AI helps me write, but in the end of the day, I’m still writing an article a day, just a little bit faster. I don’t know, that’s something, but I’m not terribly compelled. But when I go from writing one article a week to two articles a day and they’re good, okay, that’s like dramatically changing what’s going on. Now do I want? 

I personally don’t want to do that, but like, okay, that’s a product, right? Or I couldn’t respond to this many, I don’t know, posts on Twitter, whatever you’re supposed to do in social media, right? But now with this, you can. Okay. So if it’s in this multiple of saving money, increasing time, having outcomes, now maybe that’s really valuable and I’ll be interested in that. So that’s another thing I would expect from my AI. If AI is supposed to be so revolutionary, how come it’s only increasing my performance by 20%? It’s just not worth the hassle and the wonder about where this is all going. So I would also be looking for something where the AI can really make me 10X. In coding, it’s not. All the studies in real engineering departments is not that AI makes them 10 times better. The only people who claim that are the people selling AI products, the users of it, there might be individuals claiming that on Twitter because it’s something to say, but all the studies show that’s not true. 

What I find in coding though is there are certain places where it absolutely is 10 or 100 X. If I need to use a library I’ve never used before to do something and it’s like, “Oh, just use this and it does. It just works.” I’m like, “Okay, in 10 minutes, you definitely save me a couple of days.” There’s no doubt, right? But there’s other areas like a big code base with a hundred developers where it’s just like, I mean, it’s just wrong so much. It’s just you’re wrestling with it. It’s actually kind of slower than just doing it. So to me, it’s contextual. The question is, when is AI coding a big 10Xer and when is it not? Is actually the question. So I’m saying that again, because that’s also part of my answer of what would I build? I would build something like that where contextually AI really can be like that. 

So something as broad as coding, that’s too broad and it’s not even true that AI in that broad of a context is a 10Xer. So I try to find a product where it really is true that AI today, even with its failings, really is 3Xing something. Hopefully 3Xing more value for the customer, not just saving money. Saving money is a much weaker pitch. Hopefully it’s 3Xing the value and it really does and the weaknesses and the failings are fixed by the customer or we’ve picked a domain where AI really is much better, not like general AI, I guess. So these are the kinds of things I would go through as I would tick through it. Notice I didn’t talk about competition at all and I wouldn’t. My assumption is that every market of any reasonable size will be flooded with AI products. Maybe it already is, but my assumption is if it isn’t already, it’s going to be. 

So, oh well, what am I supposed to do about that? And what moat do I have? Nothing because we all use the same models. We are all making prompts. And as you say, tech is usually not a moat. Okay, if you have very, very, very … We can all pick out special cases where the tech is the moat, but that’s the point.That’s why it’s usually not. So there’s no moats there. Everyone’s doing this stuff. So what am I supposed to do when the market is crowded? We’re all using the same tech more or less. And again, I think, well, then I’ve just got to have such a great vision for my product, my ideal narrow customer, how I build for them, how good it is for that particular customer, because not everyone’s going after that particular customer. So how can I just make an absolutely amazing product for that? 

Trusting in the thing we talked about earlier that other people will also like that and want to join in. And so how can I find things like that that adhere to those other criteria? There’s a lot of Venn circles here, right? But of course there are because we just said all these things have to go right for the company to work. So yeah, that’s right. It’s going to be a vendor argument with lots of circles and a center that might not even be there. It might not even be a center, which is kind of the point. But those are the kinds of things I would look at. Now, again, not trying to imply there’s no other way to build a company, right? Of course, there’ll be successes that don’t do what I just said, like we’ve been saying. But in the spirit of that bootstrap machine where these are the things I would do that I think increase your chance of success or remove some kind of risk or at least lean into some kind of strength you have or go with the grain of what’s going on instead of against the grain and therefore just like hopefully make all these little probabilities be a little bit better than maybe they would have been.That’s what I would do. 

And of course, no matter what I thought as customers actually used it, I would discover I was right about some things and wrong about some things and stuff I didn’t think of. So of course I would have to be following my nose after that, but this is what I would start with and then of course be following my nose as soon as I could intersect it with real customers.  

Rob Walling:
Amazing. It’s a great note to end it on. Thanks for coming on the show. I want to have you back when you release the book. We can talk, probably dig into some of the content of that. Folks want to pre-order it. I pre-ordered my very own copy this morning. It’s at hiddenmultipliers.com. And you and I are going to be hanging out in Portland, Oregon here in just a few months. You’re speaking at MicroConf again. I think it’s been about 10 years since your last MicroConf talk and I’m really looking forward to hearing from you in April.  

Jason Cohen:
Yeah. The talk is about what to do when growth slows.  

Rob Walling:
Yeah. It’s just a topic for many, many people.  

Jason Cohen:
It is. I think nowadays a lot of people are seeing that large and small companies. And of course, a lot of people want to grow anyway, whether it’s slowing or not. So it’s just a useful thing anyway.  

Rob Walling:
It’s going to be good. Yeah. MicroConf.com/us if you’d like to pick up your ticket. It’s April, I think it’s 14th through the 16th in Portland, Oregon. And then if folks want to keep up with you on X, Twitter, you are a smartbear and of course a smartbear.com where all your essays live. So thanks again, man. It’s been great having you.  

Jason Cohen:
It was fun. Thanks.  

Rob Walling:
Thanks again to Jason for joining me on the show today. And I meant it when I said I want to have him back on when his book is live. I think there’s so much more to talk about with him that it both enlightens me and I think educates bootstrappers as a whole. As someone who has, I think he’s bootstrapped three companies and raised buckets of money for the fourth for WP Engine. He really just has a very grounded sense about him and about how he thinks about growing companies. As a reminder, his book is Hidden Multipliers. You can get it at hiddenmultipliers.com. And he will be speaking in just a couple months at MicroConf US in Portland, microConf.com/US if you want to buy a ticket and hang out with Jason and I for a couple days in mid-April. Thanks again for joining me this week and every week. 

This is Rob Walling signing off from episode 817.