Transcript

How to build trust fast, w/Spotify's Daniel Ek

The very best founders I know are brilliant at building systems. They connect teams, they remove bottlenecks, and they eliminate single points of failure. And yet When it comes to their own wealth. Most are running a disconnected stack. A tax accountant here and a state attorney there, a wealth manager who doesn't talk to either one of them.

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It's a new sport called skyacking. Super fun. I've landed a sky in front of about 60,000 people in Pittsburgh once, doing about 65, 70 miles an hour and like Coming in about touch the water, going, it's too fast, it's too fast. Just keep the nose up and skip, skip, skip, skip. Yeah. My name is Miles Dasher. I'm a professional parachutist, uh Eagle Scout, base jumper, and friend of the community.

I hope you've had your coffee today. Because Miles is high energy. In fact His idea of an early morning pick me up is to climb to the top of a really high place and then leap right off it. In our sport, we're all a little type A, we're all a little hungry and just kinda like running around like ah I wanna jump off this, I'm ready to do this. And uh that's pretty much all we think about when we drive around tall objects. Ooh, we could jump off of it like over there on the corner is perfect, and look at this landing area, it's great. Awesome.

Well. Yeah. Miles has done over eight thousand five hundred sky dives. And five thousand bass jumps. But unlike

The ancient Greek tale of Icarus. Miles is humble. When it comes to his own knowledge. He knows that hubris can lead to a downfall. That could be literally

Deadly. When you're flying a parachute, you're just dusting the wind. If you've got a bad gut feeling about something, you know, that gut feeling got you here. You know, that's what made you survive your whole life until now. So trust your instincts, trust your gut. And sometimes it's good to just back away from jumps. It's not just his own abilities that Miles needs to have absolute trust in. But those of his jump partners.

In one episode of his web series called Miles Above. Miles and his teammates jump from a plane in wingsuits. They then crisscross each other's paths as the earth hurdles towards them. The stakes are sky high. One wrong move. One error of judgment would cause calamity. As a team, we're basically trying to take the sports that we do to the next level. Like we'll kind of change things up to where we take our pilot, Kirby Chamblist.

He's an Edge 540 world champion pilot. He loves to come skydive with us too. We'll take him and put him on the back of Luke Aikens with his wingsuit. And we come up next to him and we're high five and Kirby. It may look like it's all fun and games on the videos where we come in and we're just laughing and high fiving, but it took a lot to get to that place and not just like skills that we've developed, but An immense level of trust where you are trusting each teammate to make the right decision and to not basically fly into you and kill you. You know? How do they develop that cast iron level of trust?

In the fast paced world of skydiving. There's not always the luxury of time, so miles. Has to rely on shortcuts. gotta make judgment calls you know in a moment's notice when you just meet somebody and okay, you're gonna fly your airplane around me. While I'm flying a wing suit, and uh I've gotta trust you not to hit me with the spinny part of front of your airplane. So but you know they're world champions, you know their background is good, but then if if I don't trust their eyes, you know, I'm gonna say, yeah, give me some space, you know? Then that's life. That's that's for everybody. That's not just skydiving and flying.

Well, as I always say Trust equals consistency plus time. Lee Hoffman said trust is the consistency of what was that? How did that go again? The name's Reed, not Lee. And it was trust equals consistency.

Plus time. Consistency plus time. That's a good formula. Lee Hoffman, man, he's a he's an analyst. He could figure that stuff out. I thought I analyzed stuff too much. Yeah, my wife, Nikki, she's like, You always overanalyze stuff. Well ask Lee Hoffman about that formula, honey. I think he's figured it out. Good job, man. Thanks, Miles. Cool, man.

Whether you're spinning through the sky at ten thousand feet or trying to do something more grounded. There will be times you need to build trust. That's because trust is a fundamental component. Of any functional relationship. But it is also one of the most difficult to build.

I believe that to quickly build the foundations of a long term relationship. You have to find shortcuts. To trust. You gotta have incredible talent at every position. It's like this gives a huge push. There are fires burning when you're going out. Can you believe it? Such an idiot. And then you go back to this is totally gonna be amazing.

There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a three-bedroom apartment. Just how you do it. This is masters of scale. I'm Reed Hoffman. Founder of LinkedIn.

Investor at Greylock. And your host. And I believe that to quickly build the foundations of a long term relationship. You have to find shortcuts. To trust.

This is especially true if the relationship in question is racked with suspicion. Trust is normally built. Upon a simple foundation. Consistency. Over time.

But this is a problem. For anyone who hopes to blitz scale. А сломов. Is an oxymoron. You often can't wait for trust to develop at its natural rate.

So how do you remove time? From the establishment of trust. You have to find a shortcut. It's like the tentative first dance at the beginning of a relationship.

You have to transition. F an awkward slow dance. To a self assured quick step. Without putting off your suitor.

Neither of you is sure. Of the other's intent. Is your potential partner in it for the long term? Or will they take you for everything you've got? As soon as your guard is down.

When companies partner They go through the same kind of courtship. But it's hard even to get on the dance floor. When your partner sees you as a mortal enemy. In these cases

You need to be bold. Make a sweeping gesture. To win that first dance. Dazzle them. And not just with your own innovative moves.

but by making them look great. To test this theory, I talked to Daniel Eck. Founder and CO Spotify. when Daniel founded Spotify in two thousand six

Online music piracy was at its піque. And the record industry was losing the fight. Daniel had a vision. For a free. Legal.

Streaming service. At listeners' fingertips. It would triumph. Over piracy.

And would set the music industry on a fairer course. That would give record companies and artists Their fair share. of online music revenues. But to win.

Daniel would have to lure users away from pirated music. Which they already had for free. He'd have to persuade record companies. to set aside their inherent mistrust of all things digital. And give his free service.

Their blessing. In both cases. He had to find shortcuts. To win their trust. For Daniel.

Trust is more than a five-letter word. It's a concept, or the deep. in the culture. He grew up in. There's something called the Alemanseretten. It's literally translated every man's right. And this comes at the core of Swedish. So for instance, if you own a piece of property in Sweden, people are allowed to walk your property.

If the property's large enough they're actually even allowed to tent at your property for twenty four hours. Every man's right. is a very Nordic notion. Of the social contract. One that sounds

Kind of crazy to American ears. Try to imagine yourself. Walking on a someone's property in the US pitching a tent and proclaiming It's your Alletin.

You know. How that story ends. But the Swedes have a totally different conceptual framework. You have to grow up in it.

To fully understand it. And this is lesson one. About trust. It has different baselines. Across different cultures.

In Sweden, for example. Everyone's tax returns. are publicly available. This notion of private versus public uh just doesn't exist to the same extent. Like all income is public in Sweden, like every single one.

So I think that plus the fact that it's such a small society means that The number one thing the whole society's built on is trust. Like you can't screw people over, like you have to honor your agreements. Daniel C's this deep Swedish concept of trust. As an advantage. And it's fair to say we have Sweden to thank for Daniel's lifelong love affair with music.

It started with his family. It's one of those weird families, uh like in normal families you would get a college degree and that would be like the important thing. Not really in our family. In fact no one had a college degree But having a music education was super important. But his country made sure

That no child left music behind. And in Sweden where I grew up, there's actually free music education. Which I think explains a lot about how music is so big in that country and why it's such a big export for us as well. You get taken to this place when you're about four or five years old. And you walk around and you get the sample

every instrument you can imagine. So I walked around and I saw people playing piano, I saw people doing the flutes, I saw people doing all sorts of things. That's the sitar, and this is the Glaucenspeeder. And in one of the rooms was th this person was playing the drums. Yeah. I saw and I was like holy sh this is amazing. I really want to play the drums. Five year old Daniel was blown away by the possibilities.

But there was one inescapable. Reality. My parents, because I wasn't really that into music at that time, uh, nor did I really want to do it, they said you can pick any instrument you want. I said I wanted to play the drums, they said well any instrument you want.

But the drums. Because we were living in an apartment and we didn't want to get evicted. Daniel turned. To a cool older cousin. For advice.

He had told me that I should pick the guitar. because if I picked the guitar I could actually have a shot with the girls. And as a five year old, uh I didn't know what have a shot with the girls actually meant. I thought he was a pretty cool guy, so I ended up uh playing guitar and and that's the story of how I started picking up the guitar. And so when did you start picking up programming and then what w was there any connection between music and programming at that time? Um no, it wasn't really any connection between the two

It was uh a C sixty four. The C sixty four is also known as the Commodore 64. It was an 8-bit home computer, popular in the 1980s. With a cassette? Yes, with the cassettes. Yeah. Indeed. And then one day the cassette broke. The actual player broke down. So I started deconstructing the

player and figured out how to fix it. Next time the computer broke down I I took it apart and then put it back together again and fixed it. Got a bit overconfident, so I asked someone who was an engineer what's the hardest thing to learn and the person said well C plus plus is probably the hardest thing to learn. C<unk> is a computer programming language. It is indeed one of the hardest things to learn. So by H Nine I thought, hey, I'm gonna learn how to program C plus plus.

And about forty pages of code later I could construct a mouse cursor that moved around. Uh, which felt like a lot of work for for something relatively simple. So um let's talk about your first entrepreneurial venture. Yeah, probably like nineteen ninety seven or so. People had started talking about web pages. In Sweden at least, it was kind of the craze that Everyone should have a web page.

So one day there was someone who asked me if I could create a webpage for them. I didn't know how to do HTML. And I certainly didn't know how to do anything in design. So my instinct was kinda s to say no. The person kept coming back and asking me again if I could do it. And so about the third time the person asked, I decided to just take an absurd number

that I could think of just to make sure I get rid of the person. So I said, Well, sure, I'll I'll do it, but I want five thousand dollars to do it and the person said done and I'm like oh holy I now actually have to learn how to do this. Daniel built those web pages and he built them well. Word spread.

More people sought him out. He raised his price to ten thousand dollars, and they agreed to pay. What happened next? Is one of the most audacious examples of scale I know of. Especially

For a teenager. fast forward, uh I'm now like in later stages in elementary school. So I had like all the people in my class that were good at math I taught them how to do HTML for me and the people that were really good at design I taught them Photoshop, so I was basically like running an illegal sweatshop uh when I was like fourteen. And that was the start of my entrepreneurial career. Well, it wasn't so much as a sweatshop because unlike you know classic child labor things, which is like oh they're working twelve hours a day and so forth, this is very high priced goods.

with skills that help them get have entire careers later and so forth. So yeah, you know, the entrepreneurial side of this is cool. Like one would normally think that when you experience this much success early, you would just keep doing it. So What caused you to kinda go, look, look this is great. I've got a huge income coming in. Yeah.

I did that. Time to move on. What w what was the thinking? What I started off doing was I bought like the TV I wanted, I bought the guitars that I wanted and I got the computer that I wanted and eventually I ran out of things to buy. Notice. But among all the material possessions he lists.

Daniel the Music Fan. Doesn't mention buying records or CDs. It's not because his love of music has died, quite the opposite. Daniel was listening to more music than ever. But like most people across Sweden.

He was buying less of it. The age of music piracy had begun. And Sweden was leading the way. Thanks to government mandated broadband. The country was way ahead of the rest of the world in terms of internet speeds.

Music files that took hours to download in other countries. Could be downloaded in Sweden in seconds. People became used to fast free access to stolen music, and Daniel was no exception. But Piracy did more than supersized his music library. It gave him a calling.

The pivotal moment when I realized that I wanted to work with the internet specifically, not just as a software developer was the first time I tried Napster. Napster was a file sharing service that launched in 1999. It was infamous for allowing people to illegally share huge amounts of copyrighted music. And for me it was like really an epiphany.

Up until that point, the internet was mostly about some text and maybe some blinking gifts. And all of a sudden came this Napster thing which enabled you to get access to the entire world's music. And for someone who's really into music, it was phenomenal. I discovered so much great music from it and when it got shut down

I figured that you can't put the genie back in the bottle. So something like it must exist. Daniel was right. The genie was out. And there was no going back.

Despite the best efforts of record companies. Napster may have been sunk by a legal broadside in two thousand and one. But others sprung up to take its place. The genie had granted every music fan The wildest dream.

No less. Than every piece of music ever recorded. Or freeze. The record companies went to desperate extremes to stop it. They sued piracy services and even private individuals.

Meanwhile Artists from Britney Spears to Metallica. railed against the illegal downloaders. Saying it was as bad as shoplifting CDs. Musicians had lost trust in their fans.

And fans. Lost trust in musicians. Trust. Was at an all-time low across the бор. And this

was Daniel's opportunity. I thought long and hard about what I was passionate about and what made me get into technology to begin with. Funnily enough, I took a stint off for a few months and just played guitar like as a on the road uh with vario Swedish artists. So I was kind of like doing more soul searching than than anything else. And what came back to me was like I had these two passions in life, music and technology.

And so it started dawning upon myself, like why haven't anyone like fixed this? Why haven't anyone made the Napster thing work? Both for consumers and work for artists as well. From his outsider perspective, Daniel saw that music consumption had become a zero sum game. A war. between music fans and music companies, where one side had to win and the other side had to lose. Daniel believed this could be fixed.

But you'd have to get both sides. to trust eча Or at least To trust him. When you've built substantial wealth through your business, it's often tied up in a single equity position.

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Humans will never be more intelligent than AI. There's gonna be two types of companies. Those were great at AI and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Calyubi.

And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show.

Because every Friday we release a second Rapid Response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely from Ford's CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. I asked Daniel about his strategy when he set out to build Spotify and bring both musicians and fans to the table. What was your theory about that inclusion? Was it like, oh God, this is gonna be really hard or

Actually, in fact, no no, we should be able to do this because This helps all of them. get to the internet age as well. I was just really naive to be honest and and like many other entrepreneurs, I didn't understand nearly enough what it would take to get this to work. So it really started with this

Just You know. being your own customer in the sense that I had this idea of the kind of product that I wanted to see in the world. And the way I articulated that to my team was What if we can build something That makes it feel like you had all the world's music on your hard drive.

If we can create that feeling, we would have built something that's much better than piracy. So we're gonna get People to consume it. Now the second part of that equation in order to not get shut down is obviously it has to work for artists. Daniel was clear about what his product needed to deliver. But he had misjudged.

The depths. Of mistrust and acrimony. That were coursing through the music industry. And he was about to dive. Head first.

Into this treacherous riptide. To avoid being pulled under. He realize he needed to win the trust. Of the consumers and the record companies. And it would be an Olympic effort.

Remember. Вот Дніол Джессед. If we can create that feeling, we would have built something that's much better than piracy. Dani wasn't just going to build something great.

Better than piracy. Music lovers. already had the world's music at their fingertips. Daniel would have to build something. So compelling.

That it was better than free. How do you create something better than free? One word. Speed. The speed thing was something that I obsessively focused on.

Although illegal downloads were free. They could be slow. So Daniel would offer something faster. than piracy. But he wasn't satisfied by just being fast.

What he knew And focused on relentlessly. І знак зуби вон у лос. In the first few seconds of trying his product. No scratch that. In the first milliseconds.

Two hundred milliseconds. To be exact. Daniel wanted the gap. Between a user hitting play And the music hitting the user's eardrums.

To be imperceptible. I read in this book that the human brain takes about two hundred milliseconds to perceive anything, like at all. So I said to the engineering team, we gotta get this down to two hundred milliseconds. And at that time, two thousand and six that was considered crazy. Daniel never gave up.

His so called crazy emphasis. On speed. He pushed his product team relentlessly. Until they made Spotify so fast. It seemed like magic.

And like any good magic trick. It relied. On some timely. Misdirection. We never got it down to two hundred milliseconds consistently. Uh we got it down to about a half a second, but when you play then with things such as

You know, the throbber. The throbber is the animated symbol that indicates a piece of software is working on something. And you cognitively make it move even before there's sound, the human brain perceives it to be instant, even though technically it wasn't. So there's a lot of things that you could do, and I got really into the details there. of just creating an amazing experience that solved the end goal. But I think I I was very clear from the beginning that this needed to feel like you had all the world's music on your hard drive and And meeting entrepreneurs today I would say it's very rare that I hear someone who can articulate

What the end status of that product that they're trying to build and we realize if you do solve that, that's gonna be a huge thing. One music lover who immediately fell under Spotify's spell was Gustav Suderstrom. He's now Spotify's chief RD officer. But when he first saw Spotify in two thousand and nine, he hadn't yet joined the company.

He became an instant fan. So for me It was really this illusion of like how did they download the entire internet? To my Computer.

This is amazing. It's it must be a trick. I you know, I thought it was a trick. Look behind the computer. It's like they have this huge hard drive somewhere, right? Gustav joined Spotify to lead the roll out of its mobile version. He's now overseeing all design, technology, data, and engineering. He believes the illusion of a fast download.

Was what set Spotify apart. From the free music that was already available. The offering that consumers had, it wasn't legal. And it was horrible for creators. But from a consumer perspective, it was fantastic. And to this day

The piracy catalogue Wasn't as bigger. So the right question is Why on earth did Spotify work at all.

When people already had this, right? Spotify had a very distinct magic trick. The magic trick was the illusion of h actually having all of Pirate Bay Downloaded. To your hard drive. Pirate Bay is a website that allows people to find and share media.

Founded in Sweden in 2003 by an anti-copyright organization. So whatever song you clicked, it started playing immediately. That was the magic trick. The Science Fiction author Arthur C Clark.

Put it best when he said Any sufficiently advanced technology. Is indistinguishable from magic. And every truly great consumer product. has had one magical feature that gave it the wow factor.

With a Tesla. І вас за уевable аксерація, Ludacris mode. With the iPhone. It was the multi-touch screen.

iPhone. And with Spotify. for its initial users in Sweden who gave it its start. І у за спід. That made them believe.

Speed. Was Daniel shortcut. to his users' trust. But to cement a long term relationship with users. Speed was not enough.

Spotify. Would have to prove its worth. Day after day. And for hardcore music fans and casual listeners alike. This meant

Helping them discover and share music. Playlists. Would be key. If you think about the original Spotify. It really was.

A fantastic product for music lovers. It was a search box. And this Yeah.

So you could literally soundtrack your entire life with these playlists, but you had to be a musical aficionado, right? A few years later there was this company called Tunigo. that wrote an app that you could use inside Spotify. What they had a set of editors who actually created playlists. Four different occasions. So they had playlists for

Dinner with friends, for barbecuing, for running. Back then. Most users playlists had long genres. But they kind of playlist it along use cases. And kind of for the masses.

Now we on the inside we actually saw the data. And we saw that wow, these players are doing great. These people are really good at playlisting. So we ended up acquiring this company, putting them on the inside and giving them access to the actual data, where they could see the number of skips per song and how the music playlist performed. And so they became Very quickly. The world's by far most data driven editorial team.

Who could really Optimised for engagement. And what then happened was The whole machine learning. Wave started to happen.

If you ask someone who loved music, they said like a machine could never curate for me. Yeah, it it wouldn't happen. But actually the opposite happened. By analyzing massive amounts of data.

At its core. Spotify. Created an approach to playlists that users grew to trust. Casual listeners tuned in for playlists of workout music. or tunes for a summer barbecue.

Hard core music lovers. were shocked by how well Spotify predicted their taste. They can't. To trust Spotify. But if Spotify was gonna succeed over the long term.

Users would have to trust them with more and more of their time over the short term. before they made a long-term commitment. Instead of pushing them to pay. Spotify. Use the great free product.

As a shortcut. To trust. We give you a free product, and the better that free product is, the more you use it. The more you're gonna convert. It's the most engaged people. They want the additional features, they want offline mode, they don't want the ads, they want speakers, all these things, right?

Which when you think about it is kind of obvious. But it says something. It says that your free product should be as good as possible. To capture as many people as possible. and make them as engaged as possible.

We got someone in. Who was using music maybe once a week or something. They clearly didn't think it was worth nine ninety nine. Then we gave them this great free product and they started using music more and more and more. At some point they hit like I use this thing every day. It's easily worth nine ninety nine.

So instead of assuming a finite world of people who were already convinced We have this machine that kind of creates music lovers. Whereas most of the rest of the industry have the opposite. They're saying, like, what if we frustrate the free users as much as possible? Surely we're gonna push them over. What happens is they push them out. Daniel found shortcuts to trust with his users.

And he kept building and building. on those long term relationships. But it was still an important hurdle he needed to cross. One that would be fatal. To his plans if he failed to clear it.

He needed the music industry on board. And for this They need to trust him. Two. Daniel decided to shortcut the time it would take to get the industry

To trust him. By offering something the pirates hadn't. Money. If he offered the record companies some revenue. He was sure

They would jump on board. My thinking was well, uh up until that point just Napster and everyone else just haven't shared any of their revenues. So I'm sure we can figure out a fairly straightforward revenue share deal with the music industry and they'll be happy because you know they get more than what they're getting now. Um Obviously it turned out that it wasn't that easy. A straightforward deal.

Doesn't cut it. When you're negotiating with someone who believes You're a mortal enemy. And that's what's so interesting and unusual about Daniel's story. Daniel is a disruptor.

But most disruptors are Don't actually work with the industries. They're disrupting. Most of these disruptors just reinvent. push things aside and create their own closed loop.

Uber. Doesn't work with taxi companies. Airbnb. Doesn't work with hotels. They just kind of go

We're doing our own thing. And you have to adapt around us. But Daniel's plan depended upon the industry's involvement. He had to get the rights.

to their back catalog. He needed The record industry's trust. And he needed it quickly. In the relationship prom

Daniel had to make a first dance gesture that would sweep the record companies off their feet. Offering a revenue share was not enough. I asked him. How he ultimately Got them on board.

So go into that a little bit without getting The you know, kind of the licensing the buy in from the labels, the buy-in from the artists. Scale not possible. Yeah. It was really, really tough.

I essentially told them like hey, you should really give away all your music for free over here. uh and make it legal because eventually people will start paying for the product. Not Very surprisingly, that wasn't a very convincing story to tell. Record companies.

Tooth and claw. Was a tactics they use previously in the eightys. When they claimed home taping was killing music. Is your teenager spending all day in their bedrooms as they try to record the groovest new sounds off the radio? Do you realize that this kind of aberrant behavior is criminal?

and is a direct cause of low school grades, drug use, devil worship, and even murder. That's right, murder. Because by home taping, your teen is kick kick kick. Record companies were being assailed from all sides. by services like kaza Bit torrent.

And Pirate Bay. They saw all streaming as a deathly threat. And Spotify. With its free subscriptions. Was no different.

Daniel had a lot of convincing to do. First, That he wasn't trying to kill the music business. And second. That he could save it.

Clearly. It was not going to be easy. To win the trust of the record industry. So Daniel.

If you looked at Sweden, at that time I think it l had lost more than eighty percent of its entire revenue base. Uh so it was really in shambles. So going from the beginning where I try to get everything in all markets and realizing that that wasn't gonna work. I decided to shift strategy and instead take a very narrow market where they lost most of it and said, Look, uh why why don't I prove this to you and take my own home country? I essentially told them like

I'll guarantee you one year's worth of revenue. in that market if you enable this business model. Daniel was de risking the deal for the record industry. He'd take a painful short term loss. In exchange for the possibility of a long term win.

This is exactly the kind of shortcut. That wins trust. The kind that put your partner self interests Decidedly and dramatically ahead of your own. This reminds me of a very similar conversation I had recently with Marissa Meyer.

Marissa was most recently the CEO of Yahoo and has now started a new venture, Lumi Labs. But she's best known for her role at Google. Where she intensively analyzed user behavior to improve products. She told me a story that happened her first week at Google when she joined as employee number 20. Google was a teeny startup then. And they had just partnered with Netscape, the industry giant.

I walked in and Heather, the office manager, said Like, we're down. Like Google's offline. Uh, and it turned out that Netscape we thought they were gonna send us one fifth of their queries, but for a period of time they sent us all their queries and it basically was more capacity than we could handle. And it knocked us offline. They had to decide.

Keep their own website up? And disappoint their partner? Or service a partner. And take their own sight down. So they actually took our site down and put up a line saying in service to our partners, you know, Google.com will be off service, you know, basically until further notice. Um, but it was, you know, a really, really chaotic day.

And I remember it was not very confidence inspiring because we had this little kitchenette for snacks and there was kind of a little cranny. And I walked in there and like I think I found Larry like in the cranny. That's Larry Page. Google's co founder. I was kinda surprised I turned around and like saw in there and I was like I was like, Hi and he's like,

I just I just need a minute to think about what to do. I was like Okay. By putting Netscape's interest squarely ahead of his own. Larry is making a strategic shortcut. To gain their trust.

And build the foundation. For a long term relationship. But it wasn't an easy decision. It's exactly the kind of decision That would send you straight to the cranny in the kitchen.

But Larry made the right call. And well. It's worked out pretty well for Google. And it's worked. For Spotify as well.

Daniel earned the trust of the music industry. He had the trust of listeners. And that got him the attention of investors. Who trust him enough. To put real money into Spotify.

Daniel was on a roll. Surely. Now that he had proven himself. It would be a simple matter. To extend Spotify's reach.

out of the Nordic countries and into the rest of Europe. And then the US. After all. The music rights were owned by the same record labels. Even

In a lot of cases, the very same record executives That Daniel had already proven himself to. I kept Being really surprised by how lukewarm Um everyone ended up being on the other side.

I was starting to second guess my own enthusiasm about the space. And I remember it specifically I was on one of these like major labels retreats and and my pitch was we're entering the golden age of music. And uh there wasn't a single person applauding anything I said. They were l just looked completely shocked.

And so I walked off stage and there was like this one guy that came up and said, Oh, it was a really interesting speech. It's the first time anyone said anything positive today. There'd been such a long sequential decline that anyone saying anything different was just unbelievable. Outsiders. tend to stay on the outside. A long time.

It wasn't until two thousand fifteen. Almost a decade since Spotify had been established. And seven years since the Nordic experiment. That Daniel says he started to feel like He was part of the conversation.

This is a community where people have known each other for twenty plus years. If you'd only been there for like ten or fifteen, you're kind of like a newcomer, like maybe you'll be around, maybe won't. So I'm still a bit considered like the outsider But what I realized was when I started getting included in the conversations that they were having, that's when their general acceptance started happening and that's where we could build mutual trust and start working together on what I think will be the next level of growth for the company where music in and on itself will change. They may have hacked trust. to get the initial buy in.

But Spotify is still working towards the long term relationship they want with the record companies. At the end of the day it's about trust and if you say that what you're going to do and then keep on doing that. You will do pretty well and If you think about

uh what we're now trying to do as a public company. It's exactly that. You know, I didn't realise it, but it's been quite a cultural shock for even Wall Street to start realizing and I'm hoping that they'll get to it and eventually start trusting us. Well Consistency over time is part of trust.

Intage. I'm Reed Hoffman. Thank you for listening. Masters of Scale is a Wait What original. The sho is recorded on site in California.

And produced at the studio inside SYPartners in New York. Our executive producers are June Cohen and Darren Triff. Our producers are Chris McCloud, Adam Skuse, Jenny Cataldo. Dan Kedmi and Ben Manilla. Our supervising producer is Jay Punjabi.

Original music and sound design is by the Holiday Brothers. Mixing and Mastering by Brian Pugh. Special thanks to Chris Yay, Bob Safian, Elisa Schreiber, David Sanford, Saida Sepieva. Christina Gonzalez and Sarah Sandman. Visit mastersofscom

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