1-5% daily growth rate. 10x yearly expansion. The fastest product launch in history. These aren't Silicon Valley fever dreams—they're the mathematical realities of companies that have mastered what Chris Yeh calls "blitzscaling."
Chris Yeh, co-author of the seminal business book Blitzscaling alongside LinkedIn co-founder Reid Hoffman, has spent years studying why some companies achieve hypergrowth while others plateau. From PayPal's explosive early days to OpenAI's record-breaking user acquisition, the companies reshaping our world aren't just getting lucky—they're following a counterintuitive playbook that prioritizes speed over efficiency.
In this comprehensive interview, Yeh reveals the two non-negotiable conditions for blitzscaling, why launching a product you're "ashamed of" might be your best strategy, and how AI is creating the next wave of winner-takes-most opportunities. This isn't just theory—it's the battle-tested methodology behind some of the most valuable companies ever built.
Watch the full interview now on EO's YouTube channel! Below is the complete transcription of the interview. Minor edits have been made for clarity and readability.
Key Highlights:
"So one of the things that Reid Hoffman and I noticed is that companies were growing faster and more valuable than ever before, and we tried to figure out what was allowing this to happen. It applies when you are in a very particular kind of market with a very particular kind of opportunity. The way you can tell is you can focus on two key principles."
"If you're not ashamed of your first product, you've launched too late. So launch a product you're ashamed of."
"The most important speed you can have is actually speed of learning, because the world around us is constantly changing."
"It took them a while to find the product market fit, and once they found that product-market fit, things happened very quickly, and the company began growing at the rate of about 1 to 5% a day. 1 to 5% a day, it's growing like 10x per year."
"AI is coming, it's absolutely going to have a huge impact, and it enables even more blitz scaling on several levels for existing companies who are looking to blitz scale."
"If you're not ashamed of your first product, you've launched too late. So launch a product you're ashamed of."
"The most important speed you can have is actually speed of learning, because the world around us is constantly changing."
"It took them a while to find the product market fit, and once they found that product-market fit, things happened very quickly, and the company began growing at the rate of about 1 to 5% a day. 1 to 5% a day, it's growing like 10x per year."
"AI is coming, it's absolutely going to have a huge impact, and it enables even more blitz scaling on several levels for existing companies who are looking to blitz scale."
The Two Non-Negotiable Rules of Hypergrowth
What exactly is blitzscaling and when should companies apply this strategy?
Chris Yeh: Hi, I'm Chris Yeh, and I'm best known as the co-author of Blitzscaling. That's a book that I wrote with my friend Reid Hoffman, the co-founder of LinkedIn, which is all about how companies can grow enormous multi-billion dollar businesses by prioritizing speed over efficiency to win a winner take most market.
So the core principle of blitzscaling, which is to prioritize speed over efficiency in the face of uncertainty, is something that is not found in any single business school textbook. I know because I went to Harvard Business School. That was not something we were taught. Whereas in blitzscaling, our message is, no, no, sometimes you have to sacrifice efficiency and risk making mistakes in order to move faster.
So the important thing to remember about blitzscaling is it's not a strategy you apply in every single circumstance. It applies when you are in a very particular kind of market with a very particular kind of opportunity. The way you can tell is you can focus on two key principles.
The first is a winner take most market dynamic. You need to be in a market where the first company to achieve scale achieves enduring market leadership, and this can come about because of network effects that you have elements like community or you have elements like a platform network effect. If you don't build that in from the start, you won't have that undertake most market dynamics.
The second part is equally important, and that is that you have a distribution advantage. So your ability to grow depends on your distribution. You can think of it as a race where you're running against your competitors and you're trying to get to the finish line first. Your distribution is the thing that determines how quickly you can run.
So the core principle of blitzscaling, which is to prioritize speed over efficiency in the face of uncertainty, is something that is not found in any single business school textbook. I know because I went to Harvard Business School. That was not something we were taught. Whereas in blitzscaling, our message is, no, no, sometimes you have to sacrifice efficiency and risk making mistakes in order to move faster.
So the important thing to remember about blitzscaling is it's not a strategy you apply in every single circumstance. It applies when you are in a very particular kind of market with a very particular kind of opportunity. The way you can tell is you can focus on two key principles.
The first is a winner take most market dynamic. You need to be in a market where the first company to achieve scale achieves enduring market leadership, and this can come about because of network effects that you have elements like community or you have elements like a platform network effect. If you don't build that in from the start, you won't have that undertake most market dynamics.
The second part is equally important, and that is that you have a distribution advantage. So your ability to grow depends on your distribution. You can think of it as a race where you're running against your competitors and you're trying to get to the finish line first. Your distribution is the thing that determines how quickly you can run.
How can companies build the distribution advantage needed for blitzscaling?
Chris Yeh: Companies should really focus on either using something like virality that allows them to build on growth from original organic growth, but you can also bring in incentivized virality, something like Dropbox, where if you refer a new user, you get additional free storage. That's something you have to consider as you're designing your business model.
So a lot of people ask, OK, is blitzscaling for everyone? As we described, it only applies to certain circumstances. But it's also the case that blitzscaling is a difficult strategy to implement. It's not like, oh great, let me just grow and things will magically happen. As we all know, growth is hard, and blitzscaling involves a level of growth that is uncomfortable and risky.
So when you're prioritizing speed over efficiency, it means that you might be in danger of running out of money. And so if you do not need to blitzscale, it may be easier to actually pursue a slower growth strategy. But that doesn't work if you are actually in a blitzscalable market, if it's winner take most, because while you are taking your time, another competitor may be blitzscaling.
So a lot of people ask, OK, is blitzscaling for everyone? As we described, it only applies to certain circumstances. But it's also the case that blitzscaling is a difficult strategy to implement. It's not like, oh great, let me just grow and things will magically happen. As we all know, growth is hard, and blitzscaling involves a level of growth that is uncomfortable and risky.
So when you're prioritizing speed over efficiency, it means that you might be in danger of running out of money. And so if you do not need to blitzscale, it may be easier to actually pursue a slower growth strategy. But that doesn't work if you are actually in a blitzscalable market, if it's winner take most, because while you are taking your time, another competitor may be blitzscaling.
Launch What You're Ashamed Of
What counterintuitive approaches does blitzscaling require from founders?
Chris Yeh: When a founder decides they're going to blitzscale a company, they have to prepare themselves for uncertainty. You are trying to figure out how to grow faster than your competitors. Your competitors are also aggressive entrepreneurs. They're also finding ways to grow quickly. And so as a result, the aggressiveness that's required means that you have to tolerate a lot of uncertainty and a lot of risk.
And so in order to actually do blitzscaling, you often have to do things that are counterintuitive in comparison to conventional wisdom. So there are a couple of these counterintuitive approaches, and I'll share one that has been very popular because it's probably one of Reid's most famous sayings: if you're not ashamed of your first product, you've launched too late. So launch a product you're ashamed of.
Now this is really strange, right, because we normally say we want to launch a great product, we want to launch a product that people love, but Reid's insight is we have the ability to rapidly iterate and improve our products. This is a lesson Reid learned with his first company, which is called SocialNet. What he discovered is they spent all this time perfecting all these little features that they thought were important, and when they actually launched it, the customers ignored them, never used them.
And so in order to actually do blitzscaling, you often have to do things that are counterintuitive in comparison to conventional wisdom. So there are a couple of these counterintuitive approaches, and I'll share one that has been very popular because it's probably one of Reid's most famous sayings: if you're not ashamed of your first product, you've launched too late. So launch a product you're ashamed of.
Now this is really strange, right, because we normally say we want to launch a great product, we want to launch a product that people love, but Reid's insight is we have the ability to rapidly iterate and improve our products. This is a lesson Reid learned with his first company, which is called SocialNet. What he discovered is they spent all this time perfecting all these little features that they thought were important, and when they actually launched it, the customers ignored them, never used them.
How did Reid Hoffman apply this lesson when launching LinkedIn?
Chris Yeh: So he took that lesson with him when he started LinkedIn. When he started LinkedIn, right when they were about to launch, one of the things that people said was, oh, you know what, we need to stop and delay the launch because we need to build the ability for people to find consultants on LinkedIn. And that sounds interesting, but Reid said, tell you what, we're just going to launch LinkedIn and then if people really clamor for it and say they want it, we'll go back and we'll build it.
That's because Reid knew that what we think is going to be essential to the user might not be, and the best way to improve the product is to get real world feedback and iterate. And so they launched LinkedIn, and it turns out that's not what people wanted. The number one request that came in from LinkedIn users was very simple: I want to put my picture on my LinkedIn profile.
And so launching a product that embarrasses you is a way of getting over your fear of what if it's not perfect. Guess what? It's not going to be perfect. It's going to have problems. And the reason is none of us are geniuses. None of us is smart enough to know exactly what the market wants. But you'd rather be fixing real problems based on real user feedback than trying to fix things based on your own intuition, which could very well be wrong.
That's because Reid knew that what we think is going to be essential to the user might not be, and the best way to improve the product is to get real world feedback and iterate. And so they launched LinkedIn, and it turns out that's not what people wanted. The number one request that came in from LinkedIn users was very simple: I want to put my picture on my LinkedIn profile.
And so launching a product that embarrasses you is a way of getting over your fear of what if it's not perfect. Guess what? It's not going to be perfect. It's going to have problems. And the reason is none of us are geniuses. None of us is smart enough to know exactly what the market wants. But you'd rather be fixing real problems based on real user feedback than trying to fix things based on your own intuition, which could very well be wrong.
Speed of Learning Beats Speed of Execution
How should founders prepare themselves for blitzscaling beyond just being aggressive?
Chris Yeh: So the question I always get when it comes to blitzscaling is, OK, how do I prepare myself to blitzscale? Is it just a matter of being aggressive? I'm like, no, no, no, hold on. Aggression is not the point. Speed is the point. And the most important speed you can have is actually speed of learning, because the world around us is constantly changing. The thing that worked 3 months ago may not work today.
And so the thing you want to train yourself to do is to be what we call an infinite learner. Someone who is able to constantly learn new things, but more importantly, let go of old lessons. We all learn lessons in our lives, often from the things that helped us be successful, but that doesn't mean those lessons still apply.
And so learning to let go of the lessons that made you successful in order to have room for the new lessons that will make you successful in the future, is one of the most important things you could do as a blitzscaling entrepreneur.
And so the thing you want to train yourself to do is to be what we call an infinite learner. Someone who is able to constantly learn new things, but more importantly, let go of old lessons. We all learn lessons in our lives, often from the things that helped us be successful, but that doesn't mean those lessons still apply.
And so learning to let go of the lessons that made you successful in order to have room for the new lessons that will make you successful in the future, is one of the most important things you could do as a blitzscaling entrepreneur.
The Product-Market Fit Dilemma
What's the relationship between blitzscaling and achieving product-market fit?
Chris Yeh: So there are a lot of misconceptions about how startups grow. Some people think that you just raise a lot of money and spend it on marketing, you can buy growth. To some extent you can, but you're not gonna buy sustainable success. That's why it's so important early on and as detailed in the book The Lean Startup, that companies find product-market fit. Without product-market fit, no company can achieve long-term success.
If you blitzscale before you achieve product-market fit, that's very risky, because if you blitzscale a product that doesn't yet retain its users, it may be that you're just spending money to buy temporary market share. The best time for a founder to implement blitzscaling is after achieving product-market fit, but before the competitors begin to scale up. That's the ideal scenario.
You've achieved product-market fit and you know that you can benefit from throwing money into growth, but at the same time, you haven't fallen behind your competitors. If your competitors are starting to grow before they achieve product-market fit, you may need to start growing earlier. That's that judgment call where you have to decide: can my competitors achieve product market fit as they scale or not.
If you blitzscale before you achieve product-market fit, that's very risky, because if you blitzscale a product that doesn't yet retain its users, it may be that you're just spending money to buy temporary market share. The best time for a founder to implement blitzscaling is after achieving product-market fit, but before the competitors begin to scale up. That's the ideal scenario.
You've achieved product-market fit and you know that you can benefit from throwing money into growth, but at the same time, you haven't fallen behind your competitors. If your competitors are starting to grow before they achieve product-market fit, you may need to start growing earlier. That's that judgment call where you have to decide: can my competitors achieve product market fit as they scale or not.
How should founders navigate the timing of when competitors are scaling without product-market fit?
Chris Yeh: Now the issue is it becomes nuanced. Let's say your competitor is scaling up very quickly. You have to ask yourself, is that competitor going to be able to achieve product market fit as they grow? Because if they do, and they've grown out in front of you, you won't be able to catch up with them.
However, if you think that they're far from product market fit, you may let them go ahead and grow. And then swoop in and buy up their assets after they go bankrupt. This has happened many times in history as well. But if achieving product market fit occurs simultaneously with scaling up, you may need to blitzscale even before you achieve product market fit.
However, if you think that they're far from product market fit, you may let them go ahead and grow. And then swoop in and buy up their assets after they go bankrupt. This has happened many times in history as well. But if achieving product market fit occurs simultaneously with scaling up, you may need to blitzscale even before you achieve product market fit.
David vs. Goliath: The Airbnb Clone Wars
Can you share a real-world example of why blitzscaling becomes necessary for survival?
Chris Yeh: One of the most fascinating stories about why blitzscaling is necessary is the story of Airbnb. So I want you to think back in time to when Airbnb was a much smaller company. It had about 30 or 40 people at the time. It was primarily in the United States. That is when the Samwer brothers of Germany decided they wanted to create an Airbnb clone.
So they actually created a clone called Wimdu, and they funded it with $100 million and they hired 400 people to build out the company. So at $100 million, 400 employees, Airbnb at that point had maybe 40 employees and $10 million of funding. So it was a sudden situation where Airbnb had gone from the leading company in the field into the David versus the Goliath of Wimdu.
And the Samwer brothers were also interested in starting Wimdu because they thought what they could do is they could merge Wimdu and Airbnb so that in the end Wimdu shareholders would own 25% of the company, Airbnb shareholders would own 75% of the company. This was a nasty shock to the founders of Airbnb because here there was a situation where now there was a competitor with 10 times as much money and 10 times as many people going after the same market.
So they actually created a clone called Wimdu, and they funded it with $100 million and they hired 400 people to build out the company. So at $100 million, 400 employees, Airbnb at that point had maybe 40 employees and $10 million of funding. So it was a sudden situation where Airbnb had gone from the leading company in the field into the David versus the Goliath of Wimdu.
And the Samwer brothers were also interested in starting Wimdu because they thought what they could do is they could merge Wimdu and Airbnb so that in the end Wimdu shareholders would own 25% of the company, Airbnb shareholders would own 75% of the company. This was a nasty shock to the founders of Airbnb because here there was a situation where now there was a competitor with 10 times as much money and 10 times as many people going after the same market.
How did Airbnb respond to this existential threat?
Chris Yeh: It would be very easy to just say yes to the Samwer brothers, to go ahead and accept this merger agreement which would still allow them to keep most of the value, but it would involve giving up so much of their value, and it would involve rewarding bad behavior. We don't want to set a precedent where people who just clone products get to extort people for their equity.
And so what Airbnb decided to do is we're going to blitzscale. The term hadn't been invented yet, but that's essentially what they decided to do. We have to raise more money. We have to hire more people. We have to compete head to head with Wimdu in Europe so that we can outgrow them.
So that's exactly what they did. They raised $100 million of their own. They launched 12 different offices in Europe in the subsequent six months. Ultimately they outgrew Wimdu. In fact, Wimdu went bankrupt in 2019, and Airbnb, thanks to the power of blitzscaling, of prioritizing growth for the sake of achieving a better competitive position, was able to become the dominant company we see today.
And so what Airbnb decided to do is we're going to blitzscale. The term hadn't been invented yet, but that's essentially what they decided to do. We have to raise more money. We have to hire more people. We have to compete head to head with Wimdu in Europe so that we can outgrow them.
So that's exactly what they did. They raised $100 million of their own. They launched 12 different offices in Europe in the subsequent six months. Ultimately they outgrew Wimdu. In fact, Wimdu went bankrupt in 2019, and Airbnb, thanks to the power of blitzscaling, of prioritizing growth for the sake of achieving a better competitive position, was able to become the dominant company we see today.
From Family to Nation: The Five Stages of Scale
How should founders think about organizational structure as they scale?
Chris Yeh: So there are a series of things that you have to follow as you're growing your company. One of them is to do things that don't scale. And so it's very tempting early on to say, well, let's build this infrastructure so it will serve us from 1 to 10 million. That's actually a bad idea because first of all, it's going to be very expensive. But the second thing is it doesn't even accomplish what you think it's going to accomplish. By the time you're halfway there, the market will have changed. All the things that you believe will have changed.
And so doing things that don't scale means understanding that change is the constant. One of the things that Reid and I observed is that at every order of magnitude of growth, your company is essentially a different company. So we actually name these after units of human organization.
So the smallest, which is less than 10 people, we call a family. It's like a family, you're probably under one roof and you see each other all the time. It's very informal. The next level up, which is about 10 to 99, that's what we call the tribe stage, and there, you're not under one roof, you may be in different homes, and you don't necessarily see every single person on a daily basis, but you still know everyone in the organization, it's still pretty informal.
And so doing things that don't scale means understanding that change is the constant. One of the things that Reid and I observed is that at every order of magnitude of growth, your company is essentially a different company. So we actually name these after units of human organization.
So the smallest, which is less than 10 people, we call a family. It's like a family, you're probably under one roof and you see each other all the time. It's very informal. The next level up, which is about 10 to 99, that's what we call the tribe stage, and there, you're not under one roof, you may be in different homes, and you don't necessarily see every single person on a daily basis, but you still know everyone in the organization, it's still pretty informal.
What happens as companies grow beyond the tribe stage?
Chris Yeh: The next stage, which is about 100 to 999, is what we call the village stage. That's when you have to bring in specialists who are really good at one thing as opposed to having generalists who can adapt to just about anything. It's not about the personal relationships, you have to start building a culture that allows people to relate to each other even if they don't see each other on a daily basis.
The next stage up from there is from 1,000 to 9,999. That's the city stage. Now you have different departments that you're working with, right? It's not just something where you have a bunch of generalists. You're gonna have specialists in different areas.
And then the final level of scale is 10,000 plus. That's what we call the nation. And at the national level, all of a sudden you're really thinking about foreign policy as well. How does my giant company interrelate with these other giant companies? You can't just focus internally, you have to look externally and figure out how do you find your place within a broader ecosystem.
And the thing about these stages, you as a founder need to recognize that the things that you did to get you from one stage to the next won't necessarily work when you get to that next stage. And as a founder, you have to evolve with your company as it grows.
The next stage up from there is from 1,000 to 9,999. That's the city stage. Now you have different departments that you're working with, right? It's not just something where you have a bunch of generalists. You're gonna have specialists in different areas.
And then the final level of scale is 10,000 plus. That's what we call the nation. And at the national level, all of a sudden you're really thinking about foreign policy as well. How does my giant company interrelate with these other giant companies? You can't just focus internally, you have to look externally and figure out how do you find your place within a broader ecosystem.
And the thing about these stages, you as a founder need to recognize that the things that you did to get you from one stage to the next won't necessarily work when you get to that next stage. And as a founder, you have to evolve with your company as it grows.
The Mathematics of Viral Growth
What determines how fast a company can grow during blitzscaling?
Chris Yeh: So there are two key variables that I would argue determine a company's growth rate. What is the friction involved to adopting the product, and what is the virality involved in using the product. The friction of adoption is what really helps you determine how quickly you can grow. The more friction there is, the slower the growth is, and this is one of the reasons why one of the key techniques of blitzscaling is offering a freemium product.
Because you want to take away any hesitation to sign up for and start using the product. But it's not just to have an easy product to onboard. The usage of the product has to begin driving additional customer acquisition. Otherwise you're going to have to spend all your money just acquiring customers. So when you're trying to build your product and build out your business model, make sure you build it in a way that has extremely low friction for adoption and where there is an inherent kind of virality or customer acquisition.
Because you want to take away any hesitation to sign up for and start using the product. But it's not just to have an easy product to onboard. The usage of the product has to begin driving additional customer acquisition. Otherwise you're going to have to spend all your money just acquiring customers. So when you're trying to build your product and build out your business model, make sure you build it in a way that has extremely low friction for adoption and where there is an inherent kind of virality or customer acquisition.
Can you give an example of what these growth rates look like in practice?
Chris Yeh: When you find a product that really fits the market and you have the growth engine of virality or distribution, you can grow at rates that seem utterly impossible, and a great example of this is the early days of PayPal. It took them a while to find the product market fit, and once they found that product-market fit, things happened very quickly, and the company began growing at the rate of about 1 to 5% a day.
1 to 5% a day, it's growing like 10x per year, and that introduces a whole bunch of stresses into the equation. It's very hard to deal with. And so we always tell the entrepreneurs they need to anticipate. You need to understand what are the key transitions that you're going to go through.
1 to 5% a day, it's growing like 10x per year, and that introduces a whole bunch of stresses into the equation. It's very hard to deal with. And so we always tell the entrepreneurs they need to anticipate. You need to understand what are the key transitions that you're going to go through.
Three Critical Leadership Transitions
What are the most important transitions founders face during hypergrowth?
Chris Yeh: One of the biggest transitions that entrepreneurs face is when they go from being a tribe to a village, and the reason is you're going from an informal organization to a formal organization. That's where so many of these key transitions come in, and you as a founder need to be ready for it. Now there's a whole bunch of them, but I'll mention a couple of the most important ones.
The first is the transition between contributors to managers to executives. Now the reason this one is very important is because as your company grows, you're going to have to build out a management hierarchy. There's no way to have a 1000 person company where everyone just sort of reports to you, the founder, and so you need to start building out these layers.
But there's a big transition when you start bringing in executives. When you have executives, they're actually managing managers. They're not working directly with the work. So how do you actually find executives who are effective? So understanding the nature of executive work and being able to successfully bring them in from outside the organization becomes one of the key lessons that blitzscaling founders have to learn.
The first is the transition between contributors to managers to executives. Now the reason this one is very important is because as your company grows, you're going to have to build out a management hierarchy. There's no way to have a 1000 person company where everyone just sort of reports to you, the founder, and so you need to start building out these layers.
But there's a big transition when you start bringing in executives. When you have executives, they're actually managing managers. They're not working directly with the work. So how do you actually find executives who are effective? So understanding the nature of executive work and being able to successfully bring them in from outside the organization becomes one of the key lessons that blitzscaling founders have to learn.
What are the other critical transitions founders must navigate?
Chris Yeh: Second major transition is the transition between dialogue to broadcasting. What this means is when you are in a small company very early on, you can just dialogue with your other employees. You have the personal touch and you can really convey your vision to everyone one on one. But when you have 1000 employees, that's impossible.
So you need to think about how you can broadcast your ideas. Somebody like Brian Chesky over at Airbnb, for example, writes an email every Sunday night to the entire company explaining what are some of the major issues he's thinking about, and that is a way to broadcast his vision, broadcast his ideas and make sure everyone's on the same page.
The final one that I always like to mention is the transition between pirate to navy. So when we think about pirates like in Pirates of the Caribbean, they're these wacky adventurers, and that's kind of what a company is like early on in its history. It doesn't have anything to lose, so it can take a lot of chances.
But as the company gets bigger and more successful, you have something to lose. It becomes important to go from being a pirate who is just risk taking and making decisions on your own to becoming a navy, where you actually have an admiral, you have captains, you have a whole structure, because you need to transition from being somebody who acts on impulse to somebody who carefully plans and figures out a strategy that other people can carry out.
So you need to think about how you can broadcast your ideas. Somebody like Brian Chesky over at Airbnb, for example, writes an email every Sunday night to the entire company explaining what are some of the major issues he's thinking about, and that is a way to broadcast his vision, broadcast his ideas and make sure everyone's on the same page.
The final one that I always like to mention is the transition between pirate to navy. So when we think about pirates like in Pirates of the Caribbean, they're these wacky adventurers, and that's kind of what a company is like early on in its history. It doesn't have anything to lose, so it can take a lot of chances.
But as the company gets bigger and more successful, you have something to lose. It becomes important to go from being a pirate who is just risk taking and making decisions on your own to becoming a navy, where you actually have an admiral, you have captains, you have a whole structure, because you need to transition from being somebody who acts on impulse to somebody who carefully plans and figures out a strategy that other people can carry out.
When Blitzscaling Ends: The Twitter Warning
Is blitzscaling something companies should do forever?
Chris Yeh: So it's very important to know that blitzscaling is not something that you do forever on a given product. Blitzscaling is a specific phase, which is to say a product starts off with low adoption, then it really ramps up, but eventually it taps out, right? When Facebook gets to 2 or 3 billion users, it can't keep growing at the same rate. There just aren't enough human beings in the world. We'd have to discover alien civilizations.
And so blitzscaling is necessarily temporary for any given product. What is interesting is that a company may always be blitzscaling somewhere. A company like Apple that has many different products may be blitzscaling different products at different times. As the Macintosh begins to tap out, here comes the iPod. As the iPod taps out, here comes the iPhone. Who knows what might be coming next.
But one of the things to know is when you achieve the natural domination of the marketplace, you have to be willing to start pulling back. And there is a classic cautionary tale here, which is Twitter. Twitter, interestingly enough, essentially hit its limit on the number of active users in the year 2013, but the company didn't stop hiring, and the correct response at Twitter at that point would be to say we have tapped out this market and we should use the profits from our more efficient operations to then develop new products.
And so blitzscaling is necessarily temporary for any given product. What is interesting is that a company may always be blitzscaling somewhere. A company like Apple that has many different products may be blitzscaling different products at different times. As the Macintosh begins to tap out, here comes the iPod. As the iPod taps out, here comes the iPhone. Who knows what might be coming next.
But one of the things to know is when you achieve the natural domination of the marketplace, you have to be willing to start pulling back. And there is a classic cautionary tale here, which is Twitter. Twitter, interestingly enough, essentially hit its limit on the number of active users in the year 2013, but the company didn't stop hiring, and the correct response at Twitter at that point would be to say we have tapped out this market and we should use the profits from our more efficient operations to then develop new products.
What should companies do when they reach market saturation?
Chris Yeh: So that's a great example of how as a founder or as a leadership team, you should recognize when blitzscaling has come to an end. Begin to operate for profitability and use those profits to invest in new blitzscaling S-curves.
The Meta Metaverse Mistake
How do you view Meta's bet on the metaverse through the lens of blitzscaling?
Chris Yeh: So let's talk about Facebook and Meta, and this is a fascinating example of, I think, appropriate focus on an interesting area but poor execution. So when Facebook rebranded to Meta, it was part of an overall effort to say let's make the metaverse happen. Now this is an error that a lot of big companies sometimes fall into, which is to believe that they can create the market.
Ultimately the decisions are made by individual consumers. If we think about other products, Google put an enormous amount of effort into something called Google Plus. That was their big Facebook killer. Guess what? It didn't matter that Google pushed it to every single Google user. People still didn't choose to use it.
And Mark Zuckerberg made the classic mistake of believing that he could make the market. None of us can necessarily make the market. We can just put something out there and see if the market picks it up.
Ultimately the decisions are made by individual consumers. If we think about other products, Google put an enormous amount of effort into something called Google Plus. That was their big Facebook killer. Guess what? It didn't matter that Google pushed it to every single Google user. People still didn't choose to use it.
And Mark Zuckerberg made the classic mistake of believing that he could make the market. None of us can necessarily make the market. We can just put something out there and see if the market picks it up.
How does OpenAI's approach contrast with Meta's metaverse strategy?
Chris Yeh: If we look at OpenAI, OpenAI didn't launch ChatGPT first. They launched DALL-E 2 first, which was the image creation software, and that got a lot of attention. But it was ChatGPT that really brought the breakthrough. And they didn't know that ChatGPT was going to be the absolute breakthrough, maybe, but they had GPT-3 and GPT-3.5 before that accessible via API and nobody picked up on it.
So you have to try things, see if the consumers will adopt, and if they do, as in the case of ChatGPT, you've got to aggressively hone in on that and leverage that opportunity that the consumer adoption has brought you.
So you have to try things, see if the consumers will adopt, and if they do, as in the case of ChatGPT, you've got to aggressively hone in on that and leverage that opportunity that the consumer adoption has brought you.
Bear Market Blitzscaling
How does blitzscaling change during economic downturns?
Chris Yeh: So one of the things that I always have to emphasize to people is that blitzscaling is relative and contextual. It's relative because it's about your relative speed, and it's contextual because it has to take into account the reality around us. We were in an incredible boom during 2020 and 2021, but we've seen a remarkable economic cooling. There are all sorts of macroeconomic issues that we are worried about. The US debt ceiling, the war in Ukraine, all of these things are affecting investor psychology, which necessarily affects the abilities of startups and other companies to raise financing for growth.
You have to blitzscale differently when you're in a bear market because of the fact you can't just assume that you can raise more money. But it is still the case that blitzscaling will work. In fact, in some ways it will work even better because the rest of your competition is subject to the same forces. So they may be retrenching, and in fact you can do a lot of things now that you couldn't during the boom.
For example, many entrepreneurs tell me, oh, it's really hard to hire great talent. They used to say, Google is going to hire and pay people so much, Facebook is going to pay people so much, how can I compete? Now, Google and Facebook aren't hiring people. This is a perfect opportunity for you to improve your talent or get the kind of people in that you really want. If other people don't have money to reach the marketplace, and you do, you have a huge advantage. It's cheaper to buy advertising during a recession, so absolutely you can still blitzscale.
You have to blitzscale differently when you're in a bear market because of the fact you can't just assume that you can raise more money. But it is still the case that blitzscaling will work. In fact, in some ways it will work even better because the rest of your competition is subject to the same forces. So they may be retrenching, and in fact you can do a lot of things now that you couldn't during the boom.
For example, many entrepreneurs tell me, oh, it's really hard to hire great talent. They used to say, Google is going to hire and pay people so much, Facebook is going to pay people so much, how can I compete? Now, Google and Facebook aren't hiring people. This is a perfect opportunity for you to improve your talent or get the kind of people in that you really want. If other people don't have money to reach the marketplace, and you do, you have a huge advantage. It's cheaper to buy advertising during a recession, so absolutely you can still blitzscale.
What should founders focus on during challenging economic times?
Chris Yeh: You'll have to do it differently, but keep in mind the overall principles. Am I moving faster than my competition? Am I achieving competitive advantage through scale?
AI: The New Blitzscaling Frontier
How is AI changing the blitzscaling landscape?
Chris Yeh: So one of the things that is really new and that I'm going around the world talking about is the way that AI and blitzscaling interact. Remember the model of blitzscaling. Technology innovation triggers new markets and scrambles existing ones. Well, guess what? AI is doing that left and right. So we are looking at this tremendous change in the marketplace, and that's going to create those opportunities for blitzscaling, those opportunities for business model innovations, those opportunities for new companies.
So the message I want to give people is AI is coming, it's absolutely going to have a huge impact, and it enables even more blitzscaling on several levels. For existing companies who are looking to blitzscale, AI and its ability to amplify human productivity allows you to grow more with fewer people and fewer resources, and the companies that leverage AI will be able to outscale their competitors.
On the other side, AI-based companies can really tap into the principles of blitzscaling because AI really has strong winner take most market dynamics. Thanks to the fact that if you build a better model, you attract more users. If you attract more users, you have more data to build a better model, to attract more users. There is this incredible virtuous circle that really helps the existing players like OpenAI, and we're going to see this play out in many different AI-based markets, and we expect the blitzscalers that are being established right now in the next couple of years to ultimately dominate the world of AI.
So the message I want to give people is AI is coming, it's absolutely going to have a huge impact, and it enables even more blitzscaling on several levels. For existing companies who are looking to blitzscale, AI and its ability to amplify human productivity allows you to grow more with fewer people and fewer resources, and the companies that leverage AI will be able to outscale their competitors.
On the other side, AI-based companies can really tap into the principles of blitzscaling because AI really has strong winner take most market dynamics. Thanks to the fact that if you build a better model, you attract more users. If you attract more users, you have more data to build a better model, to attract more users. There is this incredible virtuous circle that really helps the existing players like OpenAI, and we're going to see this play out in many different AI-based markets, and we expect the blitzscalers that are being established right now in the next couple of years to ultimately dominate the world of AI.
The Human Connection Imperative
What final advice would you give to founders looking to blitzscale?
Chris Yeh: So as you've heard today, blitzscaling is a strategy that involves prioritizing speed over efficiency in the face of uncertainty. You blitzscale because you have an opportunity to win a valuable winner take most market, and if you do so, you will ultimately keep that market for decades and print money along the way.
The reason you should want to blitzscale is not just the financial gain, though of course that's important. It's because blitzscaling is the best way for your startup to maximize its lasting impact.
So the final tip I would give to founders is the following: Always be learning. And that means you need to be constantly taking in new information, but also spend time with human beings. We are in an era where everyone's like, oh, AI will do everything. I'm like, AI is incredibly powerful, but what's really powerful is the ability for human beings to connect one on one, for you to learn from people who are out there doing new things.
All of us are out there trying to understand new technologies, and it's too difficult to understand it on our own. We need to build a whole team of learners that can learn together and ultimately figure out how to best build businesses to tackle this new world.
The reason you should want to blitzscale is not just the financial gain, though of course that's important. It's because blitzscaling is the best way for your startup to maximize its lasting impact.
So the final tip I would give to founders is the following: Always be learning. And that means you need to be constantly taking in new information, but also spend time with human beings. We are in an era where everyone's like, oh, AI will do everything. I'm like, AI is incredibly powerful, but what's really powerful is the ability for human beings to connect one on one, for you to learn from people who are out there doing new things.
All of us are out there trying to understand new technologies, and it's too difficult to understand it on our own. We need to build a whole team of learners that can learn together and ultimately figure out how to best build businesses to tackle this new world.
Explore more