Dan: Welcome to The Turing Trust podcast with James Turing and I, in which we’re interviewing some of the world’s most talented innovators and entrepreneurs about the growing role of purpose and ethics within business. Today, James and I are lucky enough to be joined by Rand Fishkin, the CEO of SparkToro, a market research platform, and of course, the former founder and CEO of Moz, where he became, I would say the most well-known figure in the SEO industry; certainly the most loved figure and definitely the most loved facial hair, for sure. Also, probably the world’s greatest job title, the Wizard of Moz, was that your moment of inspiration or someone else’s?
Rand: That was my wife, Geraldine. The odd thing about Geraldine is she can come up with clever aphorisms in seconds and do it again and again. So, it wasn’t much of a moment. It was just, okay, this is you now.
Dan: Fantastic. So before we dive into it, Rand, how are things going with SparkToro?
Rand: Yeah, good. I mean, obviously we are very early stage still, and there’s just two of us – myself and Casey – but we’ve got about 500 customers and we’re profitable and growing, and yeah, trying to make a little bit of a dent in a world that is very dominated by throwing money at Google and Facebook, which we think is not the best thing.
Dan: Excellent. So my first question then, and we’ve got some really fantastic people lined up for these interviews, but one of the reasons why I was so keen to include yourself was because you’ve always been so famous within the industry as somebody who always puts ethics front and centre, almost to the point where sometimes it may have appeared like you’re putting the interests of others before you’re perhaps considering your own.
Rand: Shouldn’t everyone do that, right? Isn’t the idea of ethics that one puts one’s ethics and the morality of the greater good ahead of one’s own self-interest and the profitability of your company and your growth, otherwise you are obviously a bad person who is doing evil things.
To me, that’s the definition of evil, right? It’s not doing all these horrible crimes and murder and those kinds of things, that’s sort of extreme evil, but the vast majority of evil is people doing things in their own self-interest or the self-interest of their companies. Sacrificing things that they know to be good and doing things that they know are not great for the world around them, for the people around them, for their team, their employees, their customers, their ecosystem, in order to get more money – that’s greed, right? And when you lean into that greed at the sacrifice of good things, that’s evil.
Dan: As I say, it probably goes a long way towards explaining why you became such a popular figure and why you are still such a loved figure, but I wonder from a commercial perspective, would you say the net result has been a positive or negative one in terms of you as an entrepreneur? Presumably, that must have helped, but there must have been moments where it has come at a personal cost?
Rand: Dan, you’re sort of getting at the core challenge of capitalism as a whole, which is essentially that the incentive model is to do things with negative externalities on the world and people around you in order to gain wealth faster or more efficiently than them. I think that well-regulated capitalism can potentially overcome a lot of those hurdles and modify those incentives to the point where you get close enough that most people will make right decisions.
But if you’re asking me in my career, were there plenty of opportunities for exploitation for doing things the more pure capitalist way and making more money and probably being viewed as more successful, absolutely. Thousands, every day, all the time, right? There’s no question about it, but also the temptation to do that has never been particularly strong for me.
Dan: I think that always came across loud and clear. I mean, I remember, was it TAGFEE? The Moz values. I mean, back in the day, I was a religious whiteboard Friday viewer, the whole team was, and I think that was where we were first introduced to the whole concept – I’m not saying values didn’t exist – but in terms of making values something really interesting, fun and engaging, and something that really appeared to attract employees to a company. It really made an impression on us, and it seems like in the last decades, almost every organisation has now embraced that as something they need to do, but so often it appears that it’s not much more than just a piece of paper in a drawer or something that exists on a remote page on the website.
I just wonder, is it as important that there are equally specific mechanisms to embed those values as simply having those words in the first place?
Rand: Yeah. What’s interesting is, historically in my career, I valued writing those values down and making them a concrete part of the company’s mission and vision and embedding them in all sorts of places. How we did hiring and onboarding, how we graded our team when it was time for reviews and promotions, and what I discovered was that it scaled to a small team, but not well to a large one.
At about 40 or 50 people, I would say those values started getting stressed, and by a hundred, a hundred and fifty people on the team, you could argue there were enough pockets where they weren’t truly being practiced or they were being perverted to such a degree that having the values alone was not the way to do it. Instead, you needed more structured rules, regulations, practices and ways to do things, and I think this is the frustrating part about scale at any business, right?
You can get by with a sort of, “Hey James, Dan let’s let’s act this way toward each other”, and that works great. Then we bring in three more people and it probably still works well. Then we bring in two dozen more people, and that sort of informal, “Hey, let’s all agree to be empathetic and kind to each other” doesn’t work as well, and then you 10x it, and undoubtedly there’s some wacky extremist, or several in the group, and it starts going off the rails and more people fall off that wagon, and that’s what I observed in a team environment. This is a team where I’m involved in either first degree or secondary order, nearly every hiring decision. So, I think that values are a really tough thing to scale, and I understand why large corporations have them printed on the wall, but find it extremely difficult to live up to them. Organisational scale is the enemy of values as guidelines.
Dan: I often think as well, maybe the biggest challenge is when you introduce one or two rockstars into the team – which is obviously what you’re searching for – but suddenly maintaining that discipline with those individuals becomes a particularly challenging task.
Rand: There are a lot of different definitions about who is a rockstar and who is not, and I think that pinches it as well. What’s interesting is there are organisations that are at very large scale that have done a very good job of this, and it is less through what I’d call nebulous values, because values are an interpretable thing and they’re not necessarily clear guidelines and rules that apply to every situation. I think that organisations that have done that well, you know, places like a lot of parts of the United States governments bureaucratic apparatus just work extremely well, even at massive scale and have very few problems. You look at the department of forestry and agriculture, for example, almost everyone always behaves ethically in those organisations. And yes, you could quibble with how or why they do certain things, but we’re talking about tens of thousands of employees scattered across billions of acres of land and managing things reasonably well, it’s kind of shocking. Like, how do they do that? They do it with a lot of rules and regulations.
I’ve also been extraordinarily impressed with Microsoft over the last decade, and it was not nebulous, freeform values, it was a lot of structure and organisational design, rules and sort of sort of laws, right? It turns out human beings are pretty good when they are given clear guidelines, and I think then you can see that breaking down when it’s not applied, or not fairly applied. I think looking at Google right now is a pretty good example. There’s all these efforts inside Google, from team members to form labour unions and to have significant conversations with their teams and their bosses about ethics, and Google is just rapidly trying to fire those people. They hired the union-busting firm a couple of months ago to try and shut all that down. So, I think that there’s some clear tension around all this stuff and it’s just difficult.
Dan: As you say, people actually value a framework that they appreciate clarity.
Rand: And even when they’re not happy about it, they’re still pretty good at living inside of it as long as they recognise the consequences and rewards of the system.
Dan: Yeah. Freedom is a funny thing in that respect, isn’t it? I think in principle, we all want it, in reality, actually, not so much. James, I just wonder, with your experience of the different organisations that engage with the Turing Trust, are you finding that actually sometimes when you’re dealing with smaller organisations, up to a certain point, they might be more inclined to operate a certain way, and maybe that becomes tricky beyond a certain threshold? What’s the apparent sweet spot from your perspective, are you seeing a certain kind of organisation that seems particularly purpose-led and values-driven?
James: Absolutely. I think that’s one of the most interesting things that you kind of highlighted, Rand, it’s that tension of you need the rules, because if you don’t have the rules, no one’s going to obey them, we’re all going to make 18 different decisions because we all think slightly differently.
So, certainly when we’re dealing with smaller businesses, they can often be like, “Oh, you want to reuse computers for charity. Great. Go do it.” That’s the end of the conversation. They have no further questions because they just assume that everything’s going to be great. Whereas when you go to extremely large businesses, I think the largest we’ve had so far is nine different rounds of compliance, which is wonderful, and there are lots of good rules for good reasons, but fundamentally it meant that nothing happened, and actually those computers went to landfill, which is the worst outcome for everybody.
So, that actually brings me onto one of the questions that I would have on this: in terms of the criteria that businesses get to set for themselves, for example, you can use the return on investment framework for social or environmental benefits, when you’re doing that as a business, does that give you enough willpower to implement those effectively? So for example, If it’s an optional thing, is a business really going to bother reviewing its supply chains as effectively as if it was mandated by law? Do we really need to go that far, or is it possible to create reasonably large companies who still can actually keep that momentum up and adhere to the rules that they set themselves even if they’re not mandated?
Rand: There is a constant tension between regulation of capitalism and freedom of operation. You see folks on both sides of that political divide, and I think what’s odd about it to me is I don’t think it’s a clear, bright-line where human beings always fall on one side or the other, organisations always fall on one side or the other. You get organisations, and even industries, that culturally evolve to be extremely problematic and manipulative, and you get industries and people and organisations that evolve to be relatively magnanimous and ethical.
I think people in the world of political discussion around this regulation point to their respective ends and say, “Hey, we should do this because look how these things evolve”, and then they point to regulation and they find examples of when through manipulation, through misaligned incentives, through a lack of awareness by politicians, poor regulation is crafted and it results in negative things as well. This is a pernicious challenge across the last couple of hundred years of capitalism meets government meets democracy, and I’m not sure the three of us are going to solve it on this phone call, but that tension does exist. I think it pays for all of us to be aware of it and empathetic toward it and to recognise what it means.
For me as an entrepreneur, one of the biggest things that this means is I just don’t want to build a big business. I don’t want to, I’m not interested in it. I want to build small businesses, maybe medium businesses. I want the businesses that I create to help small and medium businesses. I don’t want them to help big companies, even if I’m a relative fan of Microsoft and not a big fan of Google, and I think Airbnb is okay, but I think Uber is kind of terrible, you know, big business, I’m just not interested in helping. They don’t need my help. There are plenty of wealthy people who want to help them. There’s a whole industry of venture capitalists and private equity and investment bankers who are trying to help build those types of companies. I don’t care, but I think the people who need help, the people who are almost always ethical and operate inside these constraints that are often constraints of size, are the ones who are deserving of help and are the ones who I really am interested in helping. They’re the stories I like to read about and tell. So yeah, let’s build businesses that way and I’ll focus on what I can do and the way I can make a positive impact, and hopefully by telling that story through whatever it is, through podcasts and through books and through blogging and getting on stages and all those kinds of things, hopefully, that example can represent to others, footsteps that they can follow in.
As others in this world tread that path, we can create a more followable, interesting, exciting path for more entrepreneurs to follow and maybe sort of shift the startup world, which, for me, is where a lot of my passion lies, because the last 50 years we’ve seen – at least in the United States – the fewest new small businesses created, the lowest percentage of employment by small businesses over the past hundred years have been in the last 40 and it’s declined every year. So it feels like the startup world is booming, but in fact, the opposite is true. We’re biased to a few high growth tech companies, and I don’t like that.
Dan: I mean that wasn’t my perception of the US at all. It’s interesting you say that. Do you have a sense of what’s underpinning that trend?
Rand: Yeah. I think there’s a few big things underpinning it. One of them is tax code regulation. The taxes from the middle of the 19th century up to about the 1960s, 70s, if you were very wealthy and you made a tonne of money, you were taxed very heavily. There were 70% tax rates in the 1950s in the United States, and 60% in the 60s, and then you have the modern conservatism trend, which is essentially wealthy Americans deciding to back the Republican party and then to use the Republican party when it’s in power to reduce it taxes on the rich, you know, now proven by every research study in the world that you know, there is no trickle-down economics, but in fact, that’s the practice by which it’s sold. As a result of those things, you get those sort of wealthy people and wealthy corporations holding more of the income and hoarding it and focused on funding businesses that will grow significantly.
So if you look at the startup ecosystem, rather than lots of people investing small amounts of money in small businesses that can become profitable and pay dividends over time, generally the last 40 years, investors haven’t been interested in those types of businesses, they instead look exclusively for growth. You can see this in wall street and how the public markets value companies, and it’s really based on growth. Tesla is valued more than every other automaker put together; they’re obviously not as big as any of the top six or seven automakers, so the value is on the growth and the expectation of growth. The same thing has been true for Google and Facebook and before them, Microsoft, and now Amazon. All of these types of companies and the thinking behind that from an investor perspective is essentially growth is an indicator of future value, and I’ll be able to sell my stock for more in the future, and so therefore all the money pours into a small number of companies.
In the private markets, you have venture capital – I raised venture capital for my old company Moz – and that model is essentially, you know, maybe the three of us, let’s say we, we started a VC firm, we’ll call it ‘Evil Turing’, like, you know what, let’s do some evil things too. And so we start Evil Turing, and it raises $500 million or maybe $300 million, and we’re going to go invest over say 7 to 10 years in 300 or 400 companies, you know, we’ll put somewhere between half a million and a few million dollars into each of them, and our expectation will be that 95 of those hundred companies that we invest in, go out of business, make us no money. Two or three do reasonably well, they get into the tens or hundreds of millions of dollars in revenue and we make maybe, 3 to 10 times our money back from those companies. Then there’s two or three companies, sometimes only one, that make the whole fund. We invest in an Airbnb or an Uber or an Amazon or something like that, and even though we own a very small percentage, they become worth tens of billions of dollars and so we make all our money, all our real returns from that one business. So, the incentive for us is basically to find that one business out of a hundred or the three out of 300 that are going to make us all our money, and as a result, we’re sort of looking for almost all the businesses that we invest in to either prove that they are that one or die trying, and that model has been in existence now for about 40 years, that’s been how the startup world works. So no surprise then that you get one Uber and a hundred thousand failed startups, and then 10,000 startups who are trying to raise venture capital so that they can try to be Uber because we sort of feed into an immediate ecosystem and a tech ecosystem that encourages people to think either you’re a billion-dollar unicorn or you’re nothing and nobody and building a small profitable millions or tens of millions of dollars a year of business that you only have to work 30 or 40 hours a week at that’s adorable. You’re a lifestyle business. We pejoratively, you know, sort of reign on those parades as much as we can to prevent entrepreneurs from thinking that that’s an acceptable path.
Dan: Do you think that for small businesses we’re painting this picture that you take over the world or you’re worthless. There’s no kind of middle ground. A huge thing alongside values over the last 10 years has been purpose and being very clear on your bigger vision and the change that you’re trying to make in the world, which again, is still sort of tied into this idea of
Rand: Propaganda. The whole, “Well, how are you changing the world? Because it is not acceptable to simply participate in an ecosystem in a positive, profitable way, you have to change the world or who are you? You’re nobody.
Dan: Exactly. Certainly the video that I would tend to show somebody to illustrate this well would be that famous Simon Sinek Ted talk, ‘Start With Why’, and that’s all good stuff, I think there are some interesting lessons to be learned there, but sometimes in the small business world, I look at it and I say, “Do you know what, actually before you worry too much about why we might need to get to grips with what”, which is precisely the opposite of what Simon Sinek is saying, but actually in that normal world of doing a 40 hour week, actually just having a fundamentally sound business is really bloody important, and sometimes I feel like we might overdo the emphasis on those lofty, abstract vision statements, and actually, instead just need to really challenge: are these core competencies of the business fit for purpose? Are they profitable? Is this actually what the customer wants?
I wonder what your take is on that thesis. Do you think sometimes we get carried away in those grander statements?
Rand: Yeah. I mean, I think it is propaganda, right? I like the Simon Sinek thing, I like the idea of purpose, and to my mind, you can take that to a big place or a small place. You can say my why is, “I want to provide for my family and my employees and produce good things for my customers, and I don’t give a crap about how big we have to get.” The way we’re changing the world is we – like tens of thousands of other small businesses – are participating ethically and competently in an ecosystem, and we’re part of our community, and we live happy and fulfilled lives, and we put good things into the world and it doesn’t have to be at scale. That doesn’t feel as powerful as “I built a $10 billion empire and I’m worshipped, and when I get on stages, people cheer”, but is it actually more worthy of praise and worthy of emulation? Absolutely.
I think the negative externalities of big business and of massive wealth are so huge, so problematic that we have to stop worshipping those and following them. When we see those things being lauded, right, and you see everyone talking about what Jeff Bezos did or what Elon Musk did, you should question, “Wait, why is it that that’s who’s being covered? This seems very odd to me. Is it because, oh, it’s TechCrunch and they are owned by this media organisation, oh, they’re funded by the venture. Oh my gosh. All their advertising dollars come from these people. Aha. I see the incentives of why these are the people who earn the attention.” A lot like celebrity culture, the incentive model and what’s healthy and right, are not aligned. It’s up to us to question and ask, why is that happening? Right. Why are things being covered? Why are they being covered in that way? Why are these things being promoted? And could we participate in sharing different types of stories? Right.
There was a great piece on Hacker News yesterday from Sahil Lavingia, he runs a Gumroad which is this platform for small creators and artists, and it’s incredible. He has built an incredible company that makes a few million dollars a year, and he showed their revenue growth and all that kind of stuff, and they employ 30 people who work around 30 hours a week, sometimes less. None of them are full-time employees. A lot of them are working on their own side projects at the same time. And that’s how he loves it. He shared this experience, and it’s a beautiful thing, but there’s no way you’re going to see that amplified to the degree that, “Oh, Instagram acquired for a billion dollars by Facebook”, that’s the stories that we tell, why? Why are we telling those stories and not these other ones? Because there’s a financial and cultural incentive world backing that.
So, I like starting with why and I like asking why.
Dan: So when you start with why and why, it could be in quite a modest way for your immediate customers and your local village, or it could be on an enormous global scale, but going back to Moz, you were so front and centre, it was difficult to be aware of Moz without being aware of Rand Fishkin or vice versa, so I wonder if a brand is to have a really strong personality with an accompanying set of values and purpose, et cetera, how important is it to have that figurehead in that sense? Or actually, do you think a brand can take on its own personality, given the right approach?
Rand: Yeah, I don’t think it’s very important to have a single individual representing a brand at small scale or large scale. I think in the venture-backed world that I was in, which was growth-focused, it’s actually probably a negative to have a single person who’s strongly associated with the brand, and I think that’s something in the later years that I was at Moz, I was actively working against, I was trying to build up more of a cache of different personalities and people, and more of a brand association. In fact, Moz, I would say was surpassed by a couple of competitors who didn’t have that same personality-driven brand focus. I don’t think you need it. And if it works for you, great. If it doesn’t, don’t worry about it.
Dan: Presumably as well, it needs a certain kind of investor to operate the way that you would approach a business, the way that you’re encouraging other business owners to approach their businesses. Does it need an investor with a similar mindset?
Rand: Yeah, I think you have several options on this front. One is to find investors who are aligned with your model and your structure. Two is to self-fund, you know, bootstrap, a lot of people can build services businesses from home, right? Almost every consultancy and agency is built without investor backing. Three is to look at some of the more alternative, emerging types of funds, right? For folks in my space, there are places like indie.vc and Village Capital and TinySeed Fund, which full disclosure, I’m an investor in, those types of structures are less about massive growth is the only way and more about, “Hey, can you build a profitable long-term business? And can we all benefit from that?”
So I’m excited about that trend and movement. I think there’s going to be many more of those, I think in 10 or 20 years, you’ll see the look back across the fund performance and capital allocation will Change because of how relatively poorly venture capital performs and how I think these profit long-term focused funds will perform. There’s still the tax problem because they’re taxed in a different way. And then the fourth option, which is pretty exciting now is crowdfunding. Everything from Patreon, where individual creators are getting funded by their fans and their audience, to Kickstarter and Indiegogo, and self-hosted crowdfunding options. That’s a pretty exciting world, too. To have the people who want your product and are excited about you building it to fund the thing before you build it so that you can get it to market. Yeah, we actually considered that very strongly for SparkToro, just because there’s a lot going for it. We eventually decided to do private investors, mostly because we had a lot of very kind offers around that and it helped us get to funding much faster, but I like crowdfunding a lot, too.
James: One of the things I was curious about, correct me if my research is wrong, but I believe you have supported the charity GiveDirectly? I’m so familiar with their work, and one of the things I love about their model is the way that it’s trying to create a baseline of efficacy. If you can’t be simply giving the money to a poor person, what on earth are you doing? You need to start again, because that should surely be the minimum. In that sense, to me, it indicates a kind of trend that you need to be able to prove your purpose, you need to be able to demonstrate how you’re doing something that sounds nice about it, and you’re actually proving that you’re doing the most efficient thing possible about it.
I wonder whether that’s something that you perhaps see in the way that people are thinking about charity and charitable giving and whether that’s something that companies also try and particularly look for in terms of CSR type relationships?
Rand: Yeah. I mean the whole challenge there is GiveDirectly – for folks who are listening, who aren’t aware, they basically just give cash to people without means. They started their pilot programmes in a couple of African countries, including Mali and Kenya and Uganda, and essentially, the idea was, “Hey, let’s just what happens if we give people a hundred dollars a week for six months or something, and, and let’s see how that performs.” And then Canada has run studies on this, Denmark’s run studies on this, Portugal’s run studies on this and a bunch of other countries have tried this. In every case, the expected outcome, especially from people of a certain political persuasion is like, “Oh, well, they’ll just waste it on alcohol and drugs or bad things”, and of course, the reality is they invest in things like housing, healthcare and education. And then of course, what you get is that money going into the co-system and returns massive dividends, right? Because those people spend that money in their own communities and then other people get opportunities to build businesses, et cetera. So, it’s extremely positive.
The reason that GiveDirectly, as opposed to many other charities, have to prove themselves is because people just don’t believe it’ll work. They have this incredibly strong incentive to have to show their progress and do so in an extremely rigorous way because they know they’re going to be picked apart by primarily political conservatives, at least in the Western world, who believe that giving money to poor people is a bad thing, because if you’re poor, you must deserve to be poor. So, of course, GiveDirectly has to prove that their model works in this way, and I think it sort of sucks, right? It sucks that this belief outside of data exists at all, and also it’s in a lot of ways, part of that same propaganda we’ve been talking about from the last 50 to 60 years, right? Where, as people have become massively wealthier and income inequality has been exacerbated, you have to create that propaganda around who’s good and who’s bad, and why are they good and bad? This stuff is all connected, right? One of the reasons that I love GiveDirectly so much is because they’re fighting against that foolish belief that if you give people without money, money, they’ll do bad things. Yeah, I love their mission. I love how they’ve been acting. And of course this past year they opened their first US operation, which is truly an indictment of the world’s richest country, but the reality is, here in the United States has been extraordinarily successful as well.
I was very excited that a lot of events and conferences and businesses that I help out will send a check to GiveDirectly instead of paying me, so I was able to get them a nice amount of money this last year.
Dan: That’s awesome. Well, I think we’ve taken up quite a bit of your time already. This has been absolutely fantastic. I knew you were going to be sensational, but you have surpassed even my lofty expectations. So, thank you so much for your time. James as well.
Rand: Thank you so much for having me. It’s great to be here. I look forward to joining you again in the future where we can chat about terrorists taking over the US Capitol and the lizard people that rule us all.
Dan: We are going to have to get the ball rolling with Evil Turing, too. I snapped up the domain while we were chatting. We’re on our way. So thank you so much, guys. Really, really enjoyed it. Take care.
Rand: Take care.
James: Thank you very much.