That's exactly what happened with this piece because the norm of entrepreneurship, especially in startups, is that you're dealing with failure or near failure. You're like constantly trying to thread the needle to live another day. And so you end up in these really difficult situations that almost never get shared. And so I was in this really unique opportunity, just like psychologically, whereas I was in a difficult situation but it wasn't a bad situation of my own making. So I don't have any ego about just explaining the facts.
Hey there, I'm Larry Weeks. Welcome to the Bounce podcast. My guest today on the podcast is Tony Stubblebine. Tony is the CEO of Medium. He's also the co-founder and former CEO of Coach.me, and he spent a career in the intersection of technology, behavior change, and digital community. And before stepping in as Medium CEO, Tony was already a major force on the platform, running some of its largest publications, including Better Humans. And I knew of Tony through Medium before he became CEO, through his writings and through his programs on Coach.me, which were phenomenal. And I remember the announcement when he took the job and I thought to myself, well, perfect. But I, like probably everybody else, had no idea what was happening at the time until his recent post hit my inbox just last week. The post, which I encourage all of you to read, is titled 'Fell into a Hole and Got Out.' It's a great title, but it's a write-up of what happened at Medium. And the article is one of the most candid, insightful, and somehow he makes it succinct stories I've read about what happens inside a company on the brink and what it takes to pull it back. So, I immediately reached out to Tony's team to see if he would come on the show and talk about it. And I'm very grateful he did. This is a peek inside of what it's actually like to take over a company losing millions a month, hemorrhaging users, and facing potential shutdown, and the strategic and psychological work required to turn it all around. So on the show, Tony shares how he and his team built the ladder out of this hole, balancing brutal financial realities along with the challenges of restoring quality and purpose to the platform. So we talk negotiations, we get into a little bit, not too much, governance and recaps, cutting cost. We get into the human side of letting people go along with some great advice on hiring Tony gives. We discuss why Tony now thinks the business model comes before product, and he gives some great big picture advice for entrepreneurs, and then we get into his personal practices that kept him sane through all of this. So, some great advice here, but it's also when you listen to Tony, you have an example of what a thoughtful leader is, and it's also proof that you can be a good human and make very tough decisions and do very hard things. So, without further ado, here's Tony. Tony, how you doing?
Good. Do I sound okay? Do I look okay? My head's — I can match your head size if you...
I'm too ugly to get that close, that's for sure. Can I tell you the funniest thing I learned? There's a group of people that I worked with at one point who I never met in person. It took me a long time before I met them in person. And they told me I had more charisma in person, and I was like, 'What are you talking about?' And it turned out that I was sitting so far away from the screen that my head looked small, and they were reading that as low gravitas. And so in our new era, a big head on Zoom is the executive power move. The thing that cracked me up is that it had never occurred to me that having the biggest head on screen is a Zoom power move. I'm going to start zooming in. Start revealing my pores, I guess. Wow, that's some behavioral psychology right out of the gate, Tony.
Right out of the gate. That's how I love it.
I had James Altucher on some years back and I told him I hated editing stuff. He said, 'Larry, you should leave as much of this stuff.' I said, 'What are you talking about?' He said, this is early on. He said people love the humanity or the totality — he said it's a fly-on-the-wall kind of a thing where you're behind the curtain, you know.
I was early in the development of podcasts. I had worked for the startup Odeo, which is what Twitter spun out of. But originally we wanted to do podcasting, and so we were looking at what we thought were kind of two examples of great podcasts. One, this old MTV VJ Adam Curry got into podcasting, started referring to himself as the Podfather, and every podcast he did was incredibly well produced because he came from media. He knew how to do that. But the podcast that blew all of our minds, because we were startups and we didn't know how startups work, were these two venture capitalists, Venture Voice, who would record the podcast driving in their car down 280 with like traffic noise going on. And it was the opposite of well produced, and it's exactly what James Altucher is telling you about — like, yeah, it's actually to be the fly on the wall of something interesting, which, fingers crossed, we're going to do today, is really special even if it's not perfectly produced.
Yeah. People love you for your vulnerabilities. Maybe that's writ large, you know, in these kind of conversations.
Yeah. Go ahead. You got to deal with my voice. I mean, I've got a face for radio and a voice for writing, and that's how I ended up the CEO of a writing company. So, we're going to do our best with the material.
Your voice is fine. Coming at you Z107, we are live. So, man, what a great article. Thank you for coming on to discuss it. You got to be getting some great feedback here.
What I told my team is like, I wish I had a nose for what would resonate with the mainstream, but instead I have a nose for what's going to resonate with other entrepreneurs. And I was like, that's exactly what happened with this piece. Because the norm of entrepreneurship, especially in startups, is that you're dealing with failure or near failure. You're like constantly trying to thread the needle to live another day. And so you end up in these really difficult situations that almost never get shared. And so I was in this really, I think, this really unique opportunity, just like psychologically, whereas I was in a difficult situation but it wasn't a bad situation of my own making. So I don't have any ego about just explaining the facts, right? Because I don't have to be like apologetic about all the problems that I created. I just signed up. There were problems, matter of fact about it, I signed up to fix them. And so something that happens relatively frequently is a startup gets into a really bad spot and needs to get its way out. One of the ways to do that is to go restructure your deal with your investors. And it turns out there's a way to do it. And I didn't know that going in, but I learned it. The Medium ethos is if something interesting happens to you, you should write it up and share it.
So for the audience, real quick, I want everybody to read this. Don't care if you're founder, employee, what have you. 'Fell in a Hole, Got Out' — it's Medium's recap, financial turnaround, and you wrote about the difficult path to health. I just wanted to say it was great because you give a high-level overview of the challenges, strategy, and the outcome. I want to talk about the ultimately happy ending. Okay. But when I talk to you, the goal here is I want to get both the mechanics, strategy, but also the psychology, you know, the real world of what you did and some of the psychology around it to glean as many lessons as we can for the listeners. So my default reading of it was the turnaround side — okay, here's how bad it got. But my default was really focused on what you did to turn it around. But there's a huge benefit, Tony, to describing the hole, which you did very well, because you could flag — like you said earlier — you could kind of flag the founders and startups, there's so many of them, about the holes to avoid, number one, digging, or you know, you set some traffic cones around and say, 'Hey, look for these things.' I'm assuming you just wrote from your heart, but did you have this in mind — 'I'm writing this for the next founder like me'?
Yeah, one of the like really special parts of the story, because it's so meta about Medium itself, is it's a Medium blog post that spelled out the recipe that I used. And so here's this VC in 2013 who wrote out kind of the key observation about how to get it done in the situation we were in, because there's sort of a default way to do a recap and then there's some like secondary and third ways. So like I knew we couldn't do the default way. The default way is, you know, essentially your existing investors have gotten tired of you, don't want to support you anymore. You find a new investor and you say, 'I'll give you whatever terms you want because if you don't give me money, the company's going to shut down.' And so that new investor comes in and says to all the other investors, 'I'm willing to fund this company, but only if I get a massive payday from it. So either participate on my terms or this company's going to shut down and get a zero.' And that's essentially the whole leverage of these. It's essentially the startup version of bankruptcy. It's the same kind of concept here. You want to keep going, but you can't within your current financial structure. So normally that's driven by an outside investor who just sort of calls their own shot because no one else is willing to put up any money at all. But we didn't have an outside investor because we were doing this at a time when the whole startup market froze. There had been a lot of money sloshing around because we had low interest rates, and then interest rates went up and the money just froze for like almost an entire year. The winter, which I think started in the summer of '22, is — this time this month started.
Yeah. I mean, to the point that the VCs were sending out memos to their companies saying like, whatever money you have, just plan on it being the last money you ever have. Start doing layoffs. Like, they were like, that was advice that was coming across the entire industry. I want to storyboard this. I want to back up because I've got a whole thing about recaps, which is fascinating, and I know that was a large part of the turnaround, but there was so much that had hit the fan. So let's back up. You were — if you don't mind, because I want you to tell the story — I knew you from Coach.me. Let me just say, I just loved it. I was like, this thing, man, I've read you forever. I remember you wrote something about an iPhone thing. I just, I loved your stuff. Now, you were also a big part of Better Humans, which is a kind of Medium publication. Did they reach out to you?
I think the first thing you need to know about me is that if you put a text box in front of me, I'll fill it out. And like, I just love user-generated content on the internet. And so I have this history with Medium. We'll say, first of all, Medium is founded by this guy Evan Williams, who founded Blogger and then Twitter and then Medium. This is a guy that's done like the most of anyone in the entire internet to make user-generated content — this ability for anyone to just speak up on the internet and share their voice. I think he's done more than anyone ever in that regard. And I had this opportunity to work with him back in 2005. I had worked for the startup that he was working on in between Blogger and Twitter, and it was about podcasting. It didn't really work, but we built the first version of Twitter together and spun it out. And I didn't see why I should go with that, so I went somewhere else. But we know of each other, and I always go...
Yeah, there's a relationship there, guy.
I always go out of my way to say that we're not friends because we're not friends — like, he, I don't think he knows my dog's name, which I... like, all of my friends know my dog. My daughter is lovely and very friendly, but we really like working with each other. And Silicon Valley is a relationship business because it's so like you have chemistry together. And so what had happened when he left Twitter and started Medium is at the same time I was starting another company, and he helped me start it. He was on my board. He helped me actually design the first versions of it. What you call Coach.me started out as this habit tracker called Lift, and our offices were often co-located with Medium. What happened for me is I loved the business that I was building, but I also just loved writing on the internet, and I had just fallen in love with Medium as a product. And it's where I blogged. It's where my company blogged. It's where I created a community of coaches who were writing, and then I grew that to be something bigger — actually, a huge productivity and self-improvement publication called Better Humans. And I demonstrated what I thought Medium should be, which is like, there's something incredibly valuable about giving a voice to everyone because there's value in our life experiences, and there's something especially valuable about getting professionals to talk about their work. So we were doing that in Better Humans. And as Medium, they started looking for external partners, and so I just started doing partnerships with them because I liked Medium so much. By the time he was ready to step down, I was by far Medium's biggest power user. I have this long 15-year background as a CEO, but also very notably, something like 2% of Medium's traffic was going to a publication that I owned or to my own writing.
So, you're a perfect fit in that regard.
Yeah. In that regard, I think there's something — I had never gotten my own companies to be particularly successful. So I felt like I had mastered a lot of the nuts and bolts of running a company, but it was enough to be a plausible candidate for this. And turns out that a turnaround is actually a lot about knowing the nuts and bolts about what matters and what doesn't, you know, like what contributes to the bottom line and what doesn't.
Yeah. And you had — I think glad you pointed it out — one of your superpowers you say was, and it makes sense, you wore many hats. As with these smaller scale-wise startups, you had done it all and took pride in — they were profitable. So, were you privy then before they tapped you, or as they were about to tap you? I'm assuming the hole was already dug. Were you privy to that hole before you took?
I was extremely privy. I'd say like my application process was four years long. Me in the background going, 'Ev, don't do it that way. Do it my way.' And then my way turning out to be fairly successful. And so I had just this history of, I think we should go in this direction and here's why. And then it like, it kept panning out that I had a good sense of it. So the history of Medium is, like, here you've got this guy who's this luminary in publishing online, and he starts this company Medium, which right away makes this huge name for itself on design. Like, a lot of times when we think about product development, we think about, oh, we need to invent new features or add a lot of features. And Medium just proved you could take every feature that was expected of a blogging platform, and instead of adding more, you could actually take a lot of them away and just make the ones you kept like incredibly beautiful. Like, Medium found the essence of what mattered for writing online. And it's like, for that version of Medium, simplicity was power. And suddenly you don't have to like create your own WordPress. You don't have to install software. You don't have to even set up a blog or do all of this configuration. You can just start writing. And really, it almost felt innovative at just a pure design level. And then the second big innovation was the hard paywall. That's the one where we fell into a hole, which is — Ev very rightfully put his finger on everything that he doesn't like about the internet, and which most of us don't like about the internet — the root cause is the business model. If your business model is ads, then all of your incentives are attention, and attention is the root cause of why we get divisiveness, like misinformation, like, it just... that... like all of this.
Clickbait, all of that stuff. It's because the incentives are to grab your attention, not to deliver value for your attention. It's actually — if the article is too engrossing and you don't notice the ads, then you've done a disservice to the advertiser, right?
And I don't remember — was that before you were CEO, was that the model?
I tried ads, bailed out of it. And so before I got there, you know, so the two innovations of Ev — from Ev — are first the design and then to make a bundled subscription. So it's one price. You don't have to subscribe to individual people. One price for all, everything on Medium, and let the writers participate. And so rather than go build an audience and build a subscriber base, it's like, oh, maybe I only have one thing to say, but I can publish it into the subscription and get a share based on who reads it. So no one's ever put a bundled subscription on top of a social media platform. Every prior social media platform was advertising-based. And so it turned out that this just like created for the company a, I'd call it a Goldilocks problem. It's like, okay, now that we've done this, how do we do it right? And so they tried it one way, was very expensive, did not work. Tried it another way, was also fairly expensive, but also was like even worse because the quality was lower. And I was like, kind of as both of those paths were happening, I was making the case for this middle way, of like, here's where I think the commercially valuable piece of UGC really lives, and if we can deliver on that, then we can have a business.
But along that way, you sort of fell into a hole — like, a lot of things went wrong and like a lot of expensive experiments did not work. I think also, I would say, it's really hard to innovate with a middle-stage company. Somebody said, 'Don't be a hero. Look, you're going to take this role, don't be a hero.' And then I kind of parsed out — because I'm kind of slow — but I parsed out that I think it meant, and I think what you say in the article is, don't try to invent your way out of an issue or innovate. I mean, your job is to make this thing profitable, okay? Don't come in and try to add a bunch of stuff or invent a bunch of stuff or innovate your way out of this.
There's a piece of it of understanding like, you're trying to do something heroic almost by definition, because business is hard and even in good conditions you're likely to fail. And despite that, it's worth knowing what the boundaries of possibility are. And I think a lot of entrepreneurs — and actually, entrepreneurship in the US is sort of set up — there's no real downside to failure unless you put your own money up. Like, in the startup ecosystem, you can start a company, raise money, and fail, and just go get your next job. So because of that, a lot of entrepreneurs are just like, 'I'll figure it out.' And a friend of mine said that actually might be the right psychology — just if you're the one flying the plane, fly it as fast as possible until you either reach altitude or crash into the ground. Like, you want to hit the ground at full speed. But I think in this case, the advice I got was there are actual limits to what you're going to be able to do. This is the advice I got from the venture capitalist who had written the blog post that prompted me to understand I could kind of figure out the investor side of the turnaround. And that was almost his most important point, which is the psychology of an entrepreneur is that you can invent your way out of anything, and you have to come to grips — there's something here that you cannot fix. And that's the precursor to being able to go in to the investors and say, 'If you don't renegotiate your terms, it's not worth me coming in to work tomorrow.' And that's the leverage that sort of kicks off the recap part of the turnaround.
You take the job. Did you have — was the turnaround plan kind of emerged as you got deeper and deeper in the weeds, or did you have some semblance of a plan?
I had a very detailed plan on the financial and product turnaround. Like, I was so close to Medium and I had so much experience with, you know, where to spend money to make money. You know, and I've started two companies — they weren't big successes, but they both... I always thought it was important to make — if you start a business, it should be a business — and so both of them did get to be profitable. And so like, that's always, that's my wiring as a CEO, that is somewhat rare in the world of startups actually. So that part I was like, okay, we're going to do these things, I have about this much wiggle room, I'm going to have to cut these costs. Like, roughly I knew, and we're going to have to make, we're going to have to invent some product changes, but I already know what those are. It actually wasn't until the day before I started that an investor friend of mine took me for a walk and we talked the plan out, and he believed that the business plan was plausible, but he pointed out to me all of the problems in the ownership structure. So the recap, you know, there's three sides to the turnaround we did. One was product, one was financial, just making the revenue and the cost structure.
Just for the audience, it was basically insolvent at this point, right? It was just bleeding money, bleeding cash. So you really had to get this thing to profitability, and a lot of that is cost structures. For everybody listening who's not in the business world, a cap table is — and Tony, you know, if you have an analogy, but...
I'll do my slice of the pie, like a slice of the pie of ownership.
So it keeps the number of seats of people who own a piece of the company, something like that, right? And that stood out to me was the investors had pretty much given up. They knew the state of the business. So they were like, 'You're not going to get any more money from us.'
It's like, you asked me what it was like to write this piece, and it's like there's just a lot to talk about. So we'll say like...
By the way, kudos for putting it in a condensed article, because it was helpful for me, but now as we get into it, like, oh wow, there's one side to another.
Kudos to Kurt Vonikut who was like, 'Oh, this is how to simplify the structure. We fell into a hole, then we got out.' But the easiest part of the hole to understand is just the business, right? Like, we were losing $2.5 million a month. We only had limited money in our bank account and our business was shrinking, not growing. If we did nothing, eventually we'd run out of money and go bankrupt. That was pretty easy to understand. And so we needed to pivot to a product, which for us is, you know, putting the valuable content front and center. We had to make that pivot in a way that we could grow subscribers and cut some costs along the way. That's how you make a working business. And it's not that — if you've ever played like a lemonade stand game, it's not that different than that. It's like, you need a product people want. You need to advertise it. You need to sell the product for more than it costs to make. You know, that's business. The part that I did not understand was all of the complications of 10 years of investors. So this is — I didn't understand till the day I started. What got pointed out to me by this walk with my friend Ross, who's a venture capitalist, is it would not work unless I eventually renegotiated with all the investors. And that filled me with such dread because I don't like difficult negotiations.
You were also — the governance was you were kind of not the boss. You pointed out that to make a decision, votes had to happen, and you didn't have time to play around. So let's like walk through the problems with kind of honoring your existing investor agreements. You take in money with certain terms, and in a good situation everyone's happy. Everyone makes money. But there are these edge cases you get into where you can't find anyone to come to do the work to allow you to honor these terms. And so it does force a renegotiation. Employees take a backseat to a degree that...
