How to Find Consumer Startup Ideas transcript

really awesome consumer experiences for the masses >> start high-end. Yes. >> Like air travel. >> Yes. >> Used to be very high-end and now it's awesome that so many people in the world can afford to fly on a plane. Like everyone should have the same quality healthcare that a head of state has. >> Yes. Yes. >> And I think that's going to happen. That's doable. >> This is Dalton plus Michael. Today we're going to talk about AI and consumer startups.

Y we're familiar with consumer. We did a little bit of that. >> We were consumer founders back in the day. We were when we had no gray hair. To break this down, we were having this conversation that was really interesting. I think that the starting point was when you said back in the day, just putting something online made something 10x better. And so, you know, often times when we think about kind of new products, it's kind of taking something that's like really, really high-end that the rich people get and giving it to everyone.

That's the Clayton Christensen kind of disruption. And you made this point that for so many things, just putting this experience online or on the phone made it delivering a premium experience to um everyone. Flush that a little bit more. >> Yeah. when you're competing with nothing, if the alternative is >> paper >> is [laughter] non-existent. Um, it is much easier to blow people away with the experience. And so for me as a consumer, the first time I used Napster, >> yeah, >> I was like, okay, so this is all the music and I [laughter] can and and it's free and like every C I don't have to buy CDs and the alternative was like CDs were expensive. >> Yeah.

I can't stress [laughter] enough, I know, I know no one remembers this and we're getting old, but I can't stress enough how awesome it was to be able to listen to music without CDs. >> Well, to be able to pick the two songs you wanted to listen to and not have to buy 15 songs that you didn't, >> it was incredible. And the same thing with with Netflix, with video streaming versus going to a video store. >> Oh my god. >> I can't stress >> how much better it was unequivocally. >> Yes. >> In every way.

Well, do you remember before you could watch movies on your laptop and you're just sitting here like, I have a laptop. I have a screen. On this screen, television screen, I can watch movies. On this screen, you're telling me that I can't watch. [laughter] >> Yeah. What is going on? >> And you know, something like mapping, like Google Maps, because it was competing with nothing, right? Like there wasn't >> paper. >> So, so you you could have on your phone a real time dot that shows where you are in the world and you would never get lost again.

Again, I know if you're used to this stuff, you're like, "Yeah, whatever. I >> think about what that was competing with. There weren't like 10 other startups doing the same thing. They were competing with nothing. >> Sometimes you would just write directions down on a piece of paper. >> Yep. >> Like left at this street, right at this street d. And then you'd have to like just do that, right? Good luck. >> So I think that perhaps the challenge is we're transitioning.

And I think the analogy that I tried to draw is that, you know, when you see a country industrialize and go from kind of a farming economy to a more industrial economy, you get this massive increase in GDP, but you can't like you don't get that over and over again. Like once the farmers left the farm, that that's the game. And one might argue once these kind of consumer experiences, directions, travel, like da d the things we've talked about move online once the bar to making something in those spaces better goes way up. >> Yep. >> And so if you're a consumer startup today, you might feel pretty shitty because it's like you're like, "Hey, Michael Dalton, you just had to put it online." You know? >> Yeah.

[laughter] I think the way I would riff on that is to say we did have it much easier [laughter] >> because we were competing with nothing. Like the internet was a new thing and there wasn't much on the internet. >> Well, and putting things online wasn't like it was like the easiest thing in the world. >> You invited invite invented streaming, dude. >> Like there wasn't like people >> no >> talking to their fam to the chat.

[laughter] >> Didn't >> you guys invented that? So, it's much harder for someone new to come up with a better version of Twitch. >> No, >> because you guys didn't have to compete with anything at the time. >> So, they're now startups who are like, and I I would have been this. I don't know about you. I [ __ ] hate this B2B SAS stuff. Like, I don't want to be doing these like AI is this opportunity to build great consumer startups?

How should I use it? How would how would we tell them to think about this? I think that the most reliable source of great ideas that we saw over the years is to look at what the most premium experiences in the world are that people with infinite resources have. >> Yes. >> And use technology to make them available to everyone. >> Yes. >> And I would argue that is kind of technology in general. Like we get to live like kings used to live. >> Yes. >> In a bunch of different ways. >> Yes.

And so if you can build a technology that takes something that is seen as just super premium and way way too expensive to be practical >> Yeah. >> and bring it to everybody in a cheap way, I think you're going to have some success. >> But I would argue this is tricky because I would say that, you know, we started our companies in our 20s when we were internet users, but we could easily see the things that weren't on the internet. >> Yep.

And so if you're in your 20s now, seeing what a hyper premium experience is, that's a little bit harder. That's not just that's not just around like you you might have to search for it a bit harder. >> How do you think about that challenge? I would think about what are the things that people care about the most that put the most money into. And so one just to give some specifics here, I think healthcare is a really big trend >> um in the in the modern age.

I think there's still room for improvement to make healthare experiences way better. If you've ever, you know, been to a hospital or interacted with the healthare system, >> it's not hard to see that there's room for improvement. >> Yes. >> And I think the thought experiment is what medical experiences are the most premium in the world? Like what kind of health experience does a head of state have? >> Yeah. >> Like how do they interact with the healthare system?

Probably different than most people. And can you give whatever that experience that a head of state would have >> to everyone? I think that's a really good startup idea. >> I would kind of take that one step further. If you're interested in an area, let's say healthcare, >> probably the first thing you should do is try to figure out what is the most premium version of it that you're not going to readily have access to.

Yep. >> You should kind of assume you don't know what it I mean depending on how you grew up, but for most people, you should assume what you're getting isn't premium. I might argue the trap might be to start from what you're getting and try to make it 10% better. >> Yeah. >> And the opportunity might be assume there's an ultra premium version you don't know about. Go find it. I remember I had this experience. I need to like edit some of the details, but I needed a doctor [laughter] for for for an injury that I had [laughter] >> and it was really really hard to get one who is good.

And then I talked to a rich investor. I know who you're talking. I remember this. >> And they were like, "Oh, there's this whole other thing over here." And like for more money, but not crazy amount of money, you can have this like experience. And I was like, "Oh my god, I would have never known." Most people don't know. But then having that premium experience, it was like, >> "Oh, like the normal visit to a health system is not what this is like." And so I think you kind of have to dig.

And and you pointed out that that Brian Chesy at Airbnb, he kind of has a >> Yeah. He would give a talk at YC and I think in a nutshell what he would do in planning meetings like internal Airbnb planning meetings >> is to is to take whatever the idea was or the experience was. Yeah. >> And then as in the brainstorm say okay what's the fivestar version not the fourstar okay what's the sixstar and so for instance um he would talk about checking into an Airbnb.

Yeah. >> You know you show up and the app gives you access and whatever. Yeah. And so, you know, maybe the the six-star experience is a car meets you at the airport >> and takes you there >> and takes you there. Maybe a sevenstar experience is they hold a parade for you. [laughter] >> Maybe for some people, >> maybe the 11star experience is there's a parade and they put you on an elephant. They march you down down the street from the airport to your Airbnb.

And again, I I don't believe they've built that feature yet. Um [laughter] but at least for the sake of the brainstorm, it helps to stretch your brain to imagine. >> Yes. >> To think outside the box of what increasingly uh premium experiences are. Well, I want to extend that analogy because I think that one thing I want to communicate is this idea that you might not have to invent these experiences. They probably exist.

It's probably just that they don't scale very well or they're very expensive and so they're not widely available. But like often times you don't. I mean, Uber didn't invent black cars, >> correct? >> And like I remember when Uber Black first came out and I was like, as a kid growing up in New York, people who drove in black cars were like >> Yeah. >> here [laughter] and I was here and and like I don't even know how like how would you even do that?

[laughter] Like I the subway I know a taxi I know like I don't even know you can't knock on the door like you can't. And when Uber basically was like, "Oh, you just click a phone a button on your phone." And one of them I was like, and it was so funny because I remember people being like, "It's more expensive than a taxi." I'm like, "And it's better." [laughter] Like, it's also better. So, and you know, back in the day, you used to hire a driver and then buy a car and then they would drive it.

Like, it's like it's way less expensive than [laughter] that. >> Yeah. And so what's interesting though is that those opportunities I think are floating around today. I actually think AI can facilitate more of those experiences, but like I worry that people might just have to use a different part of their brain. Like it's it's it's different. [clears throat] >> Um some of the folks in the audience might be like, "Yeah, yeah.

That's what my startup does, guys. Yeah, yeah, yeah. >> But let me let me double click on that." >> Yeah. Unfortunately, I feel like I see a lot of consumer AI startups that try to replace things being done with humans with like chat bots or voice agents. There are cases where that might be better. Like for instance, um >> I don't enjoy calling in to certain places and being held on hold for an hour. So, if you could pick up the phone immediately and fix my problem, okay, you know, check.

But the issue is that a lot of the experiences aren't actually that much better than working with a human. No. >> And that the pitch that the founders have is that it's saving money >> and not that >> or time or time. >> And not that it's 100x better. No. And that's my issue like like my theory of what will cause really big consumer companies to come out is the same kind of like >> magical feeling that we felt with these 100x better products that that have come out.

And I don't think that's by sort of approximating a 95% as good version of uh of what humans do. And again, like last thing on this, it's like when I interact with someone over email and I'm like, "Oh man, this is so horrible. This is probably someone's open claw I'm talking to." >> Yes. Yes. Exactly. [laughter] Yes. >> I'm like, "Oh, this is this is horrible." And so if you're building >> Are you having a premium experience?

If [laughter] if your experience is effectively someone's like, "Oh man, I think I'm talking to a claw. This is, >> you know, unsubscribe, you know, that is not what we're talking about. That is not a premium experience." >> Well, and and what's funny is it's not a premium experience of the receiver of the email, but it's also not a premium experience for the sender of the email. And that's not talked about enough. If you're quietly just [ __ ] on everyone you're trying to communicate with, [laughter] that's not good for you.

Um, it's like, "Oh, but but you answered your email so fast." That's like, "Yeah, but everyone you're talking to hates you." That's not [laughter] That's not good. So, I'd like to play a game. We have a list of products that have been very popular in the last 20 years that are consumer products, and I would love us to kind of brainstorm a little bit about what 100x better could be. A weird product for me was Kayak. I would say that um Kayak was probably the first web 2.0 product that I used that like kind of weirdly just completely blew me away.

Y >> the product right before was like airplane sites. Airlines had websites so you could go one by one and search each one of them but you couldn't do that. And the product right before that was like you called a travel agent and like they couldn't search all of the like. So, I just remember the first time I could be like, "Here's every flight between these two places." And then I can drag this thing cuz I want to leave at like 400 p.m. and I will just see those flights.

I can sort by cheap and expens like that was mind-blowing to me. And now, as a more um experienced traveler, you know, if you're going to make some chatbot that automates that process of finding a flight, like like that's not like you're not give me the magic. I think that the magic comes from like what is an incredible trip if it's a business trip or what is an incredible vacation. You know, I see founders who are like, "Oh, the AI can create my itinerary." What happens if you had to be responsible for me having an incredible trip?

Is a premium experience to hand you an itinerary and say, "No, [laughter] >> I've gone on some incredible vacations." And the premium version of this is um actually this term I learned from No Reservations and Anthony Bourdain is this term called a fixer. And it's literally a human who is from that place you're going knows it extremely well and helps you do everything you want to do. >> Yep. >> And doesn't just like do the things that you say like they know the space really well. like actually you don't want to go there, you want to go here or like actually d and like or you're not accounting for the fact that you're going to have jet lag.

So like they're incredible. When you go on a vacation with a fixer, >> you're having a 10x better vacation than other people around you. even when you're like buying the same stuff. Like I remember I had a little microcosm of this experience when I was traveling to Bolognia and I was talking to some founders and we went to this restaurant my wife and I and we had a mediocre meal and then the next day the founders wanted to go to the same restaurant and I was like we hated that place and they were just like it's like one of the best restaurants just let us order.

And we went back the second day and just ordered different stuff and it was one of the best restaurants and I was like oh like oh I see. And so to me, if I were trying to be in the travel space, it would be like, I mean, when you're rich, you get incredible vacations. Like, you get this personal experience. If you could simulate that for every pe for everyday people at a reasonable cost, way above and beyond kayak. >> Way above and beyond.

What about you? Like, is there is there like a can you imagine a premium version of a product that we all know and love? >> I think one that I think about a lot is uh is fintech. and I funded a lot of fintech at YC. I funed Brex and you know lots of experience. One of the things that I that I noticed >> um setting up Standard Capital and >> uh what have you is I've interacted with what the high end >> of a banking experience is.

And this is an example for what you talked about earlier is I don't think most people >> understand [laughter] what it's like yes >> to have a really good banking experience. humans will come to your office and [laughter] >> so effectively the super premium banking experience is you have a person >> Yeah. >> who knows you and knows your life story >> Yeah. >> and is very senior at the place they work >> and can do a lot of things >> and whatever problems you have or whatever help you need with someone you just like text them [laughter] >> and they make stuff happen.

Yes. Um, again, let's use a thought experiment. We don't need to talk about me, but imagine if you're like Elon. >> Yeah. >> And you're like, "Hey, I need to do this like banking thing or fintech thing." Yeah. >> He would just like text someone and then they make it happen. They don't say, "Hey, go fill out this thing or go sit on this website or go hold on phone for a long time." >> Bingo. And so my whole thing about fintech is I think you could make that type of experience >> accessible to way more people.

Yes. And it's the opposite of my credit card mysteriously got declined or I have this question and I don't know how to answer it or I'm gonna call into a phone tree and talk to a robot. Again, I am personally not convinced that tons of AI automation that remains faceless and unpersonalized is actually the move. In my mind, what AI allows is for infinite personalization. And like if you know the web 2.0 mobile allowed for kind of access and for me to be the kind of primary tool user.

It's weird because it's not just someone who's an expert. Like I like what you said they know me too. Like they're an expert in me. >> Yeah. Cuz I [laughter] don't want every time I interact with a bank it to be like another rando customer support person. That is not a premium experience, right? >> No. >> I think that there's two things that come to mind when it comes to banking that's just like so funny. And I remember, you know, we had a relationship with a bank during our startup and then we continued um using that bank afterwards as for private wealth.

And I remember there was a moment where it was kind of like my parents needed some banking stuff. They needed accounts. They needed some setup to it was just they just they were like, "Well, what's your mom and dad's phone number?" [laughter] >> Can you imagine like a a big bank doing that? >> No. And literally like I would talk to my dad and mom every once in a while. They're like, "Oh yeah, like we have quarterly calls with your banker about our thing and D and I'm just like I didn't even know that was happening, right?" And so to me it's like I I just oppose that to the oh when you're traveling and your card doesn't work because you didn't tell your bank that you're like trying it's like [laughter] you know you're just like >> and and again what we're trying to say is you could just do that audience like like no one is stopping you from doing this thought experiment. >> No. and offering those experiences with technology and build an amazing business doing so.

There's no structural reason you can't offer that super premium experience. >> Well, and and I would argue that AI makes the business that wouldn't work before AI work after, right? These things that we're talking about fundamentally wouldn't work before. And if you're kind of still stuck in that mindset of like, oh, well, there have been a bunch of different kayaks and none of them worked. It's like you're not getting it.

Like >> you're right. On one hand, like making a 10% better kayak is not correct. On the other hand, what would amazing be? >> Yep. >> What would amazing be? >> And again, shockingly, I think a lot of people will work on a startup for years and not have an answer to the question of what >> what is an 11star experience? At least have the thought experiment. Well, and it's funny because, you know, just to bring it back to Twitch for a second, like the 11 star experience, and this just shows how old it was, was you can make content online and get paid.

Like, that wasn't a thing. It was it was that basic. >> Maybe to riff on one of the things I think about a lot is >> we are products of the school system, of the education system. >> Yeah. >> And I think, you know, I went to public school. Yep. >> So, I'm a product of the the Texas state public educ. And again, I'm a fan. There's not >> Yeah, it it worked out. It worked out. >> It worked [laughter] out for me, but like, >> you know, there's room for improvement, I think, is one way to say it.

And when you think about what the design challenges are of building an education system, >> it's you have to serve everybody. And a lot of the weirder parts of the product of being educated by a society >> is the trade-offs they had to make. [laughter] >> Yeah. Yes. Yes. >> Like we were all experiencing everyone. >> Yeah. But we went through a one-sizefits-all um education experience >> and there's clearly room for improvement and there are people that have a lot of resources that I think are able to have very personalized education experiences. >> Yes. >> Right.

And >> at every level. >> At every level. And people watching this, you could just go do that for every like we know what good looks like for education. >> Yeah. I think everyone will have a super personalized awesome educational experience in the future. I agree. Right. I agree. So to wrap up, I think that one we're trying to give you a hint. Consumer with AI is just starting. Like so many of these experiences have not gotten better yet.

And so if you're in the consumer mindset, welcome to the show. This is a great place to start. And then I think too, yeah, you might have to use your imagination to find some of these ideas, but also if you just assume that everything you do, someone's doing it 100x better right now and you go look for it, you might find it, you know, it's it's maybe not being advertised, but it's also not really hidden. >> Y, >> this is an area where some research could really open your your mind.

You know, if you've got a rich friend or a rich friend of a friend, like maybe you just ask them how do how do they get a tutor? How do they travel? How do they and and not so that you can just replicate it, but so you can understand what great could be and then maybe you can for how to deliver it to everyone else. >> I think the same thing goes even for entertainment products where maybe I have a less clear idea about what 100x better looks like.

Yeah. But um when you think about it, Tik Tok >> is a very sophisticated algorithm >> and what you all are competing with if you're trying to do a consumer product is a black hole for human attention that is now many years in not [clears throat] just Tik Tok but Facebook too, >> but they have all the content. They already know kind of what you like and they can siphon >> hours a day from a human's attention. And so you have to be way more compelling.

Yeah. >> Than that. And this is very different than building a consumer product 20 years ago when there was no Tik Tok. There was there was nothing else competing for these hours per day. >> No. >> I mean, you make a really good point. One, rich people are sucked into social media just like middle class people, just like working class people. So like I I have never seen a rich person I mean maybe I'm not rich enough.

[laughter] >> There's always another level on Twitter. >> Basically, what can we learn? What can we learn um from Trump and from Elon? I [laughter] think it's that using X is the most premium experience in the world and that >> with infinite wealth you would still choose to use spend a lot of your waking hours on that freaking website. >> Literally that's the [laughter] is the highest. >> Yeah, Trump loves it. So yeah, >> but if I had to riff on it a little bit, I would be thinking about just the other things that bring joy to people's life when they have wealth versus I think for a lot of people, Twitter is their you like the other things around them are not going great and Twitter or fill in social media product X.

I think sometimes people just kind of frame these things as like they're all they're just all harm no help, but people use them because they're extracting joy out of them. >> Yep. >> And so if I were to even think about how to attack this, I would just be like, I probably can't make more addictive algorithms, but can I produce more joy? >> Yeah, >> I don't know how I do that, but like I like rich people have a lot more things that produce joy.

Well, again, my riff on that would be cool inerson experiences. Like, it'd be hard to fight fire with fire, but building a more addictive social media app, >> but those same people we're talking about, they also like to do inerson stuff. >> They do. >> And and incredible. Incredible. >> So, trying to build a more addictive version of X sounds really hard, but >> having more in-person experience type things. >> Yeah. >> I want to keep this going.

I want to do two more. >> Okay. And and and I'm going to give you the choice and I'll take the other. Amazon and Door Dash. >> I'll do Amazon. I think >> All right. Go ahead. What What is What is >> So the problem the problem with Amazon is it has been SEOed to heck. >> Oh god. Yeah. >> And it's just full of crap and the odds that you'll actually get a good product are very low. >> Yeah. >> And I think the high-end experienced version of Amazon is you get the best version of something.

It's like wire cutter type stuff, >> but there's a you could just ask someone, you'd be like, >> "Michael, what's the best X?" >> And you'd be like, "Oh, it's this." >> And then you have it. >> Like Amazon did a really good job of speed of getting to my house. I don't know how much more you could improve that, but man, they have a crap problem. >> So, I want to I want to I I don't know the right poker term. I I want to like I want to raise I want to raise I want to raise you.

I want to raise you. Okay. >> I would argue that like there are lots of Amazon purchases that I that that people do because they're trying to like maintain something in their life, maintain their household, maintain their wardrobe, maintain whatever. I wonder if that whole maintenance thing could just be removed. >> Yep. >> Right. It's like not only is is this service going to pick the things that it knows is good for me, it's going to take responsibility for whatever needs to be maintained, right?

Like >> Yeah. >> Yeah. And so it's just kind of like like, oh, I don't have to, you know, if I'm clicking on Amazon, many things went wrong. >> That's a really good point. [laughter] >> Almost like uh vacuum cleaner bags. Is that what you mean? Stuff like that. >> Yeah. Yeah. It's just like the things that should be in my house are there. I will tell you like, you know, as as a rich person, I've set up more and more things like that.

And it's really weird to just like the the best knowledge I can give you is like anything you reach for that like there is a thing there. [laughter] Like it's like, oh, oh, oh. And and someone else thought about it. Well, maybe the way I would riff on this if I were doing office hours with a founder Yeah. would be >> if you go to like the Four Seasons or a high-end hotel. >> Yeah. >> What things can you take for granted?

Yes. And offer >> those things in someone's own home. >> Like, how do you make living in your house? >> Yes. >> Just like all the goodies you get from a really high-end hotel. That's probably the the thought experiment >> I would that I think that's amazing. I think that if I were to take Door Dash, the ultra high-end experience or a ultra high-end experience is having a personal chef and having a personal chef who can customize what you eat, how you eat, the the health level when it's available to the point where like you don't participate in the food system [laughter] like like you don't like you don't like like I'd argue there's like two levels of food system.

There's like the grocery store and then there's like the restaurant and then there's just a third level is just like you don't even interact with those levels of the food system [laughter] and you know hiring a chef is expensive as hell and then like making sure they're good. They know who the but like a 10x better than Door Dash. Like Door Dash knows what a lot of people in America like to eat and like Door Dash has incredible technology inside of the restaurant. >> And I think the restaurants are always trying to figure out how do we differentiate?

How do we do something like how do we not put ourselves in the commodity world? And >> I I do think this private chef thing where and it's not just like indulgent. It's actually kind of like it's healthy even like >> I think that problem is going to be solved to generalize this whole thing for the audience to make sure they get what we're trying to say. What we're trying to say >> is really awesome consumer experiences for the masses >> start high-end. >> Yes. >> Like air travel. >> Yes. >> Used to be very highend and now it's awesome that so many people in the world can afford to fly on a plane. >> Yes. >> Same with cars.

Owning a car was a ridiculous luxury experience. Ridiculous. And now you know a lot of people own cars. That's a real And so what we're trying to argue is to be inspired >> by the ideas of this stuff. But of course the point is to make it accessible to everyone. Everyone should have amazing healthare. >> Yes. Yes. [laughter] And that's so important because I think that like maybe today in our political climate it's kind of like >> it's this glass half full or like you know the pie is only so big.

So we can't give those amazing experiences to everyone, right? And it's like, "No, no, no, no, no. [laughter] We we can. We can." And and like we will. And and history is just a story of us doing that over and over [laughter] and over again. >> Like everyone should have the same quality healthcare that a head of state has. >> Yes. Yes. And I think that's going to happen. That's doable. >> When everyone today has a higher quality of healthcare than a president did 100 years ago, [laughter] >> 100%. >> And and so along that path, people saw what great was and said, "Let me give it to everyone." And let's not belittleable belittle the people who maybe are living a lifestyle that you can't afford.

Let's figure out how to give that lifestyle to everyone. And and that's that's very possible. All right. Cool. Good chat. >> All right. Thanks, Michael.