How Crowdfunding Will Change The World, Part 1: Marketing (or How Growth Hacking Changed My Life)

I’ve become a very active investor and advisor to start-ups over the past two years, and I firmly believe one piece of legislation is going to fundamentally change business, investing, and entrepreneurship. In fact, I think it might actually unleash a torrent of changes that impacts the whole world in a very positive way. This piece is part 1 of a 4 (or possibly 5) part series about Crowdfunding, the JOBS Act, and what all of this means to you. It begins with how my entire perception of start-ups was changed with a single phrase.
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In May of 2012, Ryan Holiday and I had this exchange:

Ryan “Hey, I might write a book about Growth Hacking, what do you think?”
Tucker “What the fuck is Growth Hacking?”

Little did I know, this phrase and concept would come to fundamentally change the entire way I looked at the way business is done, how I invest, and my perception of America’s future.

[And yes, Ryan wrote the book, in fact, it’s out and already #1 on Amazon. Yes, it’s really good, I’d advise buying it–but only after you read this piece]

So what is? Growth Hacking is not a new way to market, but an entirely new way to think about marketing. The basic concept of Growth Hacking is to begin with a product or service that fills a need or solves a problem, and then design it in such a way to make it easy and rewarding for people to use and share. By beginning with the proposition that the product or service itself must be valuable to people, you “bake the marketing” into the product. From there, getting people to find and use it is relatively easy, because it’s in their interest, and thus they want to tell their friends that it could help too. And since it helps them in some way, so you aren’t having to sell them, the product or service sells itself because it so obviously improves their life by helping them solve a problem.

Paul Graham sums up growth hacking very well: “Make stuff people want.”

You may be sitting there thinking this is obvious. And it kind of is, especially if you grew up in the digital age. But the fact is, this runs completely against an entire century of business, marketing, advertising and PR wisdom. The flow of business has, and still is most places, like this: Identify an existing market (like toothpaste), think up a product or service that is slightly differentiated from that market (mint toothpaste), make it, then spend a ton of money on marketing/adversting/PR to convince people that they should use it (mint is the best toothpaste!). Or even more increasingly in the risk-averse large corporation world, they don’t even make a new product, they just market it differently, relying on psychological tricks to get you to buy it (this toothpaste will make you sexier!).

Here is how Ryan describes this transition on his blog:

“[Growth Hacking] is the future. Run down the list of some of the biggest brands in the world, brands that are quickly becoming staples of our generation: Facebook, Twitter, Uber, Dropbox, Airbnb, Evernote. Who built them? How did they become so big, so fast?

 

The answer is growth hacking. It was responsible for building billions of dollars in value for essentially next to nothing–faster than its ever happened before.

 

What was not used? Traditional marketing. In fact, Facebook’s only stab at it–an ad with Weiden & Kennedy–was a total and embarrassing flop. Forget Don Draper and David Ogilvy. Start thinking about Andrew Chen, Sean Ellis, Jesse Farmer, Aaron Ginn, Noah Kagan and a new freshman class of marketing geniuses.”

This is a pretty good description, but if you think it still reads like sales copy, I agree with you. I like to talk about Growth Hacking in a different way. My favorite way to describe this is to reference the Tyler Durden quote from “Fight Club”:

“Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need, to impress people we don’t like.”

That was the entire philosophy of 20th century business, and Growth Hacking is the opposite.

The history is very clear (this is terribly abbreviated, so please excuse me glossing over all sorts of detail): WWI & WWII were the culmination of the industrial revolution in America, and created a massive and very profitable industrial and manufacturing sector that, when the two wars ended, had nothing to make anymore. So they turned to the new fields of public relations and mass psychology (e.g. the ideas of Walter Lippman and Edward Bernays) to find ways to convince people to buy more things. They leveraged the rise of mess media and the post WWII baby boom, and out of that 20th century consumer culture was born. 50+ years of companies finding ways to sell the things they make, instead of making things that people want and need, and they bridged that psychological gap by creating and supporting the mass media sector through advertising, to manufacture that demand.

That world is dead. Of course it’s still here in many ways, and it will take decades for the transition to fully shift, but 20th century consumer culture is done. The icons and dreams of the Baby Boomers are not reflected in their children and grandchildren; Boomers want stuff, Millennials want experiences and relationships. Boomers care about owning; Millennials prefer sharing and access, not ownership. Boomers derive status and identity from their job titles and school affiliations; Millenials derive their status and identity from doing meaningful things that help other people, or sharing creations that bring enjoyment to their friends.

Not only that, but the effectiveness of mass media has utterly collapsed. People–especially young people–don’t believe mass media anymore, because it’s lied to them their whole lives. As a result, you can’t manufacture hits anymore. They must be earned, and they are earned my adding real value to peoples lives–this is the essence of growth hacking, and antithesis of old consumer economy.

Look, I knew all of this before the term “growth hacking” came into my vocabulary. But like all humans, until I had a word for it, I had a problem really fully capturing and expressing a set of ideas. And that is what the term “growth hacking” did for me: Growth hacking is simply the phrase that embodies the shift that was already happening, the fundamental shift in the philosophy of business from selling the things that businesses decide to make, to making things that people want and need.

So what does all this mean to you?

It means your world is changing in front of you, and many old ways of doing things will go extinct while many new ways will open up. I think the first and possibly biggest way we’re going to see this change is in what happens when the JOBS Act launches. How is this tied to Growth Hacking?

Because Growth Hacking is the philosophy of start-ups, and very soon the JOBS Act will unleash a torrent of them that will change everything about all our lives.

More on that in Part 2.