[Book Review] The Cold Start Problem, Andrew Chen

Two-line summary

5 minute read

If you've ever wondered how Facebook superseded Myspace, or why some people choose Uber over Lyft, the answer lies in Andrew Chen's "The Cold Start Problem". Through its rich collection of tech history, this read offers compelling reasoning on how startups generated the network effects that propelled them into the Silicon Valley giants they are today.

My rating: 3/5 stars

Table of contents

• Synopsis
• Valuable takeaways
• Biggest pros
• Unanswered questions

Synopsis

Right off the bat, Chen introduces the Cold Start theory - a framework comprised of five stages that describe the lifecycle of network-based startups. The book is henceforth divided into five sections, one per stage. Every chapter greets the reader with new concepts, using case studies to give colour and understanding to respective aspects of the theory.

The first stage - the "Cold Start" - details the inception of startups with respect to their most atomic grain. Tinder notably began its atomic network with a single fraternity, replicating the success of one party in a domino effect of subsequent parties. Similarly, Facebook began in one university and Uber began in one city, and so on. Each example is used to demonstrate how the Cold Start theory generalizes to any app with an underlying network.

The examples are not limited to current tech; in fact, there are captivating recounts of the very first networks as far as credit bureaus in 1754 BC. As a 90s baby, I was amused to go behind the scenes on pieces of history that I'd lived through but of which I only had a vague understanding (i.e. the rise and fall of Internet Explorer, the inception of the App Store, and what ever happened to Google+?).

Valuable takeaways

The resounding common thread that ties this book together is the idea of the atomic network, the smallest possible self-sustaining version of the product. Moreover, if the atomic network is executed as a repeatable strategy, it is therein that the product may be driven to the tipping point that lies between the cold start and its escape velocity.

It was also valuable to learn what to do through the means of what not to do. There were important lessons on the value of network strength over building features, and further that network density beats network size any day. It is particularly vital to exercise this knowledge before the tipping point, since this is the period where the company is most vulnerable to becoming a self-reinforcing destructive loop.

Finally, the case studies on Uber and Google illustrated the David and Goliath dynamic: how large companies create defensibility versus how startups dethrone incumbent competition.

Biggest pros

Chen's ability to connect common, recognizable experiences to industry terminology is what I enjoyed most. Like many millennials, I'd experienced events described by the case studies firsthand and yet had not truly understood how they came to unfold. I had known, for example, that Google+ had entered the social media space with a bang and then quickly fizzled into irrelevance, but never understood why until this book. I'm now able to exercise terms like "flintstoning", "context loss", and "preferential attachment" to describe the everyday phenomena surrounding the most prominent apps of our time.

If like me, you've worked on a team focused on building a network, you'll also enjoy the overlap and relatability between your challenges and the ones described in "The Cold Start Problem". The mark of a solid framework is that it generalizes well, and as I reflected on the products I'd worked on in this space over the years, I consistently found uncanny parallels.  

I'd also say that the writing style itself made this a great read. It's jam-packed with information, yet light in its delivery, interlaced with funny tidbits of excellent tech trivia. Who knew that YouTube started as a dating site, or that Instagram only had thirteen employees when it was bought out by Facebook? Chen balances theory and storytelling effortlessly, immersing the reader with first-person retellings that read like a friend telling you about their "good old days". I found myself deeply immersed in the war room stories about Uber's early days, feeling the palpable energy that would have been as the narration moved from one anecdote to the next.

Unanswered questions

A recurring theme in the book was Uber's referral program, a two-sided payout for drivers to refer their friends onto the platform which cost the company hundreds of millions. Paid acquisition is often discussed as a way of kick-starting the "hard" side of the network but in Chapter 18, Chen goes on to say that 'while it is tempting to throw money at the problem [...] viral growth builds on the power of networks to acquire users, free of charge.' 

Throughout the book, I wrestled with the role of monetary incentives as a catalyst to the tipping point because I couldn't resolve what the author was saying with what Uber had actually done. They seemed to be at odds with one another. I'd be curious to explore this aspect of the Cold Start theory a bit further - at what point is throwing money at a problem appropriate? Poorly timed? Excessive?

All in all this is a page turner and must-read for any team hoping to build a stable, thriving network. As always, would love to hear your thoughts and feedback in the comments below.