Cost-curve obsession: lowest cost to serve wins

In this episode of The Slow Hunch, I spoke with Matthew Prince, the co-founder and CEO of Cloudflare. Since 2010, Matthew and his team have built Cloudflare into one of the most important companies on the internet: powering and protecting vast portions of global traffic. 

Our conversation explores the through-line from Matthew’s initial hunch about fixing the flaws of the early internet, to Cloudflare’s present role as a foundational infrastructure provider.  

We talk about the early experiments and risks that have shaped Cloudflare’s culture, and how those small bets compounded into a truly iconic company today. Matthew shares stories from the company’s pre-IPO days, the decision to make encryption free, and how Cloudflare’s infrastructure ended up running two of the internet’s thirteen root servers. Toward the end, we dive deep into the transition from a search-driven internet to an answer-driven one, and what that means for publishers, creators, and the future business model of the web.

It was especially fun to record this one with Matthew, who I’ve known since USV’s investment in Cloudflare’s Series C back in 2013. 

Hope you enjoy!

Chapters

• 00:00:00 Curiosity vs. focus; small bets culture
• 00:02:44 Pre-IPO mock earnings calls & learning to take hard questions
• 00:04:48 Matthew’s slow hunch
• 00:05:54 The Unspam origin story: legal mindset meets early internet problems
• 00:11:16 Passing trademark legislation in Utah
• 00:13:39 Meeting Lee (via Arthur Keller)
• 00:18:00 Lee moves to Utah; building from a basement
• 00:20:02 From Unspam to Cloudflare
• 00:20:25 Enter Michelle
• 00:28:19 Realizing how critical Clouflare’s role was (the 2017 outage)
• 00:29:07 Conducting experiments at scale: how small bets can become big lines of business
• 00:31:44 Making encryption free
• 00:33:26 From brittle deploys to Workers
• 00:36:00 Cost curve obsession & why lowest cost to serve always wins
• 00:38:00 Running 2 of the 13 internet root servers
• 00:41:31 Pakistan Telecom story: local demand opens networks
• 00:43:32 Principled decisions > spreadsheets
• 00:44:40 Shift from search engines to answer engines
• 00:48:00 Longing for a quirkier web
• 00:52:56 Incentivizing creators to fill LLM knowledge gaps
• 00:56:05 Designing an open, fair market (price by scale/MAU, not tokens)
• 01:01:15 Scarcity switch flips; next-gen models hit a plateau
• 01:04:00 Google’s role: should AI overviews fund creators?
• 01:06:35 GPUs & researchers commoditize; content becomes the moat
• 01:09:00 Reddit vs. NYT: the value of original/local/quirky content
• 01:10:49 Toward a golden age of content (less rage, more knowledge)
• 01:13:17 Counterintuitive optimism for human-made content