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Marketplace lessons from Uber, Airbnb, Bumble, and more | Ramesh Johari (Stanford professor, startup advisor)

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Nov 9, 2023

Guest

Ramesh Johari

Ramesh Johari, a Stanford professor and startup advisor to companies like Uber and Airbnb, shares valuable insights into marketplace dynamics. He breaks down the essentials for building successful marketplaces and emphasizes the importance of data science and experimentation. Ramesh discusses effective rating systems and the common pitfalls founders face. He highlights the power of A-B testing in innovation and stresses the need for data literacy in today’s business landscape. Tune in for practical advice and a fresh perspective on marketplace design!

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insights

INSIGHT

Marketplaces Reduce Friction

Marketplaces sell friction reduction, not goods/services like rooms or rides.
Both buyers and sellers are customers of the marketplace, relying on it to facilitate transactions.

insights

INSIGHT

Data Science in Marketplaces

Data science is crucial for modern marketplaces because it allows dynamic adaptation and friction removal.
Data science helps find matches, make matches, learn from matches, and iterate.

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ADVICE

Don't Start as a Marketplace

Focus on a specific value proposition before scaling your marketplace.
Don't start as a marketplace; address a critical problem first and gain liquidity.

Get the Snipd Podcast app to discover more snips from this episode

Navigating Marketplace Dynamics

04:52 • 23min

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Data-Driven Decision Making in Marketplaces

28:02 • 10min

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Balancing Experimentation and Innovation in Growth Strategies

38:12 • 2min

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The Power of Experimentation in Business

40:21 • 21min

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Designing Fair Rating Systems

01:01:42 • 20min

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Encouraging Data Literacy and Community Engagement

01:21:32 • 2min

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Four Thousand Weeks: Time Management for Mortals

Oliver Burkeman

In 'Four Thousand Weeks: Time Management for Mortals', Oliver Burkeman challenges conventional time management strategies by emphasizing the finite nature of human life. The book argues that the average human lifespan of about 4,000 weeks is too short to accomplish everything, and thus, it is crucial to focus on what truly matters. Burkeman draws on insights from ancient and contemporary philosophers, psychologists, and spiritual teachers to advocate for a more balanced and meaningful approach to life, encouraging readers to embrace the limits of time and prioritize activities that bring intrinsic joy and fulfillment. The book critiques the modern obsession with productivity and efficiency, suggesting that true fulfillment comes from accepting the constraints of time and living in the present[1][2][4].

How to lie with statistics

IRVING HUFF DARRELL with illustrations by GEIS

Darrell Huff

Irving Geis

Bryan Depuy

In 'How to Lie with Statistics', Darrell Huff provides an engaging introduction to the ways statistics can be manipulated or misinterpreted. The book covers topics such as biased sampling, misleading averages, and the manipulation of graphs. It serves as a practical guide for readers to critically evaluate statistical information.

Statistical Models and Causal Inference

A Dialogue with the Data

David Collier

Philip B. Stark

Jasjeet S. Sekhon

David A. Freedman

Ramesh Johari is a professor at Stanford University focusing on data science methods and practice, as well as the design and operation of online markets and platforms. Beyond academia, Ramesh has advised some incredible startups, including Airbnb, Uber, Bumble, and Stitch Fix. Today we discuss:

• What exactly a marketplace is, if you boil it down

• What you need to get right to build a successful marketplace

• How to optimize any marketplace

• An easy litmus test to see if there’s an opportunity to build a marketplace in the space

• The role of data science in successful marketplaces

• Ramesh’s philosophy on experimentation and AI

• Advice on implementing rating systems

• Why learning isn’t free

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Brought to you by Sanity—The most customizable content layer to power your growth engine | Hex—Helping teams ask and answer data questions by working together | Eppo—Run reliable, impactful experiments

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Find the full transcript at: https://www.lennyspodcast.com/marketplace-lessons-from-uber-airbnb-bumble-and-more-ramesh-johari-stanford-professor-startup/

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Where to find Ramesh Johari:

• LinkedIn: https://www.linkedin.com/in/rameshjohari/

• Website: https://web.stanford.edu/~rjohari/

• X: https://twitter.com/rameshjohari

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Where to find Lenny:

• Newsletter: https://www.lennysnewsletter.com

• X: https://twitter.com/lennysan

• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/

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In this episode, we cover:

(00:00) Ramesh’s background

(04:31) A brief overview of what a marketplace is

(08:10) The role of data science in marketplaces

(11:21) Common flaws of marketplaces

(16:43) Why every founder is a marketplace founder

(20:26) How Substack increased value to creators by driving demand

(20:58) An example of overcommitting at eBay

(22:24) An easy litmus test for marketplaces

(25:52) Thoughts on employees vs. contractors

(28:02) How to leverage data scientists to improve your marketplace

(34:10) Correlation vs. causation

(35:27) Decisions that should be made using data

(39:29) Ramesh’s philosophy on experimentation

(41:06) How to find a balance between running experiments and finding new opportunities

(44:11) Badging in marketplaces

(46:04) The “superhost” badge at Airbnb

(49:59) How marketplaces are like a game of Whac-A-Mole

(52:41) How to shift an organization’s focus from impact to learning

(55:43) Frequentist vs. Bayesian A/B testing

(57:50) The idea that learning is costly

(1:01:55) The basics of rating systems

(1:04:41) The problem with averaging

(1:07:14) Double-blind reviews at Airbnb

(1:08:55) How large language models are affecting data science

(1:11:27) Lightning round

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Referenced:

• Riley Newman on LinkedIn: https://www.linkedin.com/in/rileynewman/

• Upwork (formerly Odesk): https://www.upwork.com/

• Ancient Agora: https://en.wikipedia.org/wiki/Ancient_Agora_of_Athens

• Trajan’s Market: https://en.wikipedia.org/wiki/Trajan%27s_Market

• Kayak: https://www.kayak.com/

• UrbanSitter: https://www.urbansitter.com/

• Thumbtack: https://www.thumbtack.com/

• Substack: https://substack.com/

• Ebay: https://www.ebay.com/

• Coase: “The Nature of the Firm”: https://en.wikipedia.org/wiki/The_Nature_of_the_Firm

• Stitch Fix: https://www.stitchfix.com/

• A/B Testing with Fat Tails: https://www.journals.uchicago.edu/doi/abs/10.1086/710607

• The ultimate guide to A/B testing | Ronny Kohavi (Airbnb, Microsoft, Amazon): https://www.lennyspodcast.com/the-ultimate-guide-to-ab-testing-ronny-kohavi-airbnb-microsoft-amazon/

• Servaes Tholen on LinkedIn: https://www.linkedin.com/in/servaestholen/

• Bayesian A/B Testing: A More Calculated Approach to an A/B Test: https://blog.hubspot.com/marketing/bayesian-ab-testing

• Designing Informative Rating Systems: Evidence from an Online Labor Market: https://arxiv.org/abs/1810.13028

• Reputation and Feedback Systems in Online Platform Markets: https://faculty.haas.berkeley.edu/stadelis/Annual_Review_Tadelis.pdf

• How to Lie with Statistics: https://www.amazon.com/How-Lie-Statistics-Darrell-Huff/dp/0393310728

• David Freedman’s books on Amazon: https://www.amazon.com/stores/David-Freedman/author/B001IGLSGA

• Four Thousand Weeks: Time Management for Mortals: https://www.amazon.com/Four-Thousand-Weeks-Management-Mortals/dp/0374159122

• The Alpinist on Prime Video: https://www.amazon.com/Alpinist-Peter-Mortimer/dp/B09KYDWVVC

• Only Murders in the Building on Hulu: https://www.hulu.com/series/only-murders-in-the-building-ef31c7e1-cd0f-4e07-848d-1cbfedb50ddf

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Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com.

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Lenny may be an investor in the companies discussed.

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