Arguing Agile

AA246 - The Spotify Model: The Viral Org Design That NEVER Existed

• Brian Orlando • Season 1 • Episode 246

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Spotify never used the Spotify Model - and neither should you. 

In this $2 billion episode, Product Manager Brian Orlando and Enterprise Business Agility Consultant Om Patel take a cutting torch to one of big-A-Agile's most beloved organizational myths - the Spotify Model! We're doing invasive surgery to see what's inside beyond the over-hyped squads, tribes, chapters, and guilds that have been copied by companies the world over. 

...but what if we found out that the inside was hollow? 

What if we found out that the Spotify Model was never even live and tested by Spotify?

🔥 LISTEN OR WATCH AS WE DISCUSS

• Why Spotify Insiders call the model "aspirational and never fully implemented"
• Why the model had little or no relation to Spotify's success
• How survivorship bias tricks us into studying only "winners"
• The four critical failures of the Spotify Model

💡 DON'T WANT TO WAIT FOR TAKEAWAYS?

OK, no problem, but before adopting ANY organizational model, ask:
1. Is this documented practice or just aspiration?
2. Has the source company evolved past this model?
3. What's the original author's current position on its effectiveness?

Please follow the podcast if you'd like us to do more myth-busting content about organizational design fads from 2015!

#Transformation #SpotifyModel

LINKS
YouTube: https://www.youtube.com/@arguingagile
Spotify: https://open.spotify.com/show/362QvYORmtZRKAeTAE57v3
Apple: https://podcasts.apple.com/us/podcast/agile-podcast/id1568557596

INTRO MUSIC
Toronto Is My Beat
By Whitewolf (Source: https://ccmixter.org/files/whitewolf225/60181)
CC BY 4.0 DEED (https://creativecommons.org/licenses/by/4.0/deed.en)

you're telling me that software shops all around a world they've been trying to jam this square peg of the Spotify model into the round hole of org design what a terrible euphemism first and they're trying to do this because they read on a blog post somewhere about a model that didn't exist oh yeah Yeah, it's actually a lot worse than that. They organized or reorganized based on a wish list. So Joachim, Joachim Sunden. Joachim, Joachim, Joachim He literally said that the model was part ambition, part approximation. It's like going to a car show buying a concept car and then complaining when it doesn't have an engine squad, stripes, girls, goons, I don't know. It was never an actual operating model that a company used to scale and grow. So it, then what was it? Well, let's dig in and find out. Oh, boy. Welcome back to Arguing Agile. If this is your first time, welcome. I'm product manager of Brian Orlando and this and this is my co -host, Mr. Oh, Patel, enterprise business agility consultant to the stars and the captain of cross-functional collaboration. Ooh, look at me, I'm a captain now. I am the captain now. You're messy. Crossing the wires on the memes here. Okay, so today we're taking a blowtorch to one of the most beloved. Beloved? Is it beloved? Is it beloved? Organized myths of all time in software, the spotify model. So by the end of this episode, hopefully you'll have a sassy understanding, as sassy of an understanding as I have for the Spotify model and why it, why I consider it vaporware. and why they never use the rules as written about the Spotify model? Number one, number two, what actually drove Spotify success when people talk about this model? They attribute Spotify success at least partially to this model. I don't. And then those two things bring up another thing that we should talk about in the podcast, to spot survivorship bias when evaluating. org design and talking about the way orgs are constructed so that that's a cool little side tangent that I I like talking about or design I realize like three of us on the internet like talking about it but we're gonna talk about who's the third person that's right I don't know it says they I'm pretty sure they live in Berlin Berlin that's right it's not a real place it's just Berlin I guess I don't know and then the real cost of lift and shift thinking this whole you know we can just grab something off the internet grab the Spotify model off the internet we watch the video with some animation and now we can just do that at our organization yeah and then the last thing the last thing is what to do instead it's the model that never was the model that never was we're going to talk about the myth versus reality and let's do a little bit of a step back here and talk about Spotify this the Spotify model that's right we're revisiting a topic from podcast one or maybe two I don't remember it was up there yeah it was one the early ones you know and that was back when we had a different working agreement I didn't want to really like go hard on Spotify but today I do You know the other thing that I didn't really have in the notes here is like why why like Brian oh why this topic why do you care about this I've constantly seen people bring up the Spotify model and talk about the way to split the org and stuff like that. I'm sure you've ran into this way more times than I have. I certainly have, yeah. Yeah, it's never not topical to talk about this because you still have people trying to, you know, install the model, right? Yes. And hoping for some mythical success. PIP install Spotify. Yeah, that's right. Is that Spotify underscore? Never mind. It's fine. hey Ohm, what if I told you that the most copied org design in tech history was never actually a working implemented like functional operational thing, even by the company whose name is on the placard. the Spotify model how Spotify sold the world a fantasy that they never used They didn't drink their own champagne set a thing. Ah well Apparently if you don't have a dog that's that's the analogy. Oh I see. So there was a Jeremiah Lee former Spotify product manager. he has a article called failed hashtag squad goals from 2020. where he says and I quote I learned the famed squad model was only ever aspirational and never fully implemented. There it is. I'm showing you on the screen. A little fire and failed squad goals. Spotify doesn't use the Spotify model and neither should you. April 19, 2020. You can read it in French or Portuguese. before we get into this article, this, we have to talk the steel man. Steel man. That's right, because anybody listening is going to say, listen. Spotify, they were transparent with their 2012, seminal paper from 2012. I don't see that very often, I like it. Sounds dirty, that's why. And they said, hey, it was just a snapshot. It was just a snapshot of the way we're working. And if that's not good enough, then Brian, isn't the Spotify model good as a North Star? like anything aspirational that's not like concrete as good as the north and now we get into this discussion of academic type of discussions versus like real practical discussions yeah and that's I wanted to start there to talk about like you're gonna get that kind of pushback when we're sitting here going Spotify never did this they wrote a paper saying like wouldn't it be great if we were organized this way when they were not organized that way and then they never got organized that way. So yeah I mean we we paint the picture as if it's a binary but actually what happened I believe for what I've read is yes they didn't implement the model fully but they started to do bits and pieces of it, right? So they changed the vernacular, first of all, internally with some of their teams, probably not even all the teams, to squads and so forth. But what did they do day and day out? Nobody knows, unless somebody at Spotify is willing to speak up and say, it was just another name for doing the same thing we were doing before. I don't think we know right well that's with authority that's what the squad goals a blog so in in this blog he does talk about working at Spotify there are some quotes in the article from Anderson, co-author of the Spotify White Paper, that he puts here. quotes is when I asked my coworkers why the content was not removed or updated to reflect reality I never got a good answer many people ironically thought the posts were great for recruiting I no longer work at Spotify so I'm sharing my experience to set the record straight the Spotify squad model failed Spotify and it will fail your company to join the company after a triple in size the 3,000 people over 18 months I learned the fame I learned a famed squad model was only ever aspirational and never fully implemented. I witnessed organizational chaos as the company's leaders incrementally transition to more traditional management structures. So again, this is a firsthand account of imagine. Maybe it got better. I don't know, maybe. But I'll link this blog in the show notes. It's pretty quick. maybe that's another steelman point is like, well, this is just like one person's take, you know. But. I have more references for the sake of this not being a three hour podcast on why Brian doesn't like Spotify I'm keeping the other references to the side sure sure the other reason that like And he kind of indicated here is Spotify. probably knew that like the touting this model I mean they had if you were around in the 2012 era like 2012 to like maybe like 2015 this was everywhere sure this was every and it was touted as like a success of business agility and the people that wrote it you know are over here being rock stars and whatnot so I have a few gripes to express in this section is like how come no one's out here slowing down the train the hype train you know spot if Spotify is over here using it trying to get the best talent because you know they got squads and they got this thing all figured out autonomy home. Well there's gotta be somebody benefiting from it for it to not be stopped right so you know who is that? That's my that's my big gripe here is like the whatever the disclaimers were they were buried by the hype. Some which like I remember from from mistake because I was working in this era so that's part of my hang up here. Yeah. and you know aspirational is fine but like you need to control a little bit the damage that this is doing. Control salt, delete. Do you have any experience with seeing the people trying to copy the Spotify monologue? I have not worked at a company where they try to do that but I have read widely about other companies that have tried to do this and maybe succeeded in some regard but also failed overall. I don't know I know I know a company or two here in town who pretty much like copy -pasted the Spotify model and I know people that have worked there and they say it is a train wreck and Spotify model supposed to be like this shining flag of autonomy and like shared purpose. But this particular company that has implemented the Spotify model is quite, quite literally the opposite of that, you know, under hood, they're the opposite of that. You know, but their teams are called squads and tribes, so you know, there's Spotify now. It must be good. So the one example of a company. it's a bank, a Dutch bank, ING. They use this with some success, actually, and it's been written up in the media as well. So they did something right, but the underlying circumstances there, or they already had a culture of collaboration and autonomy. They also had backing from the highest level in the company, right, to go do this reorg. So that worked. But pretty much everywhere, including the local company you referred to, they don't have that. Yeah. So essentially, all they're doing is installing a new set of jargon to do whatever they were doing before. And that doesn't work. I think we got enough for category yeah I'm I'm realizing right now that like category one is a lot of like Brian yells at the clouds to be honest what I'm taking from this category is that the Spotify model is the business equivalent of exciting Wikipedia when you're in school and your teacher yells at you and tells you and tells you that you can't cite Wikipedia because nobody can check the sources like that that's that's a Spotify model but it says on the internet the if there are takeaways here and there are there's always takeaways in case you hear your company or people in your company talking about Spotify model or any models really. I have three questions. Number one, is this a documented practice or an aspiration? Like, are there like documented? cases of this being implemented and studied or is this something that you know somebody just made up is it real or is it memorex right so man oh boy and then number two is has the has the source company evolved past what you're showing me in this aspirational model and then what is the what is the original authors current position on its effectiveness. And also I would say what is what is the original author's current position because again all the people wrote this paper like some of them stay to Spotify for a little while but they're I think they're both gone from Spotify some of them faster than others So, you know, if you write a paper and say like, wow, my company is so inspirational and do whatever, and then you're gone like 18 months later. Yeah, what does that say? Does that say something? I think it does. It certainly does. Also, but those people did pretty well for themselves, even after they left. Yeah, yeah. Well, speaking of following the money, which is our next category, meme. Before we go there, what do you think about this category? What do you think about my railing, yelling at the clouds about Spotify? Let me know in the comments is what I'm asking. So if the org model didn't drive Spotify success, what did drive Spotify success in this era? What a fantastic question, right? What drives the success of any up-and -coming company like what is the what is the one thing they need oxygen money right? It's Spotify land money at that time when they were about to grow I think it's it's the opposite it's that Spotify had in a near I'm gonna say near infinite amount but I mean they like they had a lot of rounds of funding from private equity and venture capital they had a lot of funding billions so again a lot of people will say well out Spotify and they were autonomy and they could like outperform their competitors with these great new features because they were so innovative whatever and yeah I mean maybe they were innovative maybe that is true Again, this is arguing agile, so I'm picking aside and sticking to it, unlike where I flip-flop in other podcasts. I'm sticking to my side in this podcast. Everybody wants to innovate like Spotify, but not everyone's getting seed rounds with a billion dollars. the notes I found between podcasts, through Spotify's investment rounds, they took about 12, I think they took more than 12 funding rounds. They took a lot, more than 10 funding rounds, totaling more than$2 billion, including a 2016 $1 billion debt round alone. So money for Spotify was not a problem. And sure, you can have the greatest org design in the world when you don't have to worry about money. So there is that I just say that didn't hurt exactly right an org that was about to grow in that phase of the company the obvious pushback here. Hey Brian like money alone doesn't guarantee success because there's lots of well funded startups in Silicon Valley and wherever else that get tons of money and then they fold right and then the other one is it's their culture of autonomy and innovation and their hackathons and all the stuff that you read about Spotify that that's what led them to beat the market and create all these features that competitors couldn't match that's what people will tell you that are defending the Spotify model. Yeah, I mean, on the other side, you could say they were at the right time, at the right place, with the right investors. I mean, all the stars aligned for them. Yeah, it's definitely the cheap money era that 2008 to 2020 era. they were smack in the middle of that. I mean they were in the best era for cheat money. Right. And they were doing something that not a lot of people were doing. They were trying to take over the music streaming market from everyone else, all the record companies, everybody else that kind of missed that technology. So it was market timing. and first mover advantage together is definitely true I mean if there's something that's gonna if there's something that I'm gonna seed to the steelman that I'm gonna say well that that is just true it's the first mover advantage the ability to get a much funding and then target a thing and stay on it no matter if you were profitable or not and just burn this investor money until you just rose to the top of the market But I mean if that's the advantage that I'm going to be at like I'm willing to try like give me two billion dollars I'm willing to try you know exactly but the like so first mover advantage so the they absorbed the licensing costs that may have killed other competitors that that arguing point I kind of would also push back against so because when Spotify started licensing everything nobody was doing licensing of the online streaming and stuff like that. So they could set the first rate and then they've been if you look at the charts of how much how many how much the royalties they get paid out and the amounts to get paid out they've been climbing over time so that Spotify kind of got in early set the rates real low and have been kind of playing catch up and spending more and more as years have gone on number one. The other side of this is like money doesn't guarantee success sure that's true but are we talking to scrappy underdog here because if if that's the if that's the if that's the spotify story that story is like revisionist history it's it's flatly false they raised two billion dollars I don't know why like I'm just I'm taking a scrappy startup loan of two billion dollars on would be nice wouldn't it 2 billion that seems like that seems like institutional level money trying to but not not trying to institutional level money used to corner a market and like should that money just immediately go away like I would argue like do you think that Spotify would stay at the top of the market where they are should that money you know number one had they not had that money right and number two should that money not continue Great questions. No answers there. I mean, look, at the end of the day, if they didn't get the funding they needed, they probably wouldn't have been able to do what they did. I will say, I did, I watched a lot of podcasts. I watched a lot of presentations there by some folks from Spotify who may or may have been involved with the Spotify creation myth here. And I have a direct quote in the show planning, it says, and I quote, we don't have any money compared to other companies. the implication was they had to be scrappy and yeah segment our segment our teams for autonomy because we had to be scrappy because we had no money Completely false is right. I mean they were flush with money. I mean the stories that like coaches and product I'm in product product people are the worst for this but like the store the revisionist stories you know and also like tech folks are terrible at this too if you watch any like Brian Chesky or anything like that like the stories at home is in the woods and I was taking a hike and I was like had in my company well we did the Brian Chesky July 12, 2023, arguing Agile 120 did Airbnb fire their product managers. We watched the Brian Chesky video and then we reacted to it and kind of talked about where he was like, I went on a hike and I realized that we were too slow and I had to go you know take control whatever and then he invented founder mode after that or whatever basically he in the story he like placed himself as a victim of like oh we grow too much he didn't want to do it but he had to do it I'm like yeah but you're the CEO man you could literally do anything you want so like the only person in charge all this is you. Yeah. So the problem with talking about Spotify is there's so much of this going on. There's so much of this kind of like, well, it was never, you know, this, it was that kind of stuff going on. It's enraging to talk about. But you know the probably the thing that like gets under my skin the most about the Spotify model with the hype around the Spotify model is if you were to advise like an insurance company you know or like a FinTech start like a bunch of FinTech bros in a FinTech company like oh don't worry you can innovate like you can corner the market like Spotify by using the Spotify model and innovating and adapting squads and tribes or whatever it's like telling someone they can swim like Michael Phelps if they just buy the Michael Phelps goggles yeah we swim like him in no time that's right that's right and unfortunately you know I think the consultants are at fault for a lot of this propagating the madness. Yeah. there are some takeaways in this category. They're very quick because they're basically a recap of what we just talked about and it goes and it goes something like this. Number one, like what is your capital. Number two what is the timing what's a more basically what's the market conditions right number three what's your what's your positioning your I wrote competitive position here but I really mean positioning you know what is your name in the market what are you associated with what is your moat there right now in the AI era that like they're just waiting for claw to realize what they're doing so they can bake it in the model and or in a service or whatever and they're done yeah you know a lot a lot of people that were using cloud code as a in past through mode in their application that cloud code did just one day they did an update and shut it all down said nope you're not using cloud code is like the core of your application anymore and all those wrappers around cloud code just like vanished gone yeah the capital obviously if you don't have funding like what are you gonna do you know how are you gonna position yourself in the market without a bunch of funding But positioning is another one, like we could have a marketer on the podcast specifically to talk about positioning, because I think that's a great one that doesn't get talked about enough. Yeah, I mean, this is the corollary tool. This is before implementing any sort of model like this, not just the Spotify one. Reflect on the DNA of your organization. Does it allow for something like this to even, you know? stick or does it have a chance or do you have a culture where it's perhaps a matrix culture or matrix of matrices or whatever and you're trying to say you know just devolved decision-making and decentralized authority things like that it's not gonna happen or you know at least in a hurry so just beware of that right right so what do you think about market timing and having an unlimited supply of money you think that would help you get ahead in business if you do drop as a comment and send us some money. Oh, you didn't think about that. Just like and subscribe for now. That will do. Well, we'll settle for that. Yeah. And some money. Anyway, that brings us to a bigger problem. why do we keep studying the winners and assuming that it was, you know, their methods or or the hype that they try to sell us in models and whatever. We think that that's what caused their success. Because we're suckers. That's what we're going to talk about. we only study winners? That's the next segment. All right, for every Spotify, there is a hundred companies that try to do music streaming or whatever and fail. Try to do the squads and tribes playbook and failed. I could go on all night. But I'm not going to, because we got places to be. don't write case studies about the companies that failed and laud them. Oh, how great it is they tried a new thing and didn't survive as a company. If we do even talk about these companies, it's in a negative light, you know, it's company failed, right? So not a lot gets written about the failed companies, sadly. Or who didn't buy Netflix, a blockbuster? survivorship bias that that's what's really going on here that's why everyone's looking at the Spotify model saying like maybe we should do the Spotify model so there's a book out there David McRaney you are not so smart and there's a quote from the book it says business is a monopoly run by survivors when something becomes a non - survivor is how they're completely eliminated whatever voice it has gets muted to zero So all the business practices about blockbusters that actually were good. Nobody talks about. We don't talk about it. Yeah. And I guess I'm using probably not the greatest example because like blockbusters like very old school. But there are still like brick and mortar stores in existence. They found a way to you know survive. and the Steelman here, hey. like worth talking about them and studying them and lauding them right and then failures are very noisy they're they're not well documented there is no one there trying to like keep documentation or extract lessons because they're failures they've moved on you know and also there's a little bit of culture here as a steel man too is like that's just not the culture you know as business failure we try to hide business failures that's right nobody Right, yeah. the big thing left out of this and it also left out of the Steelman one is nobody's talking about the market timing. Nobody's talking about timing. Or, persistent application of funding over a period of time toward a specific goal. Like, you know, that's what's missing out of the Spotify model. hey, we did all the other things and we tried to organize like this, but we did all the other things. Right. Yeah, I mean, even if Spotify had succeeded. Just imagine from women that they did, right? They implemented their model internally. I mean, it was great. And they're still using that model, let's say. Just because it worked for them, doesn't mean it's going to work for you. Because you don't have all the preconditions that are present around you. All of the environmental stuff, as well as the financial. But market timing, how the hell are you going to ensure your timing the market right? You also don't have the positioning. You don't have a lot of stuff. point taken is Culture is just one little piece, but all of the conditions not being in place it'd be very difficult to copy this I mean maybe you copy maybe you copy like maybe you copy things that you maybe you copy principles And that's about as nebulous as I can get here as unhelpful as I can be here. Yeah, I mean, so culture is a small piece, but it's sort of like saying cultures like the chess board that you can play the game on, right? Without the chess board, you can play the game. They're gonna mean a whole lot. Well also you can have an autonomous team that really loves what they're doing and but there's no funding or the business doesn't want to find I've been there too is I have a successful product there are people line up to buy it but the executives are saying we don't want to be in that business we want to transfer over we think this other business will be more lucrative and they move people from the development team slowly off the business because they don't want to be in that business yeah so the funding is a real thing too and then Spotify funding around of a billion dollars. So they're like a real bad example for this. I've been at companies with like you know seven hundred thousand dollars to move around for the you know those those companies usually will be like oh let me get ten ten percent of this developer's timer you see like the gant chart of people Simon people are assigned like 23 percent of this project 15 percent of that project you know I mean one person split across six different projects because the funding is they're playing games of the funding whereas when you have a billion dollars you don't need to play games. Right, right. Absolutely. And we talked about this on some other podcast at least once. You know, those kinds of environments where you really are working on fumes and burning people, burning people out. You placate them by giving them stock options and this and that. But. at the end of the day they're going to realize sooner or later that this is just basically fantasy and you'll lose good people that that's what it results in and so you lose enough of those people and then you have fewer people that will just say yeah sure we'll work whatever hours you want it just accelerates the demise as a company I think I've learned that studying the Spotify model to learn about org design is like studying only lottery winners to learn about retirement planning. That's what I think I've learned today. My cheeky learnings, but I don't know if there's, are there real takeaways from this? I mean I'll close us out on this one by you saying look. If you think that model is what differentiates you, you think about all the different companies that adopted the Spotify model and they all failed. So was it really the model? So yeah, I mean if I'm looking at those if I'm looking at the dead companies and looking like well, what did their org design look like? this is also like why startups fail is in this category as well we don't look at the failed startups and when I read the emith revisited that was a book I wanted to do a podcast about it we never actually did the podcast because in the emith revisited they pose that know whatever this big statistics of the number of startups that fail whatever 80 % of startups like if you go over like I think within their first couple years a good percentage a good chunk of startups fail like two-thirds or whatever I don't know what the number is but if you put that on a 10-year timeline it goes to like 95 % or something like some ridiculous number yeah overwhelming failure rate but franchisees new businesses started with franchise models they're 20 % survivor, 80 % failure for normal small businesses. The franchisees are the reverse of that. Yeah, they're flipped. And that's because they come online with well documented and well run procedures that are running in other businesses that are run successfully. They grab those playbooks and then they run those playbooks. So part of it is like it's well documented success pass that people are running with and you have to wonder here are people failing because they're trying to use the Spotify model. Or are people failing here because they're running a bad business in the Spotify model just like not going to help you with a bad business regardless? Like there's a lot. Any model is not going to help you necessarily. Yeah, so I agree. Yeah, absolutely. it's less about the survivorship of the company Spotify that that succeeded before we get out of this category I wanted to run a quick Google search And what I typed into Google was, when did Spotify become profitable? Google says Spotify registered its first profitable year in 2024. So some 12 years after. they became a company. it's nice to talk about the survivorship bias, like the lens of survivorship bias, because as you can see, had they not had this but Julian dollars in funding, they'd have been dead in 2014, 2015, you know? If not sooner, yeah, two, three years, yeah, absolutely. So, yeah, I, you know, what do you think about keeping a company on life support via, you know, endless rounds of VC funding or PE funding? Let us know in the comments. And let us know if you have a round of funding for us in that. So now we're going to get into the weeds in the next category. So what specifically went wrong with the Spotify model where it wasn't actually implemented? We're going to talk about the four failures. All right, so matrix management solved the wrong problem. Autonomy without alignment, created chaos. Collaboration was assumed, not taught, and cool signing names created more confusion than it created clarity at Spotify. So from everything I read, these are the four categories I put together of the things that went wrong at Spotify. They're the four reasons why the Spotify model failed. Spotify. So, Joaquin Sundan. He was an agile coach there, I believe. Yes, he was agile coach for 2011 to 2017. And at the agile 2017 conference, he had a quote that said, if I were to do one thing differently, I would say we should not be focusing so much on autonomy, which is a heck of a thing for an agile coach. to be saying at an Agile conference. I had, there's a video, there's a whole video for that one, you can go watch it. We're not going to now. Again, the three hour version of this, we absolutely would go. Sure. I have quotes. No, I did way more prep than we're going to get to in this podcast, but it's there. Trust me, it's in there. We have some quotes we'll talk about later, but I want to hit the Steelman real quick so I can get into these quotes. So the Steelman in this category, hey, every org model has this challenge, so you know, don't yuck my yum. That's what's going to happen here. It doesn't mean the model's flawed Brian it just means you haven't done it right that's Trying hard enough that's right you're not trying hard enough you got it 996 and then the other one would be autonomy at scale is genuinely difficult you can scale autonomy but it's very difficult and everyone has a difficult time no one's been able to nail it right you know Spotify pioneering new territory they're exploring new territory so get out of my office Brian that's that would be the steel man yeah it's hard what do you want it's hard exactly well you know good luck right if you've got unlimited money and it's your model go for it so yeah all right let's let's get into this yeah got four points in this category number one matrix management created accountability vacuums when people move teams they kept their manager which created like this real spider web of like it's not so much accountability it's like if all the people on your team if there's like eight people on your team and they all have different managers in the organization What a nightmare? Oh yeah, I mean any one of those managers could pull a person off your team anytime Not just that but like I mean I work for a lot of different managers over my career Some of them were invested in my learning and development something like I guess somebody barely even knew who I was I mean that yeah some of the people on the team would feel like they're being thrown under the bus like oh yeah I can't even imagine you know what is your organizational like learning and development like when the managers are not involved like what a train wreck so and then forget about like typical HR stuff pay raises reviews you mean forget about that kind of stuff yeah yeah we all of these add up really quickly right to a culture that team members don't really you know find enthralling yeah I want to stop short of that just because again all these sources like they can live on their own like but the point is there's no like one go to you many CTO or like a domain leader in theory there are those people but in actuality it was it sounds very chaotic from all the blogs and articles and everything I read and videos and watch the other one that even Nyberg admits in his video is he has a 2022 video that I watch going into this he says in quote Spotify was very good at autonomy but also kind of went overboard we had this really dumb problem we weren't even using the same version control system and it was really really dumb so this goes to one of the other systems in your organization right it's not just implementing new names for all practices, right? What are all these other things? If you're not even using a version control system, then no amount of autonomy is going to help you. Right? You're still going to have the chaos that ensues from that. Well, theoretically the squad tribe, whatever, I don't, you know, the X, Y, X, I don't know what it is, but theoretically like each of those should have had a chapter lead or a squad lead or whatever they have in the model that obviously they never implemented and there would be some kind of technological borders around that those people own but I guess it again it was just a it was like an aspirational that maybe one day we will have leads rather than we wrote the model and then we went and declared it. So it seems like there was a difference between the people designing the organizational structure were not the people with the actual authority to say now these people are in charge of this thing and then like you have a very normal disconnect. that I remember experiencing you know when I was like deep in business agility that part of my career is usually the people that have the biggest boldest ideas of how we could change the org they're not empowered to change the work and you got a real problem it sounds like that's exactly at play here it's pervasive in most matrix organizations I would venture to say and then the jargon like we're not gonna get out of this category the four failures without talking about the jargon like a squads guilds chapters tribes tribes tribes tribes what are you talking about right yeah yeah yeah it's it's it's a it's an overhead on most teams even on teams that came from backgrounds of you know working in agile ways right to have to learn this way of working and it isn't just the language I want to say the Spotify model also has the way they organize these things differently right so you organize squads gills chapters and tribes differently than you would in a typical kind of agile structure yeah I don't know how I deal with that I mean like I would think that calling your team's squads or tribes or whatever like the changing the language doesn't necessarily make you like changing the language doesn't necessarily make you autonomous or help like delegate authority to where the authority needs to be it just makes like channels harder to search and fine it does but on the flip side of that is Yeah, it's pretty snazzy for recruitment and getting people on board and say, look what we've got. We've got, we don't have teams, we have squads, come join us. Yeah, great. Yeah. Awesome. anyway. Anyhow, So, some takeaways about, you know, when delegating authority, because that's what it should be. It should be delegating authority, like, hey, you know, this team and everyone that interacts with the team uses. you know these channels or the whatever you decide your team and teams that you interact with decide how you're gonna work but some things are not delegated like the change control system like why would that be delegated to the team you know unless you're gonna say like well there's nobody really like in charge of technology nobody in the driver's seat of technology and or processes organization wide idea I'm alignment accountability and ability are my three kind of key things to look at here before I'm like making these decisions is you know alignment is are there strategic guardrails that we need what's not negotiable obviously change control right not negotiate one would think it would be non -negotiable and then obviously accountability is straightforward accountability responsible for what is really that's all that is and then you know the ability that seems obvious to me maybe it's not obvious everyone else but like who technically can perform the work yeah because set up for success you want you want someone with all three of these this is what we charge product management we charge the product managers to be responsible for a segment of the business we give them these three things We give them business alignment and product management will talk all day about aligning and then they're the accountability the business goes to them and nobody else when they want to talk about the roadmap for a product or whatever and then we assume they have the ability to do it. I don't but we assume they do. So yeah, so this is the the three A's framework brought to you by AA Oh, not alcoholics and I mean I like you know hey if you need a drink like let us know in the comments also let us know you know if you have strong feelings about this Yeah, what would you add to the to the framework here right? Yeah, yeah well the next step from here is to talk about the last piece of the story we haven't talked about today and it's about who actually pays the price for Spotify's successes. this is actually in this particular case very interesting so right we know who paid you know who paid the dues to make them grow at the time when they were about to it's the investors but now this is the other site. Who's paying the cost, we're over here debating org charts and Spotify is like raking from investors and PE firms and everyone that wants a part of you know they want to be included in the king of streaming you know and the the single point of failure clearinghouse for all online streaming while everyone's kind of stepping over themselves throwing money at Spotify Spotify is over here building a business that pays artist 0 .000 .3 cents per stream and then flooding the zone basically with AI generated ghost artists and like content that they produce and you know investing in other questionable investments like you can go see what what Spotify in there and you can go see what Spotify is investing in it's nothing to do with streaming nothing to do with streaming like you know maybe we should ask do we really want to hold up this company as the you know shining beacon that we should copy I don't know Spotify could have done a lot to pave the way for like a fair royalties like a fair and robust mechanism of royalties like a modern error royalty type of situation and Since they're such a major player with so much investment, right? They're not going to fail because they have all this money and everyone believes, basically all the investors believe in them. They could have done a lot ethically to say, hey, nobody can break into this market unless they come up to this bar ethically that we've set. I trying to say a reasonable bar you're saying a positive to be a positive influence for individual artists and basically all the people that that they're the music that they're taking and using to become profitable in whatever would we say 2024 what yeah the steps that they stepped up to to reach profitability along the way they could have done a lot to pave the road for others that follow them But that's not how we make money. That's right, exactly. They could have been the you know the fair trade coffee grower to use that analogy. Yeah, but but they didn't Yeah, the question you asked earlier is now that you know about this company a little more and again We're not disparaging the company. We're just saying companies like this or any company look around to see exactly which business they're in where they're investing What how they're making money and then ask yourself the question is this the company we want to emulate right so right away I like the steel man to this says yeah but oh they like they've paid out ten billion dollars to rights holders and you know that's a lot of money when when taken you know in the enormity of the money they paid out that's a lot of money and then the and then the other would would be to say well the music industries economics like that's that's not a fault of Spotify if it wasn't for Spotify creating an alternate mechanism that people would pay for which by the way they weren't even the first so that this is a terrible point but I'm gonna make it anyway because it is a good point on some level to say they're just responding to the market we it's the Nuremberg defense of MP3 streaming no sorry it's not it's not but I'm not after Apple showed that it is a viable business, but Apple never they never scaled it to this point So really what Spotify did is they took a business model that was Shown to be profitable and they scaled it You know and it took them whatever 12 years to make money to make money by scaling it, but they did figure it out in the end. That's the Steelman, which is, honestly, I'd say out of all the Steelman and everything, that's probably a solid one today. And the $10 billion, I mean, it sounds very impressive, until you actually look at the real numbers under hood of the amount of songs streamed, and you realize they're paying the artists per stream, they pay the artists for million streams. they pay them 0.003 to 0.5 cents per stream. Now what I don't have is I don't have the numbers on the other side of that to understand what Spotify's revenue is per stream. that's where the steel man here really holds up to me is I don't have what I don't know like the Spotify get three dollars and the artist gets point zero zero three cents is that what the tradeoff is I don't know Yeah, that would that's a bit of information that really is lacking I don't know if that's available So I found one source that says Spotify pays 70 % a 7030 split where they give 70 % to the artist and they retain 30%. But again, I found that one source that says that like what they pay the artist is actually like a 70 30 split So it's actually more fair. So the I don't know the jury's out on this one I would not bank my case on just this thing but boy that's very little it's very low and you know the second the second point the second steelman point oh yeah by the way if you don't crack that thousand stream threshold like this is like the the cost per mill the the the CPM the advertisers do this to you have to have a thousand to get paid spot how does this too so if you put up tracks they don't get a thousand you get nothing yeah they but they do Oh yeah, funny funny story about that. Oh yes. Yeah, so I mean you'd really have to be in it for you know long enough to exceed the threshold before we even start seeing that big mother load of 0.003 cents per stream and then like back in the day like the record companies and what night they used to pay like they used to pay like they used to pay radio stations to play songs. There'd be money under the table, not really under the table, but it wasn't necessarily the business model, but it was accepted as this stuff happens. I gotta think that there's some, like underhood with Spotify, there's something about like the way they push. songs or podcast or whatever, they have to have some like corporate deals like this. Not necessarily sponsorship, but some sort of like business to business stream of revenue it says like hey we want to pump this artist this month or whatever and they have to have some kind of B2 side of their business. Yeah and if it's not you know explicit like that it's probably because they feel like pushing specific artists is good for them for future revenue perhaps right. Also that 3 to 5 like that 0 .003 to 0 .05 per stream it doesn't sound like a big range but that's a big range like it be aiming in the middle of that ring for and also this is just like the numbers I found in the internet yeah so this might not even be accurate I mean that we can only go with what's available right verify this yeah yeah so maybe it's more maybe less but like who determines if you get more or less in this that's leading straight into that second Steelman point, right? The music industry is what it is, it's not our fault, right? But you know what, being in the situation they were in, a leading aggregator at the right time, they could have been a trendsetter, and they could have done, like you said earlier, right? They could have done... right by the artists such that you get more artists wanting to you know use the platform right for them for the distribution purpose and I don't think that happened well I mean anybody under a thousand plays or a thousand you know thousand streams or whatever well they're just donating yeah the argument here would be like you're only hurting the more independent folks that don't have like big companies back in them and you know Anyway, I'm not really like here to critique the music industry but that's you know that the real the real Spotify model from my perspective is underpaying individual creators and overpaying you know large companies because that's probably who lobbies to get the bigger rates is the large companies sure yeah yeah absolutely and it leads to a very like read the fine print type of culture that is just nasty, in my opinion. But that's just my opinion. So, you know, that's just like your opinion, man. I don't know if there'll be much of a takeaway here but I put down here the shareholder stress test who benefits most from this company's success shareholders customers employees other companies you know who does who bears and the number number two who bears a hidden costs so in Spotify's case the smallest of creators bear the hidden costs here because they're also the ones that are gonna get displaced and drowned out by AI I don't know if you're did you hear about this a company that's pumping out podcasts they pump out like hundreds of podcasts per day like you told me about it one time but I forget the name of it an AI podcasting machine is turning it so I'm looking at an article now from November 17th 2025 by test patent it's the rap dot com it's and the article title is an AI podcast machine is turning out 3 ,000 episodes a week and people are listening on track for 150,000 episodes by the end of 2025 inception point ayes quiet please that's what it was quiet please a podcast network values quantity over quality so yeah There are at least 175 ,000 AI-generated podcast episodes on platforms like Spotify and Apple. so like I said the the individual creators of which we are completely drawn out by this in terms of volume but not value I mean you know again when you go to searching for something and we get buried under thousands of results of AI generated garbage yeah what is Spotify doing to help us like that that goes back to the you know they could have set themselves up to be like here's the things that we're doing that are going to help you Brian and home but you know in reality they're like who are you get out my office one of the takeaways here is when we are studying the company's org model, study their ethics as well because culture indicates how you treat stakeholders. then, you know, and then the other one that we haven't talked about is, hey, like are you proud of the way your company does business and treats people? how about that one? I don't expect people in this kind of business to be doing a lot of quiet introspection about like am I hurting or whatever the larger community or you know no and I just don't expect it so yeah I don't know this this category is depressing money machine go burr that's like so somebody in the comments please cheer me up and let us know what you think about Spotify and their business practices and hey if it's just free market Brian like get off your high horse over here let me let me yell at me that's what I'm saying comments yeah and while you're in the comments please like and subscribe so we you know we talked about a lot of stuff on the podcast today let's let's do a quick review here so We promised that we talk about why the Spotify model never actually worked as Spotify, and I think we did that. It was a part ambition, part approximation, part marketing, and it's like none of those parts were functioning. Yeah, that's right. Oh man, this you know a little less talk a lot more action is what I'm asking for And then we talked about what actually drove Spotify's success. A hint, it might have been the money, just saying. Two billion dollars, I mean it helps, you know, give me two billion dollars, I guarantee you success on. That's right, of some kind. Can I have some money? And then number three, we talked a little bit about spotting survivorship bias. We probably didn't talk enough about how to spot survivorship bias. recognize the signs that like mmm someone's someone seems afraid of talking about failures and this hiding failures and there's only talking about winners this might not be the best advice in the world here right we probably could do a whole podcast we should actually do that and then four the real cost of lift and shift thinking of thinking that you know we had that was the four failures that we talked about yeah and then the last one was all the hidden costs of like well what's it gonna do or what's it gonna do to second and third order effects are you gonna be a good corporate citizen that's yeah exactly that's a very philosophical discussion that again not like we're not qualified to make predictions about the future of the music industry and what it's gonna do to individual artists but I can guess Yeah, sadly. So on that depressing note. Well, it's it's closing time but before we close and I'm gonna need y'all to like and subscribe the podcast that's what I'm asking because every like it pays in no money but it's we like it it's fun it gives some good vibes good vibes it pays me in good vibes that's a wrap folks.