How I Built This with Guy Raz: Substack – Chris Best and Hamish Mackenzie

Introduction

In this episode of How I Built This, host Guy Raz delves into the inspiring journey of Chris Best and Hamish Mackenzie, the co-founders of Substack. Substack has revolutionized the way writers connect with their audiences, enabling them to monetize their content through direct subscriptions. Chris and Hamish share their experiences, challenges, and the innovative business model that propelled Substack to become a leading platform for independent writers.

Founders' Backgrounds

Chris Best and Hamish Mackenzie come from diverse professional backgrounds that uniquely positioned them to create Substack.

• Chris Best:

  • Grew up in the suburbs of Vancouver, Canada.
  • Earned an engineering degree from the University of Waterloo.
  • Worked as the CTO and co-founder of Kik Interactive, a popular messaging app valued at over a billion dollars at its peak.

• Hamish Mackenzie:

  • Originates from Alexandra, a small town in New Zealand.
  • Holds a master's degree in journalism.
  • Built a career as a tech and culture journalist, working in Hong Kong and the United States.
  • Authored a book on Elon Musk after working as a journalist at Tesla.

Notable Quote:

Hamish Mackenzie [07:05]: "I learned that I didn't want to work in a ball bearing factory in Stratford, Ontario."

Previous Ventures: Kik Interactive

Before Substack, Chris and Hamish experienced significant success with Kik Interactive, a messaging platform that rivaled giants like WhatsApp.

• Growth and Challenges:
  • Kik reached over 250 million users by 2015.
  • Faced legal challenges from BlackBerry over patent infringements, leading to a temporary decline.
  • Despite a resurgence, the founders eventually decided to part ways due to burnout and unresolved business model issues.

Notable Quote:

Hamish Mackenzie [10:15]: "We never really figured out what's the business model for this thing, what are we going to turn it into?"

The Birth of Substack

After leaving Kik, Chris and Hamish sought to address the declining business models of traditional media. Their collaboration led to the creation of Substack in 2017.

• Inception:

  • Hamish began writing essays critiquing the media landscape.
  • Chris introduced the idea of a platform where writers could monetize directly through subscriptions.
  • Inspired by Ben Thompson's Stratachery, they envisioned a sustainable model for independent journalism.

• Launching Substack:

  • October 2017 marked Substack's official launch with Bill Bishop, a seasoned journalist, as its first subscriber.
  • They applied to Y Combinator, receiving mentorship and initial seed funding.

Notable Quote:

Hamish Mackenzie [28:19]: "People will be willing to pay for content online, they'll be willing to pay for the artist or creator who they most love or trust."

Business Model and Growth

Substack's innovative approach centers on empowering writers to own their audience and revenue streams.

• Revenue Sharing:

  • Writers set their subscription prices, typically around $5-10 per month.
  • Substack takes a 10% cut, ensuring writers retain approximately 85-90% of their earnings after processing fees.

• Scaling Up:

  • By 2019, Substack had amassed 7,000 paid subscriptions.
  • The platform saw exponential growth during the COVID-19 pandemic, reaching over 5 million paid subscribers by 2025.

Notable Quote:

Hamish Mackenzie [52:05]: "We wanted to be in a world where we would only make money if the people actually made money."

Navigating Challenges and Free Speech

Substack maintains a strong stance on free speech, balancing it with necessary content moderation.

• Content Policies:

  • Substack permits a wide range of content, excluding incitements to violence, pornography, and spam.
  • The platform emphasizes that subscriptions are between writers and their readers, not dictated by Substack's algorithms.

• Handling Controversies:

  • In 2023, when Elon Musk's acquisition of Twitter (now X) led to stricter content moderation, Substack positioned itself as a haven for independent voices.
  • Despite initial tensions, Substack continued to uphold its commitment to minimal content restrictions.

Notable Quote:

Hamish Mackenzie [66:42]: "Our stance on this is, look, we have a set of content policies. If something comes to our attention that is against the broadly applicable Substack rules, we're going to take action."

Relationship with Elon Musk

Interestingly, Elon Musk's interactions with Substack highlight the platform's resilience and commitment to its vision.

• Initial Encounter:

  • Years before Substack, Hamish worked closely with Musk at Tesla but eventually left due to differing visions and challenges.

• 2023 Developments:

  • Substack's launch of "Notes" was perceived by Musk as a competitor to Twitter.
  • Musk offered to acquire Substack and appoint Chris Best as CEO, an offer Chris declined to maintain Substack's independence.
  • Subsequent attempts by Musk to suppress Substack links on X led to public disputes, but Substack's user base remained robust.

Notable Quote:

Hamish Mackenzie [70:39]: "Substack is not Twitter, but it's this subscriptions machine that helps the independent writers and creators of the world find new audiences and retain them."

Substack's Impact

Substack has significantly influenced the media landscape by providing a sustainable platform for independent journalism.

• Success Stories:

  • Publications like The Free Press, The Dispatch, and Jennifer Rubin's The Contrarian have thrived on Substack.
  • Substack has become the preferred launchpad for journalists leaving traditional media outlets.

• Economic Model:

  • The platform demonstrated that quality content could be monetized without relying on advertising.
  • Writers have the autonomy to set their pricing and retain the majority of their earnings.

Notable Quote:

Hamish Mackenzie [82:40]: "Substack is built around you. It's built around the direct relationship. It's built around owning your audience, owning your work, having your own space on the Internet."

Future of Substack

Looking ahead, Substack aims to evolve into a comprehensive platform for creators, integrating various media formats beyond written content.

• Expansion Plans:

  • Incorporating audio and video content to enrich the storytelling experience.
  • Enhancing tools for writers to easily produce and distribute diverse types of media.

• Sustainability and Growth:

  • Maintaining the balance between growth and sustaining the platform's core mission.
  • Continuing to uphold principles of free speech while ensuring a safe and respectful environment for all users.

Notable Quote:

Hamish Mackenzie [82:40]: "We want to bring all of that power to the people making stuff."

Conclusion

Chris Best and Hamish Mackenzie's journey with Substack underscores the importance of innovative business models and unwavering commitment to empowering creators. By fostering direct relationships between writers and their audiences, Substack has reshaped the media landscape, offering a viable alternative to traditional advertising-dependent platforms. Their story is a testament to the impact of visionary entrepreneurship in addressing the evolving needs of the digital age.

Notable Quote:

Hamish Mackenzie [84:35]: "Most people don't do the thing. Once you decide to do it, you need to work hard. You need some luck. But most of the great things in the world that don't exist are not because of a lack of talent or because of a lack of luck, but because of a lack of people setting out to do hard things."

Key Takeaways

1. Innovative Business Models: Substack's success is largely due to its subscription-based model, prioritizing writers' revenue over advertising.
2. Empowering Creators: By enabling writers to own their audience, Substack fosters genuine connections and sustainable income streams.
3. Resilience and Vision: Navigating challenges with a clear vision and commitment to core values has been pivotal in Substack's growth.
4. Future-Proofing: Substack's plans to integrate multiple media formats aim to keep it relevant and useful for creators in a dynamic digital landscape.

This summary captures the essence of the podcast episode featuring Chris Best and Hamish Mackenzie, highlighting their journey, challenges, and the impact of Substack on the media industry.