Kevin Kwok: How Systems Work

Our guest this week is Kevin Kwok and this episode is a special treat. Kevin was an investor at Greylock Partners, where he mainly focused on marketplaces, cryptocurrencies, and autonomous vehicles.

Kevin is particularly interested in understanding the underlying structures that shape industries and the core loops that drive companies. And among other things is currently working on a class on loops, network effects, and growth models.

In this wide-ranging conversation, Kevin and I jump between various topics such as A/B testing cities in China, Saudi Arabia and the future of democracy, and why we have democracies in countries and dictators in companies. 

Then, Kevin distills lessons from five extremely long biographies — four of them about US President Lyndon B. Johnson and one of them about Robert Moses, the “master builder” of New York City. Drawing on those Caro biographies, Kevin talks about power, where it originates, and how to think about systems.

Kevin has an in-depth knowledge of political history, governments, technology and growing a company in the internet age. Today, we’ll weave all of those threads together.


Time Stamps

1:27 Kevin talks about Robert Caro and his biographies on Robert Moses and Lyndon B. Johnson

3:08 How systems are the underlying reason for power in governments and companies

6:49 Kevin’s observations on the significant similarities between governments, religions and companies 

10:27 Kevin defines his theory of loops and how they are a pattern that can be seen in the most successful businesses

14:03 Kevin’s observation on how successful governments and businesses use loops to scale

17:34 The two ways Kevin sees legibility, why it’s so important in creating synchronization  between founders and employees, and how it’s the reason for Uber’s success

22:32 Kevin’s fascinations with Stripe’s thoughtful leaders and their transparency in growing the company

28:26 Why the outcome of loops is a leverage effect and how leverage can remove constraints and compound systems for more gain and less effort

34:49 Kevin talks about China’s goal to urbanize more of its country through A/B testing and his opinion on the pros and cons of their strategy

40:35 A brief history of Saudi Arabia, and its implications about whether democracy is declining.

46:25 Kevin’s opinion on the future of currency and how cryptocurrency is reshaping markets and their functions

51:32 Kevin talks about how infrastructure shapes how residents interact with their cities and the underlying problems that can arise

57:44 Kevin’s take on the new trend of contrarianism, how we’ve seen this pattern before and how to be most effective with a contrarian view

1:00:20 How Steve Jobs was a perfect example of contrarianism followed by impact

1:01:58 Kevin talks about his current focus on loops and his hope that humans continue pushing and testing this frontier


“It’s too easy to see what other people are doing. It’s so easy to raise capital if you can paint a compelling case for why there’s a good return. The best companies are companies that have these internal compounding proprietary advantages that get better and are impossible for anybody else to do other than them. That’s what I mean by loops. There’s different ways this can look. For example, network events as people come and talk about them is an example of a loop. The value of the user increases as more people join the network and that’s an internal loop that other people, who don’t have your network and don’t have your users, can’t benefit from.”

“People try to figure out how to build these systems that are independent from their hours put in. Fundamentally, your scarce resource is your hours. There’s just some finite cap and the level of productivity you can get. You can get more productive but there’s a finite cap to how much more productive you can get on your hours. As long as your output is contrast by your hours, there always is some cap to it. The question is, how do you get increased leverage on that and, how do you keep increasing the leverage on that at some point? Ultimately, capital is actually less of a constraint if you have a working business model than just the cognitive load and your ability to actively work on different things.”

“Think about how much has been shaped structurally, without even realizing it, by the decisions that were made by people crafting the Internet standards. All of those decisions people made have had huge downstream impacts on every layer that has been built on top of them. I don’t think we regret that. I think that we look at it and we say, let’s make sure we do all of the good things there. Let’s also think about the mistakes we’ve made as we create other industries, whether that’s the current waves of finance, or the current waves of tech, or whatever. When you’re in these nascent periods of new industries, how do we make sure that we help the people who we trust to be making those decisions be there at the end.”

“I think that a lot of people talk about contrarianism as being against the grain, and having views that other people disagree with. Of course, the challenge is the decision of, ‘I have this view that people disagree with. Is that actually a good view or a view that people disagree with because it’s a bad view?’ Similarly, it’s hard to judge the people around you because it could be that you have a view that is mainstream in your community, but it’s actually a contrarian view in the larger view of people. My view of contrarianism is that the important part isn’t in having this view that everybody else disagrees with. The important part is bringing it to everyone else, taking that view and causing it to become non-contrarian.”

“The people we should be most excited about that have contrarian views are the people who don’t just have them, they then go make sure that those views stop being contrarian and we all believe them. In fact, it’s the people who we look back and say, was that even that contrarian of a view? Actually, we all believe it. And I think that there is too much of a focus on the standing apart and being the one with the unique insight versus the part which is, ‘how do you educate everybody else and bring that back into the mainstream consciousness?’. That is a lot of work and proves that what you were thinking about was actually valuable and important. That’s the part of it that I wish was more focused on, not the part where you just feel hipster.”

Hey again, it’s David here one more time.

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To listen to other episodes or learn more about the North Star, you can connect with me directly at and you can always reach out on Twitter at david_perell. And if you enjoyed this episode, you’ll like the episode with Albert Wenger, a partner at Union Square Ventures. In this conversation we talk about Albert’s fourth coming book, World After Capital, and how technological progress has shifted scarcity for humanity. When we were foragers it was food that was scarce, during the Aquarian age it was a fight for land. Following the industrial revolution, capital became scarce. With digital technologies, scarcities are shifting once more. We need to figure out how to live in a world after capital, where the only scarcity is our attention.