Slack & Flickr: Stewart Butterfield

Episode Summary

Executive Summary: The episode traces Stuart Butterfield’s repeated pivots from failed online games to Flickr and then Slack, showing how each “failure” exposed a more viable product hidden inside the work. Butterfield argues that success came from recognizing user behavior, building around what people actually loved, and knowing when to stop persisting with the wrong business.

Main Topics: From unconventional childhood to tech curiosity (Priority: 4/5): Butterfield describes a counterculture upbringing in rural British Columbia, a name change from Dharma to Stuart, and an early shift from philosophy toward computers and coding. Early dot-com experience and first entrepreneurial lessons (Priority: 4/5): He worked at Communicate.com during the dot-com boom, saw chaotic leadership and a crash, then moved on to Gradfinder and other early web projects, learning the volatility of internet businesses. Game Neverending and the accidental birth of Flickr (Priority: 5/5): Butterfield’s team tried to build a web-based MMORPG, but technical tools built for the game were repurposed into Flickr after funding constraints and a flash of insight during a sick trip to New York. Acquisition by Yahoo and lessons from scale (Priority: 4/5): Flickr’s sale to Yahoo brought money and visibility, but also bureaucracy and slower execution; Butterfield frames the experience as rewarding but painful boot camp. Second game failure and the emergence of Slack (Priority: 5/5): After another ambitious game, Glitch, failed commercially, the team discovered their internal communication tool was more valuable than the game itself and pivoted quickly to build Slack. Slack’s product-market fit and explosive growth (Priority: 5/5): Slack overcame skepticism in enterprise software by creating a persistent, searchable communication archive that improved the more it was used, leading to rapid adoption and massive valuation growth. Butterfield’s philosophy on pivots, luck, and wealth (Priority: 4/5): He emphasizes that pivots require honesty about failure, that luck and timing matter as much as skill, and that his wealth should be used philanthropically rather than as a source of additional personal happiness.

Key Arguments: Successful startups can emerge from failed projects when founders pay attention to what users actually value rather than what they initially intended to build. Knowing when a product or company cannot work is as important as perseverance; stubbornly continuing can be a mistake. Internal tools built to solve a team’s own problems can become scalable businesses if the underlying pain point is common across many organizations. Slack’s core advantage was not just chat, but a shared, persistent archive of work communication that improved with use. Exponential success often compounds: user growth attracts press, investors, talent, and more growth, while failure can create a downward spiral. Butterfield argues that much of startup success is not pure genius but a combination of effort, timing, and favorable momentum. Wealth beyond a certain level adds little happiness; the more meaningful response is to deploy resources toward philanthropy and social impact.

Data Points: Flickr sale price: $20 million - Yahoo acquired Flickr in late 2004 / early 2005 Yahoo stay requirement: 3 years - Butterfield had to remain at Yahoo to fully vest earn-out compensation Yahoo tenure: 3.5 years - He stayed slightly longer than required Initial money for Glitch: $1.5 million - First funding round for the second multiplayer game effort Average player spend in Glitch: $70 per year - Early paying users of the game paid a relatively high annual amount Slack early revenue: $1 million - Within a few weeks of official launch in February 2014 Slack raise / valuation: $120 million at $1.2 billion valuation - By October 2014, about two years after Glitch shut down Slack valuation later: $5.1 billion - Reported in September 2017 Company size growth: About 10-12 employees to around 80 in one year; later to 1,000 - Slack’s rapid scaling after launch Team laid off from Glitch: 37 people - Butterfield states everyone affected got another job Pro account pricing model: $80 per person per year - Flickr monetization model described in the interview Internal communication tool adoption: Less than a week to decide pivot - Butterfield says the Slack pivot decision happened very quickly once the team recognized the value

Pivotal Quotes: "We were sure that this was going to be something that was big, but we went back to our investors... and they were like, good luck with your stupid little thing." — Stuart Butterfield: Describing how investors dismissed the early Slack idea when it was still just a pivot from game development "I lost... Flickr lost, and the game won." — Stuart Butterfield: Explaining the internal vote over whether to pivot away from the game and toward Flickr "I don't believe this can work. Like, I don't believe it anymore." — Stuart Butterfield: The late-night realization that Glitch was not commercially viable, prompting the shutdown

Implications: The episode suggests that great companies often come from disciplined pivots, not original perfection. For builders, the lesson is to watch user behavior, cut losses early, and turn internal solutions into products when they clearly solve a broader problem.