0:00

boys and girls, ladies and germs. This

0:02

is Tim Ferriss. Welcome to another episode

0:04

of The Tim Ferriss Show, where it

0:06

is my job to deconstruct world -class performers,

0:08

people who are arguably the best at

0:10

what they do. How do they do

0:12

it? What are their influences? Favorite books,

0:14

frameworks, lessons learned, things

0:17

that you can apply to your

0:19

own life. And I have someone

0:21

you may not have heard speak

0:23

before on the podcast today, Rich

0:25

Barton. close friend of Chris Saka

0:27

and some other guests we've had.

0:29

He is the co -founder and

0:31

co -executive chairman of Zillow, a company

0:33

transforming how people buy, sell, rent,

0:36

and finance homes. Before Zillow... Rich

0:38

founded Expedia within Microsoft in 1994

0:40

and successfully spun the company

0:42

off as a public company in

0:44

1999. He served as president,

0:46

CEO, and board director of Expedia

0:48

and later co -founded and served

0:50

as non -executive chairman of Glassdoor.

0:52

He has done so many

0:54

different companies and he has a

0:56

lot of stories from the

0:58

trenches, a lot that you can

1:00

use that is tactical and

1:02

practical. He's also super fit, super

1:04

active. I would

1:06

say a great father and husband.

1:09

He is an incredible human being, sort

1:11

of full stack. And that's part of the

1:13

reason I really wanted to have him

1:15

on the show. We did it in person.

1:17

We covered a lot of ground and

1:19

I think you're going to enjoy it. I

1:21

loved it. So with just a few words

1:23

from the people who make this podcast

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possible, we'll get straight to the meat

1:28

and potatoes and a wide ranging conversation

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with none other than Rich Barton. My

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first book, The 4 -Hour Workweek,

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get rid of as much as possible,

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eliminate. But sometimes there are things that are

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a huge hassle, like expense management for a

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lot of companies, which you can't get

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rid of. They are essential to your business.

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crescentcapital.com slash. Tim. And disclosure, I

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are no material conflicts other than

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this paid testimonial. And of course,

5:00

all investing involves risk, including loss

5:03

of principle. So do your due

5:05

diligence. I

5:30

know ADQ a little bit. He's

5:32

a friend. And there was a

5:34

point at which, you know, I

5:36

like to observe magic product things.

5:38

And of course, Apple has tons.

5:40

But my typical morning news setup

5:42

is I'm kind of doing my

5:44

email and sifting through things while

5:46

I drink my coffee. And I've

5:48

got my iPad set up next

5:50

to it, rolling, you know, CNBC

5:52

quietly on mute. And

5:54

at one point, a couple of years ago,

5:56

I moused off the left edge of

5:58

the screen and it seamlessly went onto the,

6:00

and all of a sudden my mouse

6:02

was on the iPad. And I was like,

6:04

oh my God, it just decided because

6:06

it was the same guy logged in, it's

6:08

an extended monitor. And I texted him

6:10

immediately. I'm like, oh, Eddie. Why

6:14

do you have CNBC?

6:17

playing concurrently is that just old

6:19

habits die hard or is it

6:21

let's see if anything cataclysmic or

6:23

monumental has happened that i need

6:25

to be aware of it's my

6:27

favorite source of news because business

6:29

news is generally happy yeah got

6:31

it just don't wallow in the

6:33

bullshit yeah and regular news makes

6:35

me feel bad yeah and cnbc

6:37

at best makes me feel good

6:39

and most of the time is

6:41

just mid That's fine. And I

6:43

get the news. I'm interested in

6:45

business and companies and strategy and

6:47

trends. And it is a pretty

6:49

funny channel. It kind of gets

6:51

on repeat. You don't need to

6:53

watch it very long. But they

6:55

get good interviews too. I usually

6:57

don't have the volume on. I

6:59

have the closed caption scrolling. And

7:01

then if something catches my eye,

7:03

I don't know how to do

7:05

it. So let's take a closer

7:07

look then at the other screen.

7:09

Yeah. You have your coffee.

7:11

Yeah. What time is this? Yeah,

7:13

I'm a pretty early riser. 6 .30

7:15

I get up usually and long

7:17

before Sarah, my wife. And so

7:20

these hour and a half, two

7:22

hours I get in the morning

7:24

are nice. My kids have all

7:26

left the house now. There was

7:28

a routine when my kids were

7:30

in the house that was obviously

7:32

very different and really fun. I

7:34

can talk about that. But now

7:36

I have two hours of... Just

7:39

catch up on the stuff in my news

7:41

feed, which is my inbox, my email inbox.

7:43

I'm kind of old school that way. And

7:45

as I go through that, I'm catching up

7:48

on the news on my iPad. I

7:50

have a smoothie every morning with

7:52

lots of stuff. What's the stuff? No

7:54

supplement kinds of things, but lots

7:56

of... Cat testicles? I

7:59

am not one of those

8:01

guys. I am not one of

8:04

the longevity supplement people, but

8:06

I'll tell you what's in it.

8:08

It's about three or four

8:10

ounces of oat milk,

8:12

ice, an apple. It used to

8:14

be a banana. I've switched to kind

8:17

of two -thirds of an apple. Pistachios,

8:20

macadamias, a

8:23

handful of blueberries. My

8:25

favorite electrolyte. I'm getting ready for my

8:27

workout. It's not very big. My

8:29

favorite electrolyte is Procari Sweat. Yeah, the

8:31

blue can, man. I had a

8:33

lot of that when I lived there

8:35

as an exchange student. My nutritionist

8:37

says that's the one. And I'm like,

8:39

okay, I'd been taking another one,

8:41

using another one. She's like, no, this

8:43

is the one. Not much. A

8:45

prune. Prune. Prune. Keeps

8:48

things moving. Keeps things moving, and that's

8:50

very important. Young people out

8:52

there don't really realize how important that is

8:54

yet. But as you age, you

8:56

realize how that can affect your day,

8:58

really. Having everything moving. Here's a little

9:00

hack. I'm not really a hacky guy,

9:02

but I do have a lot of

9:04

quirks, I guess. Hyperice, you

9:06

know that company that makes the, okay, they have

9:08

a thing. I think they bought a bunch of

9:10

products, but there's a back one called the Venom. You

9:13

must have run into that. I

9:15

think it heats and vibrates. Yes.

9:17

Yeah. So

9:19

I actually, for my whole kind

9:21

of 45 minutes of that routine

9:23

at the kitchen table, you know,

9:25

with a lot of light coming

9:27

in as soon as the sun's

9:29

up, I have it on repeat.

9:31

I'm wearing that Venom. Oh, my

9:33

God. That loosens everything up, too.

9:35

you mentioned before your workout. So

9:37

this is all pre -workout? Yeah.

9:39

I need to get things going

9:41

and feel settled, a little bit

9:44

settled, and brain on before I

9:46

work out. Coffee helps, too.

9:48

Coffee helps all that. Yep. And I don't

9:50

drink a lot of coffee. Today I had

9:52

a little too much because I'm off time

9:54

zone a little bit. But I'll have one,

9:56

maybe two cups. And that'll be the caffeine

9:58

for the day. Yeah, got it. So I

10:00

go through that and once everything's, you know, make

10:03

my ablutions and change into my

10:05

workout stuff. Rinse your face with

10:07

some holy water. And

10:09

pretty much every day I do a workout.

10:11

I can't really get my mind right without that.

10:13

All right. So we're going to talk about

10:15

the workout for people who are audio only. This

10:18

guy looks like a, I don't

10:20

know how you, a Marvel character

10:22

meets Abercrombie and Fitch model. Not

10:25

to mention scion of business. It's

10:27

unfair. I don't know how I

10:29

got the short straw in this

10:31

genetic and habit lottery, but we're

10:33

going to talk about the training

10:35

because I have this working pet

10:38

theory that longevity may be inversely

10:40

correlated with the number of things

10:42

that you do for longevity. In

10:44

other words, there are a few

10:47

things that really matter, but then

10:49

there's a long tail. of things

10:51

of questionable value that also have

10:53

unknown, uncharted side effects. So when

10:55

you start throwing the kitchen sink

10:57

plus plus at your body, the

10:59

likelihood of you heading in the

11:02

wrong direction is probably higher or

11:04

just as high. My observation is

11:06

the harder you push against something,

11:08

the harder it pushes back. And

11:10

I think the people who are

11:12

pushing really hard at the longevity

11:15

and the supplement thing and the...

11:17

The whole day scheduled out lifestyle

11:19

things to improve health span. Yeah.

11:21

Most of that's probably not useful. Yeah.

11:24

There's some basics, you know, and maybe

11:26

the most important basic is when I was

11:28

younger, my kids were in the house

11:30

because I got up early. I was to

11:33

get the kids to school parent. Yeah.

11:35

While Sarah became more beautiful. She stays up

11:37

late and I love to cook. I've

11:39

had several jobs as a kid growing up

11:41

where I was a short order chef

11:43

and worked in a lot of kitchens and

11:45

I love to cook. And

11:47

so our house is set up.

11:50

We have a kitchen island with

11:52

a big bar with stools. And

11:54

the cooktop is on the other

11:56

side. And whenever the kids wandered

11:58

downstairs -eyed, I was their short -order

12:00

breakfast chef. And anything they wanted,

12:03

I would make, which was so

12:05

fun. It was like the breakfast

12:07

buffet with the Four Seasons or

12:09

something. Whatever they wanted. I could

12:11

whip it up really, really fast

12:13

because you get that skill when

12:16

you're a short -order chef. My younger

12:18

boy had some kind of ADHD

12:20

stuff and started taking the meds.

12:22

I can't remember how old he

12:24

was, 10, 12. And

12:26

those meds make kids, it's an

12:28

appetite suppressant. Oh, for sure. Okay. So

12:31

maybe you know. And I was

12:33

a typical parent. Our primal urge is

12:35

to feed our children. That's it.

12:37

Like feed and care for our

12:39

children. That is the overriding program. That

12:41

kind of puts everything else down. And

12:44

so I got to the point where I

12:46

was so worried about how skinny he was

12:48

and he wasn't eating the rest of the

12:50

day. He was hungry in the morning. And

12:52

I would like make a 12 egg frittata

12:54

and like put potatoes in it and sausage

12:56

in it. And he downed the thing. And

12:59

I'm like, okay, he's good for the day. The

13:01

anaconda diet, just one huge meal.

13:03

And it works. Yeah. And the

13:05

punctuation on this one, aside from

13:08

that just being really quality time.

13:10

regardless of what kind of mood the

13:12

kids are in is just really quality.

13:14

I cherish it. I took a picture

13:16

most days. Okay. Totally

13:19

candid. There's no posing. I would sneak

13:21

a picture every day. And now I

13:23

have a folder called the breakfast club

13:25

on my, you know, in my picture,

13:27

my iPhone pictures. And I have like

13:29

a thousand pictures and it's a time

13:31

series of these kids growing up. Yeah.

13:33

It's a virtual possession, but it's my

13:35

most prized possession. All right, we're going

13:37

to double click on a bunch of

13:39

things we passed over. Let's

13:42

hop for the entrepreneurial set listening.

13:45

This is also related to more

13:47

than just pure entrepreneurship, but let's

13:49

see if this is dead end

13:51

or if it takes us somewhere.

13:53

Who was Brad Chase? Brad

13:55

Chase? Yeah. What impact did he have

13:58

on your life? He was a great

14:00

guy. He was my first real boss

14:02

out of college. It's not

14:04

quite right, but it's close to right. Brad

14:06

was a group product manager at

14:08

Microsoft. Microsoft was my, you know,

14:10

I'll call it my first job

14:12

out of college. It

14:14

had, this is 1991, Microsoft had only

14:16

about 3 ,000 people at the time.

14:18

And just for reference, because I have

14:21

no idea, how many employees do you

14:23

think they have now? It's

14:26

going to be a multiple of

14:28

that, of course. 300, 400 ,000. Yeah,

14:30

orders of magnitude. Multiple orders of magnitude.

14:32

Two to three. And the

14:34

product managers were kind of this elite

14:36

little group of really smart people. We

14:38

weren't very big. And he was my

14:40

boss, and we were working on MS

14:42

-DOS 5, which maybe I would say

14:45

we'll have to go two standard deviations

14:47

at in your audience distribution curve to

14:49

find anybody who really knows what MS -DOS

14:51

5 was. But it was a really

14:53

big operating system for Microsoft at the

14:55

time, and we made an upgrade. And

14:57

the feature was we

14:59

broke the 640K barrier.

15:03

which you're not going to engage on

15:05

the geeky stuff. But it was

15:07

a really big product. And my job

15:09

was to create the packaging, manage

15:11

the manufacturing, and figure out how to

15:13

get this physical product into the

15:15

Egghead. Some of you will remember Egghead.

15:17

Egghead was a retail software store.

15:20

And to push the product out into

15:22

Egghead. That was my first job.

15:24

And Brad was a guy who, he's

15:26

one of my mentors. I only

15:28

worked him for a short period of

15:30

time. Big

15:32

idea, thinker, you know, big

15:34

risks, big bets. And he encouraged me.

15:36

At a very young age, he funded

15:38

me to take a really big swing

15:41

at something and supported me in it.

15:43

And it failed miserably. Is this the

15:45

book project? Yeah. You want to tell

15:47

people about it? Well, I don't know

15:49

how that interesting is, other than the

15:51

lesson of take big swing. It is,

15:53

but the details help paint a picture.

15:55

People can conjure a visual in their

15:57

head. All right. It's become a huge

15:59

series. It's a series for dummies, blank

16:01

for dummies. Yep. And the

16:03

book that the dummies series

16:05

was founded on was DOS for

16:08

dummies, believe it or not. It

16:10

was like the best -selling. book

16:12

about software of all time. And

16:14

I was like, I'm a young

16:16

product manager. I want to sell

16:18

more MS -DOS 5 upgrades. And

16:21

I was like, okay,

16:23

we have all these software retailers where

16:25

people go. But the really big thing

16:27

at the time, believe it or not,

16:29

was Barnes & Noble and Borders Bookstores.

16:31

Bookstore experience was huge back then. And

16:34

DOS for Dummies sold millions and

16:36

millions of copies of this book

16:38

in Barnes & Noble and Borders.

16:42

was like, why don't we do a

16:44

bundle with DOS for Dummies and

16:46

have that be the manual for the

16:48

upgrade? Bundle it together,

16:50

the book and the upgrade.

16:52

Seems reasonable. And distribute it through

16:55

bookstores. How brilliant. And

16:57

so I went and met with

16:59

one of the Riggio guys at Barnes

17:01

& Noble. I met with the

17:03

guy who created the Dummies series, this

17:05

guy John. So I met with

17:08

all these people. We designed the product.

17:10

It was really, I was feeling

17:12

pretty like a big deal. Built a

17:14

bunch of it at probably cost

17:16

us $8 to $10 a unit, which

17:18

is a lot for cogs, right?

17:21

Cost of goods sold. I can't remember

17:23

how many we built, but it

17:25

was at best a C, maybe

17:27

a D. What was the

17:30

retail price? You hit the

17:32

problem. The problem was... People are going

17:34

in to buy a $12 book. And it

17:36

was a $54 price tag or a

17:38

$49 price tag, which is basically what the

17:40

software cost at Egghead. And it kind

17:42

of looked a bit too much like a

17:44

book. I kind of made it look

17:46

like a book. It wasn't the

17:48

greatest cover. Anyway, I'm embarrassed about what it

17:50

looks like now. I have one, of

17:52

course, as a reminder. But yeah, the

17:55

shock value was too much. People didn't realize there

17:57

was software in it. And

17:59

so we ate a bunch. We

18:01

ended up getting rid of all

18:03

the inventory, but it was not

18:05

a success. And the amazing thing,

18:07

depending on where your audience is

18:10

in their careers, like you work

18:12

at a lot of places out

18:14

there and great organizations encourage innovation,

18:16

encourage big idea people to take

18:18

big swings and do not punish

18:20

them when it doesn't work out

18:22

according to plan. If that

18:24

happens too many times, maybe there's a

18:26

pattern and somebody should go find another

18:28

job. But Brad Chase, back to Brad,

18:31

sat me down. I thought I was for my review

18:33

and I thought I was going to, who knows?

18:35

It was a 10, $20 million mistake. And

18:38

I was a young kid. And

18:40

he said, I remember distinctly, he said,

18:42

all right, what's your next big

18:44

idea? Amazing.

18:46

That is that Microsoft was and

18:48

is an amazing organization because of that

18:50

kind of culture. Wow. How

18:53

have you, if you have sort

18:55

of taken that forward into companies

18:57

that you've built or just philosophically

18:59

or operationally speaking, how do you

19:01

encourage that? Because there must be

19:03

some constraints on things so that

19:05

you don't light the whole house

19:07

on fire. Yeah. Right. Yeah. How

19:09

do you think about enabling people

19:11

to innovate? You don't want learned

19:13

helplessness where they're afraid to do

19:15

anything. Right. At the same time,

19:17

you don't want some rogue trader

19:19

like. That's right. That's

19:22

right. or whatever. Yeah, it's really hard.

19:24

But everything ultimately boils down to

19:26

the people that you hire and the

19:28

people you choose to work with

19:30

and the people you keep. And

19:33

saying your culture is XYZ

19:35

is very different from having

19:37

people who channel those traits

19:39

that you want. And so

19:41

my method for doing this

19:43

is to make sure we're

19:45

really diligent about finding those

19:47

innovators and the entrepreneurs sometimes

19:49

who the intrapreneurs, let's call

19:51

them, the inside entrepreneurs, and

19:53

protect them a little bit

19:55

because sometimes they're different. And

19:57

mainline corporate culture sometimes rejects,

20:00

often rejects the innovators and

20:02

the ones who want to

20:04

disrupt whatever, just rock the

20:06

boat a little bit. And

20:08

you really do need to

20:10

rock the boat to innovate.

20:12

And so the leadership needs

20:14

to hire, cultivate, protect, and

20:16

invest in those people. Yeah.

20:18

The foreign bodies so they don't get

20:21

rejected by the corporate immune system. Which is

20:23

just, it's just natural. Yeah. You know? All

20:26

right. So let's come back to one

20:28

thing you mentioned. You said,

20:30

in effect, not totally true, but let's

20:32

consider Microsoft first job out of college. What

20:34

was the actual first job college? I

20:36

was, you know, I was one of these

20:38

high performance. Confession coming. Yeah. I

20:40

was just one of those kids. You know, I

20:42

went to Stanford. Was

20:45

an engineer. Management consulting? Yes.

20:48

No. Say it ain't so rich. I know,

20:50

but it was funny. There's a good

20:52

story here. I

20:54

mean, I don't know if it's a good story, but we'll tell it. Yeah,

20:56

man. I was like, success kid. Do

20:58

well. Loved that, identified that way. And

21:00

so, of course, whatever the hardest job

21:03

that came to interview at Stanford when

21:05

I was a senior, of course, that's

21:07

the job I wanted. And there was

21:09

like strategic planning at Disney. There was

21:11

the kind of investment banking training program,

21:13

analyst program. And there was like the

21:15

strategy management consultant. And those were like

21:17

the big ones. And it was the

21:19

most competitive, hardest to get. So that's

21:21

how I got tracked. And I took

21:23

a job as a strategy consultant in

21:25

Cambridge, right out of college. I

21:28

knew pretty damn quickly it wasn't for

21:30

me. Was it like BCG? It was

21:32

a spinoff of BCG called Alliance Consulting

21:34

Group. Great group of people. Super smart.

21:36

It was going into a recession, though,

21:38

in 1989. And so a lot

21:41

of people ended up losing their jobs.

21:43

However, the interesting thing was one

21:45

of my besties at Stanford, Nina

21:47

Roberts, who was an engineer with me.

21:49

We were both interviewing for all the same

21:51

jobs. And, you

21:53

know, she didn't get the big job. But

21:56

she got this little tech company in

21:58

Seattle, Microsoft, which, of course,

22:00

I knew. The companies that I really loved

22:02

were Microsoft, Apple. All I needed to

22:04

do was buy Microsoft and Apple stock back

22:06

in 89. That would have been, yeah,

22:08

I wouldn't be talking with you now. Microsoft,

22:11

Apple, I liked Patagonia. That was a brand

22:13

that I identified with. Anyway, Nina got the job

22:15

as a product manager at Microsoft. And

22:18

she went to Seattle. I went

22:20

to Cambridge. And we kept

22:22

in close touch. And I knew pretty quickly

22:24

it wasn't for me. And she

22:26

knew Microsoft was the place for me and

22:28

was like on the horn with me every

22:30

week saying, you got to come out here,

22:32

you got to come out here. And so

22:34

it took about a year to finally get

22:36

the flight out and the job offer. How

22:38

did you know it wasn't for you? What

22:40

about it wasn't for you? Because there are

22:42

some people who thrive in those environments, right?

22:44

Yes, yes, yes, yes, yes, yes. You

22:46

know, a trite answer would be... up

22:48

in a suit and tie and wearing

22:50

uncomfortable shoes wasn't for me. I liked

22:52

to go barefoot. That really

22:54

wasn't what it was. It

22:57

kind of makes you feel important

22:59

when you dress up. And I was

23:01

presenting things to CEOs and stuff,

23:03

and it did feel important. And I

23:05

got a really good business school

23:08

education in competitive strategy, the Michael Porter

23:10

stuff. I basically got an MBA

23:12

in this one year. What I discovered

23:14

about myself... And I discovered

23:16

it there. I probably knew it before,

23:18

but I hadn't really focused on it.

23:20

I believe the world is somewhat divided.

23:22

It isn't totally binary, but it's a

23:24

continuum. But it's maybe a barbell. Clients

23:26

and servers. Which

23:28

is kind of a geeky software

23:31

architecture reference, but people get

23:33

it. There are all

23:35

of these industries that

23:37

are set up to be

23:39

service provision industries. Lawyers,

23:42

doctors, consultants, academics. And

23:44

the benefit of these industries is

23:46

you get to indulge your curiosity

23:48

and deal with lots of different

23:50

clients and lots of different problems.

23:52

But oftentimes with consulting, you're not

23:54

seeing things through to the finished

23:56

product. And it

23:58

was apparent to me really quickly

24:00

that I derived my jollies, on

24:03

the other hand, from being a

24:05

builder and the client. loved

24:08

what the clients were doing more than what we were

24:10

doing when I was a consultant. So it became clear

24:12

to me that I was a client. I wanted to build

24:14

things. I derived my jollies that way. And so I

24:16

started looking. And it was good to discover at a

24:18

pretty young age. And then I got

24:20

to Microsoft and it was like, I

24:22

was a kid in a candy store.

24:24

I never left the place. Thank God for

24:27

Nina, was it? Nina. Wow. I hope

24:29

she still gets a box of chocolates. We're

24:32

still close. She's great. All

24:34

right. So let's talk about

24:36

then. Microsoft

24:38

and Expedia. How does this

24:41

happen? I'll just leave it

24:43

broad. Well, back

24:45

to the earlier conversation we had

24:47

about taking big swings and intrapreneuring.

24:49

The how on how this happened

24:51

is that Expedia was a, quote,

24:53

venture startup inside of Microsoft. And

24:55

then it spun out and we

24:57

can get to that. But the

24:59

real reason I even got into

25:01

it and left the operating system

25:04

group was that my wife, Sarah,

25:06

who you just saw. is a

25:08

doctor and she was applying to,

25:10

she was in medical school at

25:12

Northwestern and was applying to her

25:14

residencies. She's an OBGYN. And there's

25:16

only one residency, OBGYN residency in

25:18

Seattle where I lived with only

25:20

six or seven residents a year

25:22

and one of the most attractive

25:24

residencies in the country. So super

25:26

competitive. We were engaged and then

25:29

soon married after that, we got

25:31

married pretty young. And

25:33

I was like, well, she's not going

25:35

to match out here in Seattle, so

25:37

I'd better get ready to move to

25:39

New York City, or this probably would

25:41

have been New York City where she

25:43

matched. This was during the Windows 95

25:46

launch. I left the Windows 95 team,

25:48

and I went to the consumer division

25:50

at Microsoft, which was kind of small.

25:52

Now, this is going to maybe

25:54

sound like a side quest, but when

25:56

you say you moved, did you just

25:58

put in a request? How easy is

26:01

that to do? At great companies, it's

26:03

relatively easy. Relatively easy. Especially for people

26:05

who are tagged as high potential. But

26:07

it's still not easy, of course. Brad,

26:09

who was my boss at the time, couldn't

26:12

believe we're launching Windows 95. This is

26:14

going to be the biggest launch of all

26:16

time in the software industry. Maybe one

26:18

of the biggest product launches of all time.

26:20

I don't know if you remember that.

26:22

I do. It was a big deal. And

26:24

about six months before we launched, I

26:26

had a big job there. I interviewed for

26:28

jobs over in the consumer division. and

26:30

took on a portfolio of multimedia

26:32

CD -ROMs. And the reason I did this,

26:35

I was interested in consumer marketing,

26:37

obviously, but the reason I did this

26:39

was that I was going to have

26:41

to leave Microsoft. And I

26:43

wanted to start a company. And it wasn't going

26:45

to be an operating system. That

26:48

just wasn't going to happen for reasons

26:50

that we don't need to get into, but

26:52

the government made clear to Microsoft at

26:54

one point. So I figured it was going

26:56

to be a consumer software company, and

26:58

I wanted to go learn that. And the

27:00

folks over there were fantastic. Microsoft was

27:02

fantastic. And I took on a portfolio of

27:04

CD -ROMs. Some of you out there will

27:06

not even know what that is. This

27:08

is kind of basically precursor to the internet.

27:10

It's the thing your doctor gives you

27:12

that you can't make any use of with

27:14

all your images. It's true. It's true. And

27:16

some artists, some musicians still hand

27:19

out CDs. It's the artifact that

27:21

your doctor gives you. It

27:24

was what came in the

27:26

red envelopes at Netflix. Anyway,

27:28

so these things were

27:31

like, Wikipedia before Wikipedia

27:33

was called Encarta. It

27:35

was a multimedia CD -ROM.

27:37

And one of the products

27:39

in my portfolio of

27:41

rando ideas was an Encarta,

27:43

so an encyclopedia of

27:45

travel guides. This is really

27:48

good. You take a whole bookshelf, a

27:50

whole shelf of... Travel guides cram it

27:52

down onto one CD -ROM, pictures, audio.

27:54

Wow, what could be better for travel

27:56

planning? And that was one of them.

27:58

And I remember going into my first

28:00

product review with Bill Gates and others,

28:02

which was kind of every six months,

28:04

every year kind of thing that the

28:06

product people did. And I

28:08

was used to business plans with

28:10

billions of dollars from the operating

28:12

system group. And I was responsible

28:14

for this thing. And I'm like,

28:16

Bill, this is tiny. The whole

28:18

travel book industry in the US

28:20

is maybe $100 million. And that's

28:22

the whole thing. And so really,

28:24

A, there's not an opportunity. And

28:26

B, you can't travel with the

28:28

CD -ROM. The

28:30

laptop at that point was this compact suitcase

28:33

that weighed 20 pounds. I'm like, that's when

28:35

you want the travel guy when you're traveling.

28:37

So even though I know it's your idea

28:39

and it's kind of fun, it's

28:41

not going to work.

28:43

That said, I demoed Easy

28:45

Saber on Prodigy. Prodigy

28:47

was an online service. Oh, yeah. Okay.

28:49

And I was a geeky online guy.

28:51

Right. And EasySaber was

28:53

a tool for travel

28:55

agents to use at home

28:58

on Prodigy to access the

29:00

airline reservation systems. Okay. So

29:02

it wasn't meant for consumers, but I could

29:04

get access to it on Prodigy. And I

29:06

demoed that for him. He actually knew about

29:08

it. I demoed that for him. I'm like,

29:10

this is a change of the world thing.

29:12

If we can have consumers. be able to

29:14

do this, then we can become the largest,

29:16

e -commerce wasn't a word then, we could

29:18

become the largest seller of travel in the

29:20

world. That was my pitch, my dream. The

29:22

pitch further went, and fund me on the

29:24

outside because I'm going to have to move

29:26

to New York because my wife, she's not going

29:28

to match out here. And this doesn't want

29:30

to be a Microsoft business anyway. It's travel

29:32

first, software second, not software first, travel second.

29:35

He agreed with all that. He thought it

29:37

was an awesome idea. He also liked

29:39

that we could rebuild all the mainframes on

29:41

Windows NT, which is a different conversation.

29:43

So he loved it. He greenlit it. He

29:45

was my first venture capitalist. He said,

29:47

no, don't go do it on the outside.

29:49

Do it here. We have a great

29:51

team that we'll put together. And I'm sure

29:53

Sarah will match her residency at University

29:55

of Washington. High degree of

29:57

confidence. That

29:59

was the end of that. She did match.

30:01

I honestly, to this day, don't know

30:03

if there was any thumb on the scale.

30:06

I doubt he had that kind of

30:08

power, but she matched. I stayed in Seattle.

30:10

He had promised me that he'd consider

30:12

spinning it out if it got big enough.

30:14

And then that's what happened. So we

30:16

spun in the height of the internet bubble,

30:18

which is so bubbly that people today

30:20

who think we're in a bubble have no

30:22

concept. I mean, you remember. Oh, yeah.

30:24

I moved out right before the Thelma and

30:26

Louise car went off the cliff. I

30:28

mean, I moved out to the Bay Area

30:30

in 2000. It was crazy. Impeccable timing. We

30:33

all thought we were the smartest people in

30:35

the world. We really did. And we all thought

30:37

this. people in New York City just didn't

30:39

get it. And then there was

30:41

comeuppance. But Expedia was a really

30:43

good business. I was working for Balmer

30:45

at the time. And I

30:47

asked Steve for $100 million to spend on

30:49

a television advertising campaign because I said,

30:51

we are becoming. We can do this. We

30:54

are in the pole position. We can

30:56

build the biggest brand and travel. And

30:58

Steve laughed at me like,

31:00

no, we don't do that. I

31:02

said, well. Dogshit.com is

31:04

going public right now at a billion -dollar

31:07

valuation. It wasn't quite that. It was like

31:09

$500 million, which seemed big at the

31:11

time. Really dumb, stupid stuff in my closet.com

31:13

was going public. Put it

31:15

on the web. Anyway, and I was

31:17

like, the public markets would give us

31:19

$100 million, and it'll cost basically nothing.

31:21

And so let's give this a try.

31:23

Let me spin this thing out. It's

31:25

a good HR experiment, human resources experiment,

31:28

too. Now, just explain for folks, why

31:30

does spinning something out make sense? What

31:32

are the advantages of doing that to

31:34

them and to you? Okay.

31:36

I mean, the financial answer to

31:38

that is unlocking value that is stuck

31:40

in a company. And this happens

31:42

a lot. That's kind of

31:44

the most uninteresting one. Unlocking

31:47

value meaning... It's not getting valued

31:49

by the shareholders as being part

31:51

of Microsoft. Right. But if you

31:53

take it public or do something

31:55

outside of Microsoft, all of a

31:57

sudden... It could attract its own

31:59

investor base that were interested in

32:01

in particular. So there's a conglomerate

32:03

discount, generally speaking, in the public

32:05

markets where the more... stuff you

32:07

have in a big company, the

32:09

less the individual businesses are valued.

32:11

There was a period of American

32:13

business history where conglomerates actually got

32:15

a premium, like in the GE,

32:17

the Jack Welch GE days, and

32:19

Honeywell, and there were all these

32:21

big conglomerates. And then the pendulum

32:23

swung the other way. Microsoft could

32:25

have cared less about the financial

32:27

play, though, however. I pitched it

32:29

mostly as an HR experiment. Microsoft

32:32

was getting so big. at

32:35

the time, that people could hide

32:37

out in random corners of Microsoft. And

32:39

as long as Windows NT, the

32:41

operating system, succeeded, or Microsoft Office succeeded,

32:43

they could make a lot of

32:45

money off their stock options. And

32:48

so that's basically

32:50

a compensation accountability disconnect.

32:53

And so some of the

32:55

best people at Microsoft, there

32:58

was this... Field of dreams, wild

33:00

opportunity outside of Microsoft, even though it

33:02

was the place everybody wanted to work at

33:04

the time. Probably still is. There were

33:06

great people, like I'll just say like me,

33:08

like I would not have stayed. I

33:10

would have gone out and started something on

33:12

the outside because the opportunity was so

33:15

great. And so Steve Ballmer understood

33:17

this really well. This was like

33:19

a talent retention pitch. Sort of, sort

33:21

of. And so he's like, yeah, we'll take a

33:23

flyer on it. And that was great. And Greg Maffay,

33:25

who was the CFO at the time, he became

33:27

my chairman and he was really supportive. He

33:29

and I still work together. He's been a

33:31

great mentor to me. We took 150 people out

33:34

of Microsoft. We gave them the choice if

33:36

they wanted to stay or come. All

33:38

but, I think, two people. We had

33:40

150. I was all but two people decided

33:42

to come, take the adventure, give it

33:44

a rip. I was 32 years old, 31,

33:46

32 years old. Now, were you pitching

33:49

those people yourself? Yeah. What was the pitch?

33:51

Because it's going to be different than

33:53

the pitch to... Walmart, right? Yeah,

33:55

way different. I mean, it was,

33:57

I had had this idea for a

33:59

while. And so the people I recruited

34:01

back to an earlier comment I made,

34:03

the people that were on the team

34:06

were the people who were the adventurers

34:08

and the ones who wanted to, who

34:10

would have left. Okay. And so this

34:12

was all about the adventure. The hardest

34:14

sell was not the people. It was

34:16

the spouses. And

34:18

I remember several dinners like with

34:20

an S1 for those, you know,

34:23

it's an IPO document with our

34:25

Expedia draft of the S1 lying

34:27

on a dinner table at Wild

34:29

Ginger in Seattle with a skeptical

34:31

spouse. The S1 is highlighted and

34:33

like there's annotation and I'm having

34:35

to answer like, you know, those

34:37

were my toughest investors actually. It

34:39

worked out really well, maybe too

34:41

well, because Expedia was a real

34:43

business. We actually were profitable and

34:46

growing like crazy. I mean, obviously,

34:48

digital travel agent made a lot

34:50

of sense. And so when Thelma

34:52

and Louise went off the cliff, as you

34:54

say, we were already public. And we'd gone

34:56

to the moon. The stock price had gone

34:58

to the moon. We crashed back down, but

35:00

we had a real business. And

35:02

very shortly... hop back up on

35:04

the climb and just climbed from

35:07

there and were very successful. Microsoft,

35:09

however, crashed with Thelma

35:11

and Louise and it took 17 years

35:13

for Microsoft to re -achieve the same

35:15

stock price it had in November

35:17

of 99 when we spun Expedia out.

35:19

So the HR experiment kind of

35:22

failed. How long did it take Expedia

35:24

to recover or to get back

35:26

on the climb? I mean, to re

35:28

-achieve the all -time high, probably a

35:30

couple of years. Yeah, but a couple

35:32

versus 17. Yeah, but the valuations

35:35

were a bit nutty, right? So it

35:37

was obvious that Expedia was on

35:39

the right path very quickly. And there

35:41

was kind of a flight to

35:43

quality with internet investors, which meant find

35:45

the profitable recent IPOs, which there

35:47

were not many. And let's invest in

35:50

those, but we were one. Just

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a quick thanks to one of

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37:18

Maybe this is not a good

37:20

question, but I have to ask,

37:22

how did you learn to pitch?

37:24

How did you learn to pitch

37:26

different stakeholders? Because you're talking about

37:28

employees, bomber, gates,

37:30

spouses. That is a

37:33

skill set. Persuasion. Yeah.

37:35

How did you develop that? It

37:37

just must have been an

37:39

innate thing that got a lot

37:41

of exercise as I was

37:43

growing up. I was an engineer

37:45

by degree, but never a

37:47

practicing engineer. I was an engineer

37:49

because I liked technology. What

37:52

type of engineer initially? The

37:54

story there kind of answers the

37:56

question. I was an industrial

37:58

engineer. But I wanted to

38:00

go study in Italy my junior year. Now,

38:03

industrial engineer would be like you end up

38:05

going to a smart design or one of

38:07

those types of companies. Or how

38:09

are you thinking your path would unfold?

38:11

It's not a degree anymore at

38:13

Stanford. It's called management science and engineering.

38:15

And then there's kind of a

38:17

symbolic systems thing. The industrial engineering degree,

38:19

which kind of sunsetted, was really

38:22

a kind of manufacturing efficiency. I got

38:24

it. Okay. I got it. Optimization,

38:26

simulation. Lots of

38:29

computer work going in because it's

38:31

a design of making things more efficiently.

38:33

Yeah, kind of like the operations,

38:35

research, finance department at other places. That's

38:37

right. I did it just because

38:39

it was a Bachelor of Science, not

38:41

a Bachelor of Arts. And it

38:43

was the most businessy of the engineering

38:45

disciplines. At Stanford, they called it

38:47

imaginary engineering because the mechanical and the

38:49

electrical folks didn't respect us. And

38:52

probably deservedly because we were more interested

38:54

in business. But anyway, I did this because...

38:57

I had all these other

38:59

interests and skills around persuasion

39:01

and people and entrepreneurialism. Already

39:04

at that point as an undergrad. Already.

39:06

Already. As a kid, I had all that.

39:08

I probably was a good pitch person

39:10

already, but had a lot of support and

39:12

exercise of that. You mentioned Italy in

39:14

passing, so we're going to come to Italy.

39:16

But how did you get that exercise

39:19

when you were younger? I went to Italy,

39:21

so I got off the industrial engineering

39:23

track. And Stanford was awesome. I came back.

39:25

And I'm like, well, you can't get

39:27

an accredited degree now. I'm like, I don't

39:29

care. And Nina's dad was

39:31

a professor at the time. And he

39:33

said, well, Stanford, you can self -design

39:35

an engineering degree. So let's just design

39:37

one for you. So I designed one.

39:40

So my degree is called General Engineering

39:42

Colon Industrial Economics. Anyway,

39:45

you know, unlike a lot of kids today,

39:47

I worked real summer jobs. You know, my

39:49

kids generally did. Actually, my kids have worked

39:51

real summer jobs. So we were talking like

39:53

busboy? Yeah, I mean, my daughter, I'm just

39:56

thinking of what their jobs are right now.

39:58

My daughter spent, you're going to know this

40:00

place, you know, after Gurney's was redone, it

40:02

became like this club scene. This is out

40:04

in Montauk. Once they got fancied up. Took

40:06

away the day passes for the locals, you

40:08

bastards. Anyway, yeah. So

40:13

it was after her sophomore

40:15

year in college, I think,

40:17

sophomore year. And I'm

40:19

like, honey, you've got to. place to

40:21

stay out in the Hamptons you don't

40:23

need to get on the track the

40:25

track that every smart kid is supposed

40:27

to take you don't need to do

40:29

that why don't you get real experience

40:31

so she came and lived in our

40:33

house out in Montauk and was the

40:35

who's the person that stands at the

40:37

counter when the hostess the hostess at

40:39

the club part of Gurney's oh god

40:41

okay where it was like that was

40:43

two thousand dollar tables yeah yeah that's

40:45

quite an education it's an amazing human

40:47

nature human nature job oh my god

40:49

she had a crazy

40:51

successful interesting learning experience yeah yeah and

40:53

we had fun watching it happen and

40:55

we also got tables set anyway when

40:57

i was a kid i was the

40:59

ice cream man so i ran my

41:01

own ice cream business this is in

41:03

connecticut i went to high school in

41:05

connecticut i learned how to do house

41:08

painting as a crew member of a

41:10

buddy of mine and then after one

41:12

year doing that like well well i

41:14

can bid the jobs myself And

41:16

I can hire a crew. And so

41:18

I had my own painting company for

41:20

a couple years, which was hugely profitable

41:22

for a kid. I mean, I made

41:24

a ton. I had to pay for

41:26

all my expenses at college, not my

41:28

tuition. My parents covered the tuition. But

41:30

I had to pay all my other

41:32

expenses. So making, back then, I would

41:34

make like $15 ,000 or $20 ,000 in

41:36

summer painting. And that was a boatload

41:38

of money. And so I had

41:40

run my own businesses. Got it.

41:42

All right. I knew I liked it. And

41:45

why did you go to Italy at all?

41:47

Why did I want to go when

41:49

I was in school? I have no Italian

41:51

heritage, as you can probably tell. But

41:55

I went to Italy and Greece when I

41:57

was in high school with my Latin teacher.

42:00

And just had these awesome kind

42:02

of kid high school trips. And

42:04

while I was in Italy, I

42:06

literally fell in love with the

42:08

whole vibe. The food, the wine,

42:10

the girls, the family, culture, the

42:13

kind of work is not as

42:15

important, you know. And I kind

42:17

of fell in love with it

42:19

and kept going back. So I

42:21

went to study. And then after

42:23

I sold Expedia to Barry Diller, we

42:26

were public and Barry Diller bought it. And

42:28

we had three little kids and I was leaving

42:30

after Barry bought it. I wanted to give

42:32

space to the next team. And I

42:34

said, let's go back to Italy. And so

42:36

we moved to Florence for a year after

42:38

we sold Expedia. In fact, Nina, who I

42:40

was talking about before, she was living there,

42:42

married to a European guy. And

42:45

I'd gone to Stanford there when

42:47

I was a junior, and I'd

42:49

kept in touch with the woman

42:51

who ran the Stanford program, Linda.

42:53

And so we kind of moved

42:55

to Florence and went back to

42:57

school and learned how to paint

42:59

and started road biking. Anyway, so

43:01

I love the whole Italy vibe.

43:03

Let's take a closer look at

43:05

the Barry Diller transaction. Yeah, yeah.

43:07

How did that come to be?

43:09

And what were the most important

43:11

aspects of that deal? Could be

43:13

deal structure, could be timing, could

43:16

be anything. But how does that

43:18

even happen? Yeah, so Expedia had

43:20

been public for maybe four years

43:22

and had become very successful and

43:24

pretty big, pretty highly valued in

43:26

the market. And I

43:28

think it came about, I mean, Barry

43:30

was kind of interested. He was

43:32

building a... interactive conglomerate

43:34

called IAC. USA Networks. I think

43:36

he owns most of the popular

43:38

dating apps, things like that. IAC

43:40

buys a lot of stuff. And

43:42

then spun it out as Match.com. He

43:46

was post his media career, he got

43:48

into interactive media and he started buying

43:50

stuff. And a

43:52

guy, his kind of key corporate

43:54

development strategist and all around

43:56

great freaking guy who worked for

43:58

him was a young guy

44:00

named Dara Kazushahi. Okay.

44:03

Folks might recognize that,

44:05

man. I may be miscrediting

44:07

or giving you too much credit,

44:09

Dara, but probably not. I think

44:11

Dara's idea was consolidate the players

44:13

in the online travel space. That

44:15

it was already big, but it

44:18

was going to be much bigger. And

44:21

Microsoft was the majority owner,

44:23

but didn't have anybody on

44:25

the board. Even there,

44:27

65 % of the company didn't have anybody on

44:29

the board. They knew me, and they trusted Greg

44:31

Maffei, who had left as CFO and was

44:33

running a company. an unbelievable level of trust. It

44:35

just didn't matter to Microsoft, right? Yeah, I

44:37

guess. It just didn't matter. Just as a percentage

44:40

of the total. And at some point, somebody

44:42

came in. I won't name names. Somebody came in

44:44

and said, we need to focus at Microsoft.

44:46

We need to get things focused. We're too scattered.

44:48

And an easy thing to do was to

44:50

take a big offer from Barry Diller. And so

44:52

they did. It was a bit of a

44:54

two -step deal. IAC

44:57

and Dara and Barry bought Microsoft

44:59

65%. And then maybe, so

45:01

we were public but captive to

45:03

IAC. And Barry Diller was

45:05

my chairman for a while. And

45:07

then maybe eight months later,

45:09

bid for the rest of it.

45:11

And consolidated it down. I

45:13

think they kind of pushed us

45:15

to buy the number two

45:17

player, which was Hotels.com. And so

45:19

we mashed those things together.

45:21

And I moved on at that

45:23

point. So when in that

45:25

journey, the Expedia journey, did you

45:27

feel the highest high? For

45:29

instance, I would imagine when you

45:31

were working summers and on

45:33

your way through high school and

45:35

college, there was probably a

45:37

moment, I'm just guessing here, but

45:39

when you had your first

45:41

big summer with that painting gig

45:43

and made $15 ,000, $20 ,000. My

45:47

God, you must have felt rich. Yeah,

45:49

we went to the high lie. You

45:51

know what the high lie is? Yeah.

45:53

Took the crew to the high lie.

45:55

Yeah, so with the Expedia journey, was

45:57

it the tail end with the Barry

45:59

Dillard transaction? No. Because there's

46:01

mixed emotions there, right? Yeah. And I didn't control

46:03

the company. I learned that henceforth I would

46:05

control the companies that I started. No,

46:08

I mean, that was great and it

46:10

made sense and it created value. No,

46:12

the highest highs were probably

46:14

around the spin out. and the

46:16

IPO. There's kind of a funny

46:19

IPO story that my wife, Sarah,

46:21

was pregnant with our first child,

46:23

Will, during the roadshow. Okay,

46:25

so this is November of 1999.

46:28

It's really pitching to the buy side. So

46:30

it's pitching to the mutual funds, the investors.

46:32

Okay, got it. And it used to be,

46:34

I think now is a lot more on

46:36

Zoom, which it should be, by the way. But

46:39

it was a rite of passage back then for

46:41

companies going public, and a lot more companies went

46:43

public then. And it

46:45

was 15 cities over

46:47

three weeks, five meetings a

46:49

day, six meetings a day, chartered

46:52

private plane with banker team and CFO

46:54

and CEO zipping around the country. Okay.

46:56

Exhausting and exhilarating and repetitive and kind

46:58

of boring. Also really fun anyway. So

47:00

Sarah was pregnant and she wasn't due

47:02

until December, but we had been on

47:04

the road for. Two and a half

47:06

weeks already, we'd filled the book 30

47:08

times over, which means we had a

47:10

lot more demand. We knew the offering

47:12

was going to be successful. These were

47:14

back in the days when the offerings

47:16

were a little bit managed to the

47:18

advantage of the inside banker people. But

47:21

anyway, that's a different story. So it

47:23

was going to work. The IPO was

47:25

going to work. And I called the

47:27

Red Show off a day early. I

47:29

flew back to Seattle, exhausted. I

47:31

get in bed at like one

47:33

in the morning after getting home.

47:35

Sarah's super pregnant. I

47:37

get a tap on the shoulder

47:40

at... 3 a .m. And

47:43

she said, she's an OB, so she

47:45

knows what's going on. Although that's not always

47:47

the case, but she knows what's going

47:49

on. And she said

47:51

to me, honey, this

47:53

is like IPO day. If our baby

47:55

is born on the IPO day, do

47:57

I really have to name him Expedia?

48:00

Which is what I promised the team. And

48:05

then we went to the hospital

48:07

and while the IPO was happening, My

48:09

son was being born. That was,

48:11

yeah, my, my, my, my oldest was

48:13

being born. And so that was

48:15

actually the high point right there. Wow.

48:17

All right. Now we're tracking the

48:20

path. So now you're painting a vase

48:22

of fruit and Florence living the

48:24

life of a naked. It was a

48:26

naked woman. It was like, it

48:28

was like trying. There we

48:30

go. Charcoal. Charcoal

48:32

drawing of naked lady changing poses every

48:35

10 minutes. What could be a better

48:37

way to learn art? What a lovely

48:39

way to learn art. Living

48:43

the life of a refined gentleman. Costa

48:45

and wine and culture and

48:47

road biking. Little cap, maybe. Little

48:50

cap, of course, no helmet. Taking

48:53

Italian classes in the morning. Yeah,

48:55

yeah. So here and there. Sounds

48:57

like a great life. It was

48:59

fun. So how the hell does

49:01

Zillow happen? Yeah. Do

49:03

you start getting fidgety? I mean,

49:05

what happens there? Yeah, I

49:07

was still pretty young. So probably,

49:10

I was like 35, 36. And

49:13

I was hoping art, music, thought

49:15

I might write books, whatever, you

49:17

know, find the next chapter. Because

49:19

I really didn't need to, I

49:21

had enough to take care of

49:23

myself for the rest of my

49:25

life. But something I discovered, I

49:28

was still on a few boards,

49:30

including the IAC board, which had

49:32

bought Expedia and Netflix, where I'd

49:34

been on the board since like

49:36

2000. And still, I'm still on

49:38

that board and a couple others.

49:40

So I was still involved in

49:42

the business world from a kind

49:44

of long, in a long distance

49:46

way. Though I had

49:49

an amazing time learning experience, I didn't

49:51

find my next calling. And I was

49:53

still really curious about the business world

49:55

and what was going on. So

49:57

I knew that we weren't going to stay

49:59

in Italy. We were going to move back and

50:01

I was going to do something else, which

50:03

is great to learn. And

50:06

we did. Did it in Florence for a

50:08

little over a year. We spent

50:10

a few months skiing with the family, which was

50:12

really fun. In the mountains. And you came

50:14

to the U .S. I am going on

50:16

a hunting expedition. Did you already have an

50:18

inkling of what you were going to do? A

50:20

little bit. I didn't know if I really

50:22

had another startup in me. Because

50:24

I knew how much work it

50:26

was. And I adjusted my life

50:28

to prioritize some things I hadn't

50:31

prioritized when I was younger. Like

50:33

living well and family and body

50:35

and mind. And I was very

50:37

curious in all kinds of different

50:39

things. So the venture capital opportunity

50:41

was available to me to go

50:43

be a GP at a venture

50:45

capital firm. And I was kind

50:47

of headed in that direction. And

50:49

then my Zillow co -founder, Lloyd

50:51

Frank, who was a guy I

50:53

went to Stanford with and did

50:55

Expedia with. He was still at

50:58

Expedia and he got fired by

51:00

our good friend, Eric, who was

51:02

running Expedia at the time, probably

51:04

for good reason. Awesome guy,

51:06

really smart. I

51:08

won't follow up on that. We

51:10

don't need to. It's a fun story.

51:13

So Lloyd got fired, and Lloyd's like, wait,

51:15

wait, wait. Don't move to

51:17

California. Let's just sit in an office and brainstorm

51:19

for a while. And so

51:21

we did. We did, and we

51:23

went through a bunch of ideas. He went

51:25

off on one that was kind of Dropbox

51:27

before Dropbox. It was obvious that the kind

51:29

of cloud storage thing was going to be

51:32

huge. And I said, go figure that

51:34

out. See what it costs. And so he disappeared

51:36

for a couple weeks. So we were kind of sharing

51:38

an office and came back. He's like, yeah, 100 %

51:40

this is going to work, but there's going to

51:42

be no profit. There's no profit. Microsoft

51:45

and Google are going to give this away. were

51:47

you guys brainstorming? We were brainstorming. And his dad was

51:49

a stockbroker. He had an extra couple of rooms

51:51

in his office, and he just gave them to us.

51:53

New York City? No, no. This is Seattle. Oh,

51:55

Seattle. Seattle. Yeah, yeah. So we're in Seattle. Because we

51:57

didn't sell our house in Seattle. When we moved

52:00

to Italy, we moved back to our house. But we

52:02

were looking for a new house. We

52:04

were going to maybe move to

52:06

California or something in Seattle. Our

52:08

family was getting bigger. And so

52:10

we went through a series of

52:12

ideas. And then at one point,

52:14

I said, hey, you know, back

52:16

when we started Expedia, we also

52:18

wrote a plan for an electronic

52:20

stockbroker, matchmaking service, all the classified

52:22

categories, basically, and all the kind

52:24

of agent categories were all obvious

52:26

that. We were on a little

52:28

team of people researching big ideas

52:30

inside of Microsoft. How would the

52:32

web change industry? And so we

52:34

had all these plans. Expedia

52:36

was one of the ideas. There

52:38

was basically to create a digital

52:40

real estate marketplace. And

52:42

I dusted that off and I said, hey,

52:44

what about that? I mean, you're looking for

52:46

a house right now. It's really freaking hard.

52:49

This is 2003. And

52:51

I can't get the price

52:53

of a home online. I

52:55

can't even get the address. Because

52:57

the industry had been very good at

52:59

defending their special data. Making it opaque.

53:01

Yeah, yeah, yeah. And we were the

53:04

power to the people guys. We were

53:06

the guys who freed all that information

53:08

for the regular traveler. And we were

53:10

like, well, wants to be power to

53:12

the people here too, right? And we

53:14

couldn't believe that it hadn't changed. And

53:16

so that was the dawn of Zillow.

53:19

So he convinced me not to move. And I

53:21

said, well, I'll be CEO, but I'm not

53:23

going to work that hard. He's like, don't worry,

53:25

I'll do it. Just be CEO.

53:27

I need you to be CEO because you have to raise

53:29

money and stuff. Oldest trick in the book. So

53:33

maybe I am a four -hour work with a

53:35

cat kind of guy. I said, look, I don't

53:37

want to do it full -time. You can use my

53:39

name. Of course, he was like, yeah, sure, whatever.

53:41

You can do whatever you want, Rich, knowing I'd

53:43

be sucked in. Let the line out. He totally

53:45

managed me. Yeah, I

53:47

think I'm in charge now. Lloyd

53:49

was in charge. So when you

53:52

say you're brainstorming, there's an entire

53:54

universe of possibilities. Yeah. What constraints

53:56

or criteria are you applying to

53:58

that brainstorming? What are you looking

54:00

for? I think most great

54:02

ideas, there's just a big, obvious

54:04

problem. I like consumer stuff. And

54:06

so that means the way I

54:08

interface with the world, the way

54:10

we all interface with the world

54:12

is rife with problems. And

54:14

all those problems are business opportunities. And

54:16

when you see a particularly big, oh

54:19

my God, why is it this way?

54:21

Those are probably the bigger opportunities. It's

54:24

almost as simple as that.

54:26

We identified this big dislocation.

54:28

We knew 100 % that

54:30

there would be a leading

54:32

digital real estate marketplace in

54:34

the US. At some point.

54:36

At some point. Inevitability. Inevitability.

54:38

And business model, who knows?

54:40

Who cares? It's a giant.

54:42

It's a big pond. And

54:45

so my business criteria for

54:47

doing stuff is, is it a

54:49

big pond? And are there

54:51

good fishermen? Because the travel CD

54:53

-ROM wasn't big enough. You said

54:55

100 million. That's the entire

54:58

market. Plus, you're not going to

55:00

carry a briefcase that you're

55:02

doing weight training with inadvertently to

55:04

read the thing. A lot

55:06

of entrepreneurs make this mistake of

55:08

identifying a really big problem,

55:11

but it is just a small

55:13

opportunity. And then there are

55:15

ones where I know Bill Gurley

55:17

was on the pod. a

55:19

couple years ago, talking about the Uber thing.

55:22

You were involved there a little bit.

55:24

I was one of the first three

55:26

advisors when it was called Uber Cab

55:28

LLC, way back in the day. And

55:30

for people who didn't pick up, Dara. Oh,

55:33

sorry, Dara's the CEO. Current CEO

55:35

of Uber. He was the CEO of

55:37

Expedia after, you know, two

55:39

after I left as well. Anyway, a

55:41

lot of people make a mistake, is

55:43

what I was going to say. of

55:45

identifying a real problem, but it's just

55:47

too small. Uber kind

55:49

of, to a lot of people,

55:51

looked too small because it was

55:54

a black car tan, the total

55:56

addressable market. But the insight that

55:58

you and Curly and Travis and,

56:00

I guess, JCal and others had

56:02

was that actually, no, it was

56:04

going to take not just the

56:07

black car market, but... taxi, transportation,

56:09

and then ultimately more. It can

56:11

expand the total addressable market. That's

56:13

right. Car ownership. Yeah. Just

56:15

transportation. And of course,

56:17

obviously, it's beautifully played out that way.

56:19

It took a little while to

56:21

see, but it's amazing. Anyway, so big

56:23

pond, good fishermen, after identifying the

56:26

big problem. And I guess that was

56:28

the guiding thing here. I knew,

56:30

Lloyd and I knew, there would be

56:32

a digital real estate marketplace. We

56:34

didn't know what the business would be.

56:36

We didn't know how we were

56:38

going to play. And we started

56:41

poking at ideas for attracting audience

56:43

with software. And we made a

56:45

couple of big mistakes before we

56:47

landed on the solution. What

56:49

were some of the big mistakes? And

56:51

how costly, how risky were they? Pretty

56:53

small venture numbers at that point. And

56:55

Lloyd and I were funding it ourselves.

56:58

We put the first $5 million total in

57:00

with a couple of friends. Costly,

57:04

but not that costly. Side

57:06

note also, what Garrett Camp

57:08

did with Uber early on.

57:10

There was self -funding for

57:12

a while. It wasn't expensive.

57:14

It wasn't overly expensive. It's

57:16

a good way to go as a

57:18

second -time founder or a non -first -time

57:20

founder if you actually have some resources. Because

57:23

you end up with more of the company

57:25

down the road. I love

57:27

Gurley. We're really close. But by

57:29

the time Gurley or the venture

57:32

capitalists come in, If they're

57:34

writing the first check, they're going to end up with

57:36

a big chunk of the company, which is great, especially

57:38

if you get somebody like Bill. But

57:40

we were able to do it ourselves.

57:43

We were enamored of Google, everyone

57:45

was at the time. The

57:48

magic business model that they

57:50

sort of discovered or innovated, iterated

57:52

on that came from another

57:54

company was the AdWords, the digital.

57:56

auction -based marketplace. it came from

57:58

another company. Yeah. I might

58:00

not know that wrinkle. Yeah, it

58:02

did. Meaning they acquired something?

58:05

I'm thinking, what's the guy's name

58:07

who did that startup incubator

58:09

factory? Gross? Oh, Bill Gross? Yeah.

58:12

I may be getting this wrong. Am I making

58:14

this idea lab? He did idea lab.

58:16

A lot of companies kind of sort of

58:18

spun out of that, but one of them

58:20

was... a search engine whose

58:22

name I'm forgetting. We can look it

58:25

up later. The

58:27

whole basis of the search

58:29

engine was AdWords. Did

58:32

Google acquire that or are they just

58:35

being a better mousetrap? I

58:37

think the latter, but I'm not an expert. Regardless,

58:39

I don't want to speak out of turn.

58:41

We'll put the story in the show notes.

58:43

There's a good story there, I'm sure. Why

58:47

I brought it up was we were

58:49

enamored of Auctions

58:51

have huge geek appeal

58:53

for mathy idealists. And

58:56

we were like, well, obviously the U

58:58

.S. housing market should be at auction,

59:00

and that's the most efficient mechanism for

59:02

price discovery, which of course it is.

59:04

And we were like, okay, so that's

59:06

our business. We're going to auction homes. And

59:10

what we learned trying to

59:12

auction a home that our buddy

59:14

Gordon got us kind of

59:16

on consignment was that Well, two

59:18

things. One, to have an

59:20

auction work, you kind of need

59:22

a real -time liquid market. Okay?

59:25

Duh. Okay. So

59:27

you need all the bidders there at the same time. Okay.

59:30

Well, the housing market doesn't work that way.

59:32

It's just, you know, it's a long period

59:34

of time. You want to show it to

59:36

a lot of bidders. You know, that didn't

59:38

work. The second thing, which is obvious, is,

59:40

and to all those innovators out

59:43

there, If you have to

59:45

educate your customer on how

59:47

to buy the thing that you're

59:49

doing, if it's a radically

59:51

new way to do it from

59:53

decades or hundreds of years

59:55

of ingrained human behavior, it's a

59:57

pretty heavy lift. It's got

59:59

to be super duper simple, obvious,

1:00:01

and 10 times better than

1:00:03

the current way. And we didn't

1:00:05

check any of those boxes.

1:00:07

But in pursuit of price discovery,

1:00:09

we found the Zestimate, which

1:00:11

was our killer feature. And the

1:00:13

visual on the Zestimate that's

1:00:15

in my head that kind of

1:00:17

popped in our collective heads

1:00:19

on the home auction web experiment

1:00:21

was a real -time estimated value

1:00:23

algorithmically driven as your Google

1:00:25

Maps zooming over neighborhoods looking. We

1:00:28

wanted prices on every roof

1:00:30

because everything should have a price.

1:00:32

And the timing of that

1:00:34

is pretty wild, right? And it's

1:00:36

just like how things line

1:00:38

up. I mean, how long had

1:00:40

the aerial view? been around

1:00:42

prior to you guys. Short. It

1:00:44

was short. Short. And there

1:00:46

was no iPhone. There were no

1:00:48

smartphones. Yeah. But it was

1:00:50

obvious. I was like, whoa. And

1:00:52

then I also had in

1:00:54

my head, homes are for American

1:00:56

homeowners, oftentimes their largest asset

1:00:58

and the bulk of their wealth. And

1:01:02

people care a lot about it. Yeah.

1:01:04

So I knew they wanted to know

1:01:06

the value. I knew that was catnip.

1:01:08

Okay. In my gut, I knew that

1:01:10

was candy. We did. The team knew

1:01:12

it was candy. And I'm like, oh,

1:01:14

it's an investment. And so let's plot

1:01:16

the home value like a stock chart.

1:01:18

And so the aerial view with the

1:01:20

numbers, any home's value laid out like

1:01:23

a stock chart. Those were the two

1:01:25

things. And when we discovered that, we

1:01:27

were kind of off to the races.

1:01:29

Okay. So at the time,

1:01:32

was it just... Rentable infrastructure,

1:01:34

AWS. You get it going, you launch,

1:01:36

and it's up to the right. Just

1:01:38

a nice, smooth rocket launch. Is that

1:01:40

what happened? AWS didn't exist. I know.

1:01:44

You baited

1:01:46

me. No, dude, man. This

1:01:48

was like server in a closet. Yeah,

1:01:51

this was server in a closet.

1:01:53

true you forbade Christmas lights or something?

1:01:55

You're preserving electricity and compute power

1:01:57

and all this stuff. I don't remember

1:01:59

that. I don't remember. The things

1:02:01

of lore. David Bightel, who was our

1:02:03

CTO at the time, and still

1:02:06

is, and was CTO at Expedia with

1:02:08

me too, he may have told

1:02:10

that story somewhere, so it may actually

1:02:12

be right. Yeah, I believe. I

1:02:14

remember our launch blog post with Garrett,

1:02:16

who worked for David. What's

1:02:19

the professor in? It's Doc.

1:02:21

From Back to the Future.

1:02:23

3 .2 gigawatts. Whatever. Because

1:02:26

we launched and millions of people

1:02:28

showed up because Walt Mossberg, who

1:02:30

was the equivalent? Is there any

1:02:32

equivalent of Walt Mossberg now? It's

1:02:35

like the Oprah of tech at

1:02:37

the time. I mean, God. And

1:02:39

Walt loved it. And Walt published.

1:02:41

And millions of people came on

1:02:43

day one. And of course, the

1:02:45

big server in the closet tipped

1:02:47

over for a while. And it

1:02:49

was painful. But Amy Butinsky, who

1:02:51

was running our marketing at the

1:02:53

time, said, don't worry, we'll make

1:02:55

lemonade out of lemons. And the

1:02:57

headline the next day in the

1:02:59

San Francisco Chronicle was, house porn

1:03:01

site Zillow launches and falls over.

1:03:03

Because it's so popular or something

1:03:05

like that. And she's like, yeah,

1:03:07

that's going to be good press.

1:03:11

Anyway, I'm a big believer in the product

1:03:13

being the most important part of the

1:03:15

marketing mix, if that makes sense to you.

1:03:18

Gurley actually challenged us when we launched.

1:03:20

He was on the board. Benchmark and

1:03:22

TCV were our A -round funders. And

1:03:25

he was on the board at the time.

1:03:27

And we had had kind of a spend. advertising

1:03:29

dollars mindset at Expedia because we really needed

1:03:31

to grow exposure to the brand. And Gurley

1:03:33

said, well, what if we didn't have any

1:03:36

marketing budget? And that launched, we were like,

1:03:38

no way, you can't do that. made

1:03:40

us think a lot more creatively

1:03:42

about the features that we built,

1:03:44

the way we built them, and

1:03:46

then the way we PR communicated

1:03:48

them. And I've since developed a

1:03:51

pretty good playbook around, I guess,

1:03:53

what I would call provocation marketing.

1:03:55

When you have really provocative feature that you

1:03:58

know people are going to feel emotional about

1:04:00

one way or the other, and they're going

1:04:02

to talk about it, you're on to something. What

1:04:05

are some aspects of that toolkit

1:04:07

or the playbook? Yeah, I mean,

1:04:09

having data, having a stream of

1:04:11

data that people are interested in

1:04:13

at Glassdoor, which I did with

1:04:15

Bob Homan, who was at Expedia

1:04:18

with me as well. Glassdoor is

1:04:20

another example of that. When you

1:04:22

have constantly changing data that people

1:04:24

are interested in, you can almost

1:04:26

think about feeding that data to

1:04:28

hungry consumers in a Bloomberg -like

1:04:30

way. And so the playbook that

1:04:32

Amy kind of put together was

1:04:35

building a PR data distribution infrastructure

1:04:37

down to the local. me who

1:04:39

Amy is. Amy was our marketing

1:04:41

chief at Zillow. She's still on

1:04:43

the board today. And she was

1:04:45

really creative about recognizing that there's

1:04:47

an infinite news hole for housing

1:04:49

data at local newspaper level once

1:04:52

upon a time. And

1:04:54

if you could wire that

1:04:56

up to just feed, constantly feed,

1:04:58

the endless appetite. Housing is

1:05:00

just an important topic, right? And

1:05:02

there's always space in the

1:05:04

paper for a story on housing

1:05:06

and changing prices. And so

1:05:08

we set up a mechanism to

1:05:10

feed that data, which was

1:05:12

a terrific brand builder for us,

1:05:14

rather than spending ad money.

1:05:16

And then just having this estimate

1:05:18

be so provocative, like high

1:05:20

school boyfriends, house philanthropist development team

1:05:22

that are trying to figure

1:05:24

out who's a good target, whatever.

1:05:26

Lots of applications. Lots of

1:05:28

applications, yeah. I know you

1:05:30

had a lot of fans. I think

1:05:33

the Arizona attorney general was a fan.

1:05:35

That's a deep cut. Wow. No,

1:05:38

but this is of interest to

1:05:40

me because there is opposition also. Oh

1:05:42

yeah. Right. And my God, I

1:05:44

mean, the number of, I don't think

1:05:46

they were actual ulcers, but just

1:05:49

the rollercoaster ride that I was also

1:05:51

on with Uber from a regulatory. mobbed

1:05:55

up local fill in the blank

1:05:57

perspective. It was just nonstop battles. that

1:05:59

was just part of the deal. And

1:06:01

actually part of the playbook. Honestly,

1:06:04

it's the same provocation marketing. It's the exact

1:06:06

same thing. It's exactly the same. So what

1:06:08

happened with you guys? We

1:06:10

were provocative to some of the

1:06:12

industry players who were big lobbyists. The

1:06:15

Taxi Commission, Uber's case. In our

1:06:17

case, a lot of the real

1:06:19

estate professional associations. A lot of

1:06:21

voters. They were not thrilled. They're

1:06:24

not thrilled, or they think they're

1:06:26

not thrilled. They don't realize until

1:06:28

later that it could be helpful,

1:06:30

but whatever. Yes, they were provoked.

1:06:32

No industry that likes change. Most

1:06:34

people don't like change. I'm one

1:06:36

of the people that loves change,

1:06:39

but most people don't. You

1:06:43

may like change when you're

1:06:45

the instigator of the change.

1:06:47

Well, that's awesome. It

1:06:49

leaves me more open to change coming

1:06:51

from the outside, too, though. I do

1:06:54

believe. Obviously,

1:06:56

this is just human nature. Yeah,

1:06:58

but the equivalent of the taxi commission

1:07:00

in the Uber case was these

1:07:02

real estate professionals and a lot of

1:07:04

places we had them lobbying to

1:07:06

have us outlawed. They're

1:07:09

not licensed. How can they make an

1:07:11

appraisal? You know, whatever, whatever thing they're

1:07:13

going to make up. We knew we're

1:07:15

on really strong legal ground. And

1:07:17

so we weren't so

1:07:19

worried about that. But

1:07:21

the strategy for combating

1:07:23

that resistance was literally

1:07:25

probably the same thing

1:07:27

you guys did at

1:07:29

Uber, which was we

1:07:31

knew the legislators, state

1:07:34

legislators, not to mention

1:07:36

federal legislators, were big. fans

1:07:38

of the site and the

1:07:40

service. Yeah. Okay. And

1:07:42

so all we had to

1:07:44

do was make sure we just

1:07:46

activated that latent love for

1:07:48

the product itself and made it

1:07:50

obvious that this way is

1:07:52

the future way. And the lobbyists

1:07:54

got nowhere and it was

1:07:56

overcome. Yeah. In the case of

1:07:58

Uber, I don't want to

1:08:00

make this overly about Uber, but

1:08:02

also Turns out

1:08:04

when people have something that is incredibly

1:08:06

convenient and useful, they do not want

1:08:08

it taken away. And if elected

1:08:11

officials like the service or are

1:08:13

even ambivalent about the service, they

1:08:15

do love getting reelected. And man,

1:08:17

oh man, if there are a

1:08:19

lot of your constituents using that

1:08:21

app and you take it away,

1:08:23

they're not going to be super

1:08:25

happy about it. Power to the

1:08:27

people, baby. I mean, like you

1:08:29

build. magic stuff for masses of

1:08:31

consumers that they want to talk

1:08:33

about with their friends unprompted on

1:08:35

the sidelines of the soccer game

1:08:37

or what have you. Have you

1:08:39

tried Uber? Have you tried Zillow?

1:08:41

Have you tried Expedia? Whatever. It's

1:08:43

like you're definitely on to something.

1:08:45

And having popular support, as we're

1:08:47

learning politically right now, is having

1:08:49

big populist support is ultimately where

1:08:51

the power is derived. Sometimes

1:08:54

you can go too far. We don't

1:08:56

need to talk about that. Of course you

1:08:58

can go too far. In fact, it

1:09:00

may be that you need to go too

1:09:02

far to establish where the frontier is.

1:09:04

All right. Well, I can't not take the

1:09:06

bait on that one. What does going

1:09:08

too far look like? I

1:09:11

was thinking specifically Uber. Oh, all right.

1:09:14

Because some cities, municipalities, or

1:09:16

Airbnb. You can push too

1:09:18

hard. You can push too

1:09:20

hard. And learn some lessons

1:09:22

about how much lease you're

1:09:24

going to be given by

1:09:26

the popular support. Because it

1:09:28

does tip into a point

1:09:31

where like with Airbnb, you

1:09:33

know, this is not a story. I

1:09:35

know this guy's a little bit, but it's

1:09:37

not a story I'm intimately familiar with,

1:09:39

nor was I an early investor or anything.

1:09:41

But, you know, they did piss off

1:09:43

some homeowners, you know, in certain cities, not

1:09:45

just the hotel owners. And,

1:09:47

you know, so they found the line.

1:09:49

And I think they managed it really,

1:09:51

really well because they lead from the

1:09:54

heart. I think other companies

1:09:56

may have not obviously led

1:09:58

from the heart and had difficulty.

1:10:00

At Zillow, our job was

1:10:02

a little easier. Also, with those

1:10:04

battles, I remember there were

1:10:06

early on a number of locations

1:10:08

that were incredibly important. Not

1:10:10

just from a ride volume perspective,

1:10:12

but from a precedent setting

1:10:14

perspective. So if you win a

1:10:16

few of those precedent setting, then

1:10:19

you don't necessarily have to do

1:10:21

a full frontal assault on the next

1:10:23

10 locations. Because people have gotten the

1:10:25

message, you can be a little more

1:10:28

diplomatic about it. Which people figure out

1:10:30

over time. But then there's

1:10:32

the next country, and then whatever. Anyway, there's

1:10:34

always something. But provocation

1:10:36

marketing with a heart. With

1:10:39

the end consumer's best interests

1:10:41

in mind. That's a winner.

1:10:44

So if you were teaching a class, maybe you already

1:10:46

have, I have no idea, related

1:10:48

to provocation marketing. All right, there you

1:10:50

go. You get to choose. You

1:10:52

can go back to your alma mater,

1:10:54

wherever it might be. You're teaching

1:10:57

a class. What would other elements of

1:10:59

the class be? Other resources, principles,

1:11:01

anything at all? While I try to

1:11:03

figure out a structure here on

1:11:05

the fly to give a couple other

1:11:07

examples of stuff that I've been

1:11:10

involved with. So I co -founded Glassdoor. which

1:11:12

many people out there

1:11:14

may know. And our provocation

1:11:17

data marketing feature was

1:11:19

how much money do people

1:11:21

make? Okay. Not individuals,

1:11:23

but the product manager at

1:11:25

XYZ company or the

1:11:27

developer or the customer service

1:11:29

representative. And our model

1:11:31

was, we knew that salaries was

1:11:33

kind of a little bit taboo

1:11:35

for a lot of people. So

1:11:38

it was inherently secret and provocative.

1:11:40

Okay. And then, Robert Homan,

1:11:42

who is my co -founder

1:11:44

and the team, they had

1:11:46

a data collection problem because

1:11:48

it was ultimately user -generated content.

1:11:50

People would need to share

1:11:52

their salaries in a way

1:11:54

that we believed in order

1:11:56

to get enough data to

1:11:58

provide anything interesting to everybody

1:12:00

else. And so their innovation,

1:12:02

after kind of hand -cranking

1:12:04

it with survey, their innovation

1:12:06

was give to get. You

1:12:09

show me yours, I'll show you

1:12:11

mine. Very good. That's very

1:12:13

clever. Very clever. And say, hey, I'll give

1:12:15

you a little taste, but if you want to

1:12:17

see any more data, you've got to share

1:12:19

your salary and your title and your company. We

1:12:21

promise you'll be anonymous. And

1:12:23

do a company review. How many people

1:12:26

screw that up? We're the only person

1:12:28

in that position. And

1:12:30

we have protocols for that. We

1:12:32

did have protocols for that. It

1:12:35

worked really. And we also then solicited

1:12:37

feedback on what it's like to work

1:12:39

at the company. And, you know, CEOs

1:12:41

are kind of public figures. So, okay,

1:12:43

we're going to let you review the

1:12:45

CEO performance. Yeah. And

1:12:48

we knew all those things

1:12:50

would provoke. We knew some

1:12:52

CEOs would go crazy, you

1:12:54

know. So there's another example

1:12:56

while I'm formulating a framework.

1:12:58

Another one is with another

1:13:00

former Expedia guy, Mark Britton.

1:13:02

We founded a company called

1:13:04

Avo, which was in the

1:13:06

legal space. And we

1:13:08

decided to rate attorneys, systematically

1:13:11

rate attorneys. This had never happened before.

1:13:13

It was just kind of like trip advisor

1:13:15

for attorneys. You need to kind of

1:13:17

trip advisor for anything, right? These are business

1:13:19

models that are well -trodden now, but these

1:13:21

were kind of innovative back in the

1:13:23

day. And of course, we were

1:13:25

going to get sued because we were

1:13:27

rating attorneys. Yeah,

1:13:30

definitely a great way to kick the hornet's nest. Some

1:13:33

investors, when we were raising money, I

1:13:35

remember traveling around, you know, doing the Sandhill

1:13:38

Shuffle with Mark. And, you know, I

1:13:40

remember some people saying, well, is this legal?

1:13:42

You're going to get, can you rape

1:13:44

people? You know, you're going to get sued.

1:13:46

You know, I'm not going to invest.

1:13:48

And we were like, yeah, we're

1:13:50

going to get sued. You know, did

1:13:52

you see Die Hard? You remember Die Hard

1:13:54

where the German terrorist leader is waiting

1:13:56

for the last lock to open and he

1:13:58

needs the power to go down in

1:14:00

order to be able to get the bearer

1:14:02

bombs out of the Nakatomi Plaza safe? And

1:14:05

the people are like, how is he going

1:14:07

to get the power to go down? And

1:14:09

he's like, he said. Ladies and gentlemen, I'll

1:14:12

give you the FBI. And they

1:14:14

came in on those things and the FBI, the

1:14:16

playbook said, all right, cut the power. Anyway,

1:14:21

that was exactly the launch strategy of

1:14:23

ABBA. was like, here come the suits.

1:14:25

I'll give you the FBI. Anyway, was

1:14:27

perfect because it created all kinds of

1:14:29

noise. I'm struggling with the

1:14:31

structure. here, let's go with the lawsuits.

1:14:33

All right, so the Sandhill Shuffle, for

1:14:35

people who don't get that reference. So

1:14:37

Sandhill Road, if you could imagine going

1:14:39

to like, This is not going to

1:14:41

be the best comparison. You go to

1:14:43

Kuwait, and there's a shopping mall with

1:14:46

Balenciaga and Prada and all the fanciest

1:14:48

brands, all the aspirational brands. Well, if

1:14:50

there were such a place, but it

1:14:52

was all the highest -end venture capitalists, that

1:14:54

would be Sand Hill Road. And

1:14:56

now it's more distributed, but still. It's

1:14:58

a thing, right? Oh, yeah. If you go

1:15:00

stay at the Rosewood and you're right

1:15:02

around the corner, that's got its own stories.

1:15:04

That's a strange place. Fantastic.

1:15:06

Fantastic. Love that bar. And

1:15:10

then you have, you name

1:15:12

it, right? Everybody's there. All the

1:15:15

big players. And so that's

1:15:17

the Sandhill Shuffle. So why not

1:15:19

be afraid of lawsuits? What

1:15:21

did you guys know that the guys who

1:15:23

said, I'm not going to touch that with

1:15:25

a 10 -foot pole? Well, the founder CEO,

1:15:27

Mark Britton, was my general

1:15:30

counsel at Expedia. And he

1:15:32

worked Securities Exchange Commission prior

1:15:34

to that. He was a

1:15:36

real attorney. And the

1:15:38

way we did it, we were 100 %

1:15:40

convinced of our legal grounds. And

1:15:42

so people could still just consume so much

1:15:44

energy, right? No doubt. So we raised money to

1:15:46

deal with that, but we knew it was

1:15:49

going to be pretty cheap lawsuits. And

1:15:51

we could provide the legal, most of

1:15:53

the legal billing ourselves anyway. And so

1:15:55

it would be cheaper than hiring some

1:15:57

fancy firm. We were convinced. And, you

1:15:59

know, after we won the first few

1:16:01

suits, you know, they lost steam. The

1:16:03

lawyers lost steam on suing. So it

1:16:05

caused some venture capitalists to not do

1:16:07

it. But the more kind of disruptive

1:16:10

oriented folks were like, yeah, great. So

1:16:12

what happened with Ava? It did pretty

1:16:14

well. It did pretty well. We had

1:16:16

trouble. So in a kind of trip

1:16:18

advisor for legal sort of way, it

1:16:20

did really well. Ultimately. these

1:16:23

kind of trip advisory digital middlemen who

1:16:25

were kind of SEO on one side,

1:16:27

collecting Google search traffic on one side

1:16:29

and trying to monetize leads on the

1:16:31

other. As time wore on,

1:16:34

a lot of those business models

1:16:36

got somewhat disintermediated. And so the protection

1:16:38

against that is usually to go

1:16:40

down into the workflow of the transactions

1:16:42

of the industry, which is, say,

1:16:44

what we've done at Zillow. or what

1:16:46

Expedia does. So could you explain

1:16:48

that just one more time and maybe

1:16:50

an example would be helpful. So

1:16:52

let's just say there's a TripAdvisor for

1:16:54

X. Like you said, they're kind

1:16:56

of harvesting traffic on the SEO side.

1:16:58

So their pages are engineered in

1:17:00

such a way. That's right. Maybe also

1:17:02

using ad spend to drive traffic

1:17:04

to these reviews, which are then monetized

1:17:06

on some level. That's right. Some

1:17:08

people can see, but by selling those

1:17:10

leads out the other side of

1:17:12

the marketplace. So literally a lead middleman.

1:17:15

How would they get intermediated?

1:17:17

Michael Porter, Five Forces, would

1:17:19

say, look, if you have

1:17:21

an over -dependency on any supply

1:17:23

of customers, you're strategically exposed,

1:17:25

for obvious reasons. If you

1:17:27

have an over -dependency on

1:17:29

any supplier, you're strategically exposed. Business

1:17:32

Strategy 101 says diversify your sources

1:17:35

of customers and your sources of

1:17:37

supply so that nobody gets too

1:17:39

much leverage over you. Also,

1:17:41

it's like a single point of

1:17:43

failure, right? Absolutely. Factory went down

1:17:45

because of XYZ. That's a problem. We're

1:17:47

dealing with that right now in the country

1:17:49

because COVID discovered that we had lots

1:17:51

of supply chain single points of failure. Anyway,

1:17:53

we don't need to sidetrack on that. So

1:17:56

in that example, if you're

1:17:58

primarily getting your traffic from

1:18:00

Google, paid or free,

1:18:03

you're developing a serious dependency on

1:18:05

Google. And Google, of course, in

1:18:07

its own search for increased value,

1:18:09

starts looking vertical, which means down

1:18:11

into your business. And so people

1:18:13

probably noticed over the years that

1:18:15

Google started doing reviews, and then

1:18:17

they did their own mess. So

1:18:19

they're doing their Yelp reviews and

1:18:21

their TripAdvisor reviews, and then they

1:18:24

started doing... airline schedules and hotel

1:18:26

bookings and restaurant reservations and, and,

1:18:28

and. And so when the big

1:18:30

guy that you're getting all your

1:18:32

customers from starts taking a more

1:18:34

than passing interest in your business

1:18:36

model because they want to capture

1:18:38

more value, you better figure out

1:18:40

something else. Yeah. Okay. So strategically

1:18:42

speaking, my defense against that in

1:18:45

my digital marketplaces has been twofold.

1:18:47

One, build a giant brand that

1:18:49

customers know and love. And therefore,

1:18:51

most of your traffic and customers

1:18:53

comes directly to your app and

1:18:55

sites. You have to have

1:18:57

a brand to do that in

1:18:59

order to have power. And then

1:19:01

two, look down your funnel and

1:19:03

look into the workflow of the

1:19:06

business you're in, be it travel

1:19:08

or real estate or legal or

1:19:10

jobs for the verticals that I've

1:19:12

done stuff in. And make sure

1:19:14

you become digitally integral to the

1:19:16

workflow. You're building tools for the

1:19:18

industry. Ultimately,

1:19:20

maybe even doing the transactions

1:19:22

and having a platform for

1:19:24

the transactions. And that,

1:19:26

in a nutshell, is what Zillow's long

1:19:28

-term strategy is. We're basically building a

1:19:30

super app, a one -stop shop application

1:19:33

for anybody who's renting or buying.

1:19:35

Soup to nuts, everything integrated. All the

1:19:37

professionals plug in and workflow. And

1:19:39

that, we have a big brand. We

1:19:41

source almost all of our customers

1:19:43

directly. Not all, but most.

1:19:45

And we're embedded in the

1:19:47

workflow, solving real customer problems.

1:19:49

And the business is great

1:19:51

and growing. All right. So

1:19:53

I haven't forgotten about the Provocation Marketing

1:19:55

class. However, I think this is a great

1:19:58

place to buy you some more time

1:20:00

and talk about naming. Okay, oh. How do

1:20:02

you name companies? You saw that live

1:20:04

post. I

1:20:06

played around with blogging like all of

1:20:08

us. It really stuck with some,

1:20:10

and it didn't with others. I probably

1:20:12

only had like 10 posts on my

1:20:14

blog. But one of them was naming,

1:20:16

because I've had a lot of fun

1:20:18

naming companies. And I gave advice on

1:20:20

naming, I think, the title of the

1:20:22

post. The site it's on is called

1:20:25

hopperanddropper.com, which is a fly fishing term. which

1:20:28

nobody's gone to. I only had 20

1:20:30

visitors, Tim being one. Lucky

1:20:32

21. I

1:20:35

have a few rules about naming.

1:20:37

First, when you're trying to

1:20:39

brand a company, if you're building

1:20:41

a consumer brand especially, you have two

1:20:43

broad ways you can go. The

1:20:45

easy way and the hard way. I'll

1:20:48

forgive the four -hour work week and the

1:20:50

four -hour body, but I'll tell you that there

1:20:52

are no shortcuts. You

1:20:54

take the shortcut to the long road,

1:20:56

my coach Jimmy says. Anyway, the

1:20:58

easy way is if you're building a

1:21:00

travel site to call it hotels.com,

1:21:02

airlinetickets.com, you name it. Every category has

1:21:05

a literal word.com. And the advantages

1:21:07

to that are it's easy to explain

1:21:09

to people what you do. And

1:21:11

the disadvantages to that are you

1:21:13

don't own any brand of equity because

1:21:15

you can't own a word that

1:21:17

previously exists. And so you're nondistinct and

1:21:19

nondistinctive. There's an in -between way.

1:21:21

which is to use an existing

1:21:24

word but make a new application of

1:21:26

it, Apple, computer, amazon.com, and that's

1:21:28

viable. But you have to build a

1:21:30

new definition for that word, which

1:21:32

those companies obviously did successfully. The hard

1:21:34

way and the best way, I

1:21:36

think, for consumers is to make up

1:21:38

a word. Make up

1:21:40

a word. which is super hard because

1:21:42

you have to tell people what the

1:21:44

word means. You have to define it

1:21:46

for them. But once you do, you

1:21:48

own that word. The definition of that

1:21:51

word is yours and only yours. And

1:21:53

so I like the hard path because

1:21:55

I like building brands. And with provocation

1:21:57

marketing, I think I can get a

1:21:59

big audience early, which begins to familiarize

1:22:01

people with the brand. So I was

1:22:03

confident in my ability to, my team's

1:22:05

really ability to do that. Okay,

1:22:07

so now when you're making up a word, what do

1:22:09

you do? And I think this is what you're referring to.

1:22:11

Okay, so high point Scrabble letters. Do you play Scrabble? It's

1:22:14

been a minute, but yes, I've played Scrabble.

1:22:16

Okay, you know that there are different point

1:22:18

numbers on each letter as you play Scrabble.

1:22:21

And do you remember what the high point

1:22:23

ones are? I don't. Okay. Their

1:22:25

Z is 10. X

1:22:29

is 10. That's the highest points you can

1:22:31

get. A, E, I, O, U are 1. Here's

1:22:33

why. Q is 10 too. Here's

1:22:35

why. Z, X, and

1:22:38

Q are super rare letters. A,

1:22:40

E, I, O, U are super common.

1:22:42

And so rule number one is pick

1:22:45

the super rare letters and pick them

1:22:47

because they're very distinctive. They jump off

1:22:49

a page when you read. They stick

1:22:51

in people's brains in a way that's

1:22:53

not crowded. So all my stuff has

1:22:55

Zs and Xs and some Qs actually

1:22:57

too. Rule number two, fewer

1:22:59

syllables is better than more. I kind

1:23:01

of learned this lesson with Expedia. Expedia

1:23:04

was too many syllables. It's worked

1:23:06

out fine. We've overcome that. The

1:23:08

company's overcome that now, but it was,

1:23:11

in hindsight, was a lot. I

1:23:13

liked it because of rule number

1:23:15

three, which is it was evocative

1:23:17

of positive things, speed, expedition.

1:23:20

So it said adventure and speed, and

1:23:22

that all felt good in that

1:23:24

word. But fewer syllables. I think two

1:23:26

syllables is the sweet spot because

1:23:28

I also want it to be a

1:23:30

good dog name. So if the

1:23:32

word could be a good dog name,

1:23:34

you're onto something like you can

1:23:37

call for it. Yeah. Zillow. Anyway, another

1:23:39

one is it can be turned into

1:23:41

a verb pretty easily. So pick a

1:23:43

word that can be turned into a

1:23:45

verb. So it probably, the dog name

1:23:47

and verb probably means it ends in

1:23:49

a vowel sound. And then the last

1:23:51

one is people, double letters and palindromes

1:23:53

are good too. So anything that is

1:23:55

unique, a unique word form, double letters,

1:23:57

people remember, they jump off the page

1:23:59

and palindromes are. words that are the

1:24:01

same forward and backward spelled, right? So

1:24:03

just interesting, interesting words. Yeah. Anyway, that's

1:24:05

my handbook. Palindrome, like my friend Mike

1:24:07

Kim back in the day. I

1:24:10

was struggling to think of one. I couldn't

1:24:12

pull one on the fly. Taco Cat. It's

1:24:15

a good game. So you're in the game

1:24:17

space. the name of Taco Cat. That

1:24:20

is a funny game, isn't

1:24:22

it? It's so stupid. It's

1:24:24

so fun. It's so good.

1:24:26

So I'm thinking of double

1:24:28

letters. So there are names.

1:24:30

Expedia had... X. Has an

1:24:32

X. X speed. Good connotation

1:24:34

with pre -existing words or

1:24:36

concepts. Maybe one syllable too

1:24:38

long. Then you got Zillow.

1:24:40

Zillow, that's a sweet spot. Kind

1:24:42

of named it. I'm imagining this

1:24:44

Labrador Retriever, right? Yeah. And

1:24:46

starts with a Z. Like how

1:24:48

many words start with a Z? That's

1:24:50

great. And two double letter LLs.

1:24:52

Soft ending. Double letter, but I'm not

1:24:54

sure because I am not up

1:24:56

to speed with my Scrabble glass door.

1:24:58

Glass door in the mid, you

1:25:00

know, in the middle. It was pretty

1:25:02

evocative of having people peer is

1:25:04

transparency. Power of the people and transparency

1:25:06

is a big thing. And we

1:25:08

really liked kind of looking in through

1:25:10

the glass door inside of a

1:25:12

company. Two syllables, not a great dog

1:25:15

word, you know, but two double

1:25:17

letters. So it kind of jumps off

1:25:19

the page. It's an interesting looking. I

1:25:22

would say we get kind of

1:25:24

a B on that. But Robert

1:25:26

did a very good job with

1:25:28

marketing that. All right. So if

1:25:30

you need more time, I'm

1:25:32

not going to forget about it,

1:25:35

the provocation marketing curriculum. And it

1:25:37

could just be one seminar. It

1:25:39

doesn't have to be ongoing, just

1:25:41

if that complicates the envisioning process.

1:25:43

Find a seven deadly sin zone,

1:25:46

something that is emotionally core to

1:25:48

us. That

1:25:50

you know is going to incite

1:25:52

an emotional response. All right.

1:25:54

Okay. So some topic

1:25:56

that people are emotional about.

1:25:58

And then go address

1:26:00

some sacred cow, you know,

1:26:02

some taboo or sacred

1:26:04

cow in that space. Most

1:26:06

of the ideas that you could probably

1:26:09

think of with that outline would be

1:26:11

really negative. And then get

1:26:13

rid of all those. Because I do believe

1:26:15

a cheap way to get attention is

1:26:17

to scare people. Okay. But I

1:26:19

think it's cheap. It's a cheap

1:26:21

way to lead is to scare people.

1:26:24

Effective, but cheap. And

1:26:26

it doesn't make people feel

1:26:28

good to be scared. So

1:26:30

if you're building a brand

1:26:33

and a service, you want

1:26:35

people to be provoked, but

1:26:37

feel good or tickled or

1:26:39

entertained, you know? And so

1:26:41

that is where I would

1:26:43

head with the seminar. end

1:26:45

up brainstorming about getting people's ideas

1:26:47

for that. Let's touch on briefly, mention

1:26:49

Bill Gurley. Of course, famous venture

1:26:51

capitalist. He's been on the show. Brilliant

1:26:53

guy. Also quite hilarious. And local.

1:26:56

And local. Hey, Bill. Yeah. Yeah. He's

1:26:58

right down a couple of blocks

1:27:00

from where we're sitting right now. You

1:27:02

have spent time at Benchmark Capital,

1:27:04

which way back in the day, I

1:27:06

mentioned this to Bill when I

1:27:08

first moved to Silicon Valley. A

1:27:10

book was recommended to me called E -Boys

1:27:12

way back in the day. And

1:27:14

putting aside how Bill may or may

1:27:16

not feel about it, we didn't really

1:27:19

get into it. I'm sure there's lots

1:27:21

of stuff that could stand some fact

1:27:23

-checking, but it was incredibly inspirational and

1:27:25

so entertaining. I mean, this was the

1:27:27

heyday, right? I mean, this was just

1:27:29

rocket ships everywhere. So fun.

1:27:31

So you've spent time

1:27:33

at and with Benchmark. What

1:27:36

led you to that? Was

1:27:38

that kind of biding time

1:27:40

until you figured out which

1:27:42

next big swing to take?

1:27:44

What was the motivation? And

1:27:46

then also, what did you

1:27:48

learn there or what came

1:27:50

into greater resolution or clarity

1:27:52

while you were there? Yeah.

1:27:54

Okay. So

1:27:56

as we chatted about before, when

1:27:58

I was coming with my

1:28:00

family back from sabbatical, I'm a

1:28:03

big believer in the sabbatical

1:28:05

in Italy and was considering the

1:28:07

next. career move. I got

1:28:09

to know first Bruce Dunleavy and

1:28:11

at benchmark and then Bill

1:28:13

and the other guys. I did

1:28:15

read E boys then too,

1:28:18

which was, you know, romantic

1:28:20

kind of, you know, in a weird way,

1:28:22

but you know, for business geeks like me

1:28:24

and you maybe romantic. And

1:28:26

I also knew that I had a personality

1:28:28

that did want to have my fingers in

1:28:30

a lot of stuff. I

1:28:32

did. I knew that. I liked to do lots of

1:28:34

things and I want to do lots of things and I

1:28:36

could do lots of things. I could think about lots

1:28:38

of things. And so in the

1:28:40

course of trying to figure out prior to

1:28:42

Zillow, trying to figure out what to do,

1:28:44

I got to know those guys really well.

1:28:46

They invited me to a bunch of stuff

1:28:48

to sit in on stuff. I knew I

1:28:50

would be good at that. I knew I

1:28:52

liked doing that. And then a condition with

1:28:54

Lloyd Frank of doing the Zillow thing and

1:28:56

taking the CEO title, I said, look, you

1:28:58

know I'm going to do a bunch of

1:29:00

other things too. I'm going to start more

1:29:03

companies. And I'm going to

1:29:05

do the venture capital thing. And

1:29:07

he's like, all good, no problem. And

1:29:09

so as a way to keep

1:29:11

myself stimulated and seeing lots of stuff

1:29:13

and get down to the valley,

1:29:15

I was in Seattle, which was not

1:29:17

really a venture pop -ed at the

1:29:19

time. Cloud computing hadn't happened yet.

1:29:21

We did have Amazon, Expedia, and Microsoft.

1:29:25

And so the action on the cutting edge

1:29:27

was down in the valley. I had

1:29:29

some boards I was on down there as

1:29:31

well. And so I took the venture

1:29:33

partner job with Benchmark, which is a pretty

1:29:35

ill -defined position, as a way to keep

1:29:37

me going to the valley and keep

1:29:40

me in the flow of the latest stuff.

1:29:42

And I really loved that. I

1:29:44

do believe that ended up benefiting all

1:29:46

the other stuff I was doing as

1:29:48

well. I really love that team. I

1:29:50

love that team to this day. How

1:29:52

did it benefit the other things? Was

1:29:54

it just seeing around corners, kind of

1:29:56

getting an idea of what's coming before

1:29:58

most other people have a chance to?

1:30:01

Yeah, and thinking of new ideas for

1:30:03

companies too. But I'm a big believer.

1:30:05

There are some companies that hold on

1:30:07

to their people and say, you can't

1:30:09

go do other things. Don't sit on

1:30:11

other boards. I really like. executives that

1:30:13

are on my teams to have another

1:30:15

board. And if you love it, set

1:30:17

it free. If you're scared about losing

1:30:19

people and you're being too retentive, that

1:30:22

means you're too insular probably. And

1:30:24

you got to give to get. If

1:30:26

you give time and get interested in

1:30:28

other business models, you help them. But you

1:30:30

end up learning a bunch of stuff

1:30:32

for your own company. I've learned so

1:30:34

much from sitting on the board of Netflix

1:30:36

that I've imported to my other companies.

1:30:39

Can you explain, just for folks who may

1:30:41

not be familiar, what does it mean

1:30:43

to sit on a board? What does

1:30:45

that actually mean? It depends board to board,

1:30:47

I'm sure, on responsibilities and expectations. But

1:30:49

along with that, you must have lots

1:30:51

of requests to join X, Y, or Z

1:30:53

boards. How do you choose? the

1:30:56

boards to be a part of.

1:30:58

Okay. What it means to sit

1:31:00

on a board is when a

1:31:02

company's private, it means help the

1:31:04

CEO and the leadership team build

1:31:06

the company. Okay. So

1:31:08

it's really being an advisor

1:31:10

and a coach and somebody

1:31:12

with a lot of business

1:31:14

building experience to help pick

1:31:16

the right strategy. You're not

1:31:18

running anything, but you're basically

1:31:20

coaching the entrepreneurs who oftentimes

1:31:23