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find yourself a co-host at airbnb.com/

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host. You have to have speed and this

2:43

is one of the things that Silicon Valley

2:45

has learned more intensely than anywhere in the

2:47

world other than maybe China. You were a

2:50

truly prolific entrepreneur. PayPal, LinkedIn, Airbnb,

2:52

Open AI, what were some of

2:54

the learnings that you learned at

2:56

PayPal that helped you become a

2:58

great entrepreneur? People are familiar with

3:01

pivots because it's not working. But

3:03

pivoting towards opportunity is one of

3:05

the things that entrepreneurs really need

3:08

to keep in mind. What's scaling

3:10

companies is prioritizing speed over efficiency

3:12

in an environment of uncertainty. Speed

3:15

over profitability. Yes. And by the

3:17

way, through speed of learning it and deploying

3:19

it and scaling it is the game. Sometimes

3:22

entrepreneurs are told, oh, ignore risk. You know,

3:24

no, no, no, take smart risk. When you're

3:26

scaling really fast, hiring really fast,

3:28

how can you maintain a healthy

3:30

company culture? You have to intentionally...

3:48

Yep Bam, welcome back to the show.

3:50

Today we have a true legend on

3:53

the podcast, Reed Hoffman, who is the

3:55

co-founder of LinkedIn and inflection AI, is

3:57

joining us. He's also renowned venture capitalist.

3:59

He's been behind companies like Airbnb, PayPal,

4:02

so many great huge companies that

4:04

have moved the world forward. He's

4:06

also a partner at Greylock. He

4:08

hosts a podcast, Masters of Scale,

4:10

and he's a prolific author. He's

4:12

got a brand new book out

4:14

on AI called Super Agency, which

4:16

we're going to dig into in

4:18

this conversation. Me and Reed talked

4:20

for well over an hour in

4:22

20 minutes, but you guys know

4:24

I love to do when somebody

4:26

is just absolutely amazing. I want

4:28

to keep them on for as

4:30

long as possible. In part one

4:32

of this conversation, we really focus

4:34

on entrepreneurship. So I talked to

4:36

him about his early entrepreneurship endeavors.

4:38

We learn about his failures and

4:40

big learning lessons. And then we

4:42

go into scaling, all of his

4:44

strategy for scaling businesses. And guys,

4:46

he's scaled huge companies, like I

4:48

mentioned, LinkedIn, Airbnb, PayFile. He's behind

4:50

some of the biggest companies in

4:52

the world. So he's got a

4:54

lot of great content when it

4:56

comes to scaling businesses, specifically his

4:58

Blitz scaling methodology. And then in

5:00

part two, we really focus on

5:02

AI. He wrote a new book

5:04

called Superagency. It's all about how

5:06

humans are going to have agents

5:08

moving forward, AI agents. And I

5:10

really pick his brain on his

5:12

optimism towards AI and how he

5:14

imagines the future to be with

5:16

AI in the picture. And everything's

5:18

going to be changing. So in

5:20

part one, like I mentioned, we're

5:22

talking about entrepreneurship. So stay tuned

5:24

for that and enjoy my conversation

5:26

with the amazingly talented Reed Hoffman.

5:29

Reed, welcome to Young and Profiting

5:31

Podcast. It's great to be here.

5:33

I've been looking forward to this.

5:35

Me too. And first of all,

5:37

I want to say I feel

5:39

very honored to have you on

5:41

the show. You were a truly

5:43

prolific entrepreneur. You've literally helped push

5:45

the world forward for decades. You've

5:47

been a leader at companies like

5:49

PayPal, LinkedIn, Airbnb, now inflection AI.

5:51

You also... were a part of

5:53

open AI so you've just been

5:55

behind so many huge companies that

5:57

have pushed the world forward like

5:59

I said so I want to

6:01

to ask you, when you think

6:03

of all your contributions to the

6:05

world and all the companies that

6:07

you work with, because you don't

6:09

have to work right now. You

6:11

choose to work. And so you

6:13

must be thinking about, like, okay,

6:15

what makes me want to work

6:17

with a company? What is your

6:19

mission and what is the red

6:21

thread with everything that you're doing

6:23

in the world right now? I

6:25

guess probably it's like I'm, to

6:27

put it at like philosophically, a

6:29

humanist, which is how do we

6:31

make ourselves better individually? and as

6:33

a group. So it's empowering a

6:35

bunch of different individuals' lives, but

6:37

also leaving the world much better

6:39

than we found it. And how

6:41

do we do that? And that's

6:43

the red line through everything I

6:45

do, including companies, because you want

6:47

to do companies that, of course,

6:49

have all the normal company things

6:51

of writing great product services and

6:53

jobs and all rest, but you

6:55

also want it to be the

6:57

impact that you have in the

6:59

world. leaves the world in a

7:01

much better place to transform industries,

7:03

to transform societies. And like all

7:05

the companies you mentioned, that I've

7:07

been involved with from the earlier

7:09

stages, whether it's personally LinkedIn and

7:11

PayPal, or as an investor, and

7:13

board member, Airbnb, open AI, all

7:15

of it has a theory of

7:17

how does it improve human life,

7:19

human work, quality of experience, how

7:21

do we elevate ourselves, become more,

7:23

the people we aspire to be.

7:25

And in a similar way, in

7:27

a similar token, I'd say, you've

7:30

said in the past, society flourishes

7:32

when people think entrepreneurially. So talk

7:34

to us about why you believe

7:36

that the more entrepreneurs that we

7:38

have in the world, the more

7:40

that mankind is better off. It's

7:42

part of how you create the

7:44

future. Everything that we have in

7:46

our lives, I mean, this podcasting

7:48

stuff, these computers, these phones, all

7:50

come about through entrepreneurial innovation. And

7:52

it's part of how the new

7:54

future is created, and it's part

7:56

of how prosperity is created, it's

7:58

part of how life is improved.

8:00

And basically we wouldn't get to,

8:02

you know, even when you say,

8:04

well, wait, there's also science, which events

8:06

vaccines and other kinds of things,

8:08

a lot of vaccines are commercial these

8:11

days and have an entrepreneur all

8:13

bent, like Madonna. And so it's

8:15

this invention of new things. And it's

8:17

envisioning the way the world could possibly

8:19

be. How could you create something that

8:21

would be of service to this is

8:24

one of the things that I think

8:26

people always forget about. the process of

8:28

Adam Smith and capitalism is

8:30

the theory of moral sentiments.

8:32

How are you being of

8:34

service to other people? And

8:36

that entrepreneurial creation of business

8:38

and products and services is a really

8:40

key part of it. And, you know, when

8:42

you look around our lives and all the

8:45

things in it, it was earlier entrepreneurs

8:47

that we were building upon

8:49

their work. So speaking of

8:51

building on entrepreneurs of the

8:53

past, my career has totally

8:55

skyrocketed from Lincoln. I was able

8:57

to become a full-time entrepreneur

8:59

with my social agency and

9:01

my podcast network. And so

9:03

my question to you is,

9:05

LinkedIn has blown up into this

9:07

huge platform. It's one of

9:09

the biggest social media networks

9:11

in the world. 135 million

9:13

daily active users. Was your

9:15

vision for LinkedIn what it

9:17

is today? What was your initial vision?

9:20

And did you ever imagine it would

9:22

scale to what it is today? So

9:24

when you start a business, you should think

9:26

about this as a kind of probabilities

9:29

of outcomes. So I did think that

9:31

LinkedIn could become what it is today. I

9:33

actually even think things that work could be

9:35

bigger and could be on path and you

9:37

could be asking me this question in five

9:39

years when I achieved a bunch of new

9:41

things and I would also say, hey, yes,

9:43

this is possible. Now, are we in a

9:45

low probability, but a high result

9:48

future from when I started LinkedIn?

9:50

Absolutely. You have to be rational

9:52

as an entrepreneur. And part of

9:54

what sometimes entrepreneurs are told, oh, ignore

9:56

risk, you know, like, no, no, take

9:59

smart risk, man. it smartly. And so

10:01

when I started, it was like, well,

10:03

we could be this big. And, you

10:05

know, there's all of these outcomes between

10:07

here and there, which include not succeeding

10:10

at all, that we, you manage your

10:12

way towards, even as you have the

10:14

moonshot, the, if you shoot for the

10:16

stars, maybe sometimes you only get to

10:19

the hills, right? But you have that,

10:21

but you're wise about it. And so,

10:23

yes, you know, there's learnings and we

10:25

can go to the depths of... which

10:28

things I made mistakes on or which

10:30

things turned out to be new surprises

10:32

with LinkedIn, but I would say that

10:34

we're within that probability set that I

10:36

thought was possible. I love that, and

10:39

I'm definitely going to be asking you

10:41

about scaling a business and all of

10:43

your... guidance around that. But first before

10:45

we do that, I do want to

10:48

talk about your early entrepreneurship days because

10:50

a lot of the listeners tuning in,

10:52

they're young entrepreneurs, they're failing every day,

10:54

which is a big part of eventually

10:57

becoming a great entrepreneur is failure at

10:59

first so you can learn and get

11:01

better. So you started a company called

11:03

SocialNet, which actually was a failed startup

11:05

when I read about it. You could

11:08

tell me if it was a failure

11:10

or not, but it was a social

11:12

app. for dating way before we had

11:14

the dating apps of today, like bumble

11:17

and things like that. So it was

11:19

like a really innovative concept. Tell us

11:21

about what happened with that company, why

11:23

you ended, pivoting to something else, and

11:25

some of the failures and learnings that

11:28

you had from that. So a lot

11:30

of the writings I've done are all

11:32

the learnings from mistakes. There was almost

11:34

never anything like I just got it

11:37

right the first time. It was that

11:39

you iterated at speed and you kept

11:41

adapting and you kept learning. And that's

11:43

one of the rules of entrepreneurship is

11:46

always be learning. So Social Let, you

11:48

know, I started with the kind of

11:50

this theory of, oh, I've learned how

11:52

to create software products. I know what

11:54

a really good thing would be. I've

11:57

got a great product idea. Let me

11:59

go raise the venture capital. Let me

12:01

release the product. Well, a huge number

12:03

of things. to software and consumer internet

12:06

because I thought I would polish it

12:08

and get it just so right and

12:10

beautiful before getting out. And when we

12:12

released, we quickly discovered half of things

12:15

we'd spent months on were completely useless.

12:17

We thought that the game was entirely

12:19

about, well, did we have a vision

12:21

for product quality? And we didn't spend

12:23

that much time thinking about like our

12:26

go-to-market strategy, which is fundamental to entrepreneurship.

12:28

And so it was just failure after

12:30

failure. and recovery. But the two ways

12:32

that I kind of kind of kind

12:35

of learned to summarize this was one

12:37

is I perhaps never learned so much

12:39

in my life except for between the

12:41

ages of two and three because when

12:44

you're falling over and learning it and

12:46

standing back up. And then the other

12:48

one is every Friday there were things

12:50

I wish I had known on Monday

12:52

and those things I wish I know

12:55

and weren't person X is going to

12:57

return your phone call or this partnership

12:59

pitch won't work out. It's literally how

13:01

to play the game, what to do.

13:04

And so it was a tremendous learning

13:06

experience, which of course means lots of

13:08

scars, tissue, and a lot of blood

13:10

on the floor. And I'd say that

13:12

it was, you know, in Silicon Valley

13:15

terms, a failure. We returned the investors

13:17

capital, but that was all we were

13:19

able to do fundamentally. And so I

13:21

love that you started as an entrepreneur,

13:24

and you learned a lot with SocialNet,

13:26

and then you went to PayPal, right?

13:28

And you learned as an executive there

13:30

before you went and co-founded LinkedIn. So

13:33

talk to us about that. What were

13:35

some of the learnings that you learned

13:37

at PayPal that helped you become a

13:39

great entrepreneur? So part of what happened

13:41

is two friends of mine, Peter Thiel,

13:44

Max Lovechen, came to me and said,

13:46

hey, we're starting this business. You've been

13:48

doing this for a year and a

13:50

half with SocialNet. We'd really love you

13:53

to join the board. We'll have you

13:55

and Scott Benister join the board. And

13:57

could you do that? And I said,

13:59

yes, because I've just gone through a

14:02

here and a year and a year

14:04

and a year and a year and

14:06

a year and a half of learning,

14:08

a year and a half of learning,

14:10

initial booster pack on, which is all

14:13

the various lists, which is hire people

14:15

who are high talented and learn. more

14:17

than people have had a ton of

14:19

experience. I mean, they must know how

14:22

to do the job. But as opposed

14:24

to like, I've done this job for

14:26

10 years. I've done this job for

14:28

at least a year or two, and

14:31

I'm an intense learner. So PayPal started

14:33

as an encryption technology on mobile phones,

14:35

went to cash on Palm Pilots, plus

14:37

an online. synchronizing payment service and then

14:39

quickly converted to an online master merchant.

14:42

And that was after the last pit

14:44

was after it launched. And so all

14:46

of that initial cryptography on mobile phones

14:48

was completely thrown out the door and

14:51

useless. Because again, it was kind of

14:53

this don't just build something because it's

14:55

an interesting product. What's the market need?

14:57

How are you getting into it? And

14:59

so there were just tons and tons

15:02

of experiences. I'd say one of the

15:04

central things that I learned about. Entrepreneurship

15:06

from PayPal was the speed of execution,

15:08

the speed of making decisions. And so

15:11

one of the things, I mean, there

15:13

was a whole stack. Again, we could

15:15

take this entire podcast. Things I learned

15:17

from social art, things I learned from.

15:20

PayPal, things I learned, you know, like

15:22

just each one of them. But part

15:24

of the thing was, basically, I kind

15:26

of adopted there, which I wish I

15:28

had had at Social Let, this decision

15:31

mode, where when I'm confronted with a

15:33

decision, I say, can I go. And

15:35

by the way, usual answer is what

15:37

decision would I make? Okay, I would

15:40

decide X, not Y. Okay, is there

15:42

anything that I could learn by researching,

15:44

talking to people, etc. that would change

15:46

from X to Y? Okay, what's the

15:49

cost and time to do that? And

15:51

if the cost and time is too

15:53

great, you just make the decision, go

15:55

with X. Can you live with it?

15:57

And maybe sometimes part of X and

16:00

Y is, is it a one-way door,

16:02

two-way door, because if you can recover

16:04

from it. You're less likely to go

16:06

do the research about should you decide

16:09

why versus X. Part of this practice,

16:11

it gets you comfortable with making decisions

16:13

at a... really intense speed where you're

16:15

uncomfortable with it because you don't know

16:18

everything when you're making the decision. And

16:20

that was one of our many ethos

16:22

is at PayPal that allowed us to

16:24

navigate this just like lots of things

16:26

almost blew us up and it was

16:29

definitely a X-Wing fighter going into the

16:31

death star. Oh my gosh, are we

16:33

going to live or die on this?

16:35

We succeeded. Yeah, and I'm sure you've

16:38

gotten really comfortable with uncertainty and taking

16:40

these risks without really knowing if it

16:42

was the right or wrong decision. And

16:44

like you said, prioritizing speed over anything

16:46

else, which is so important. And I

16:49

know you say that in your book,

16:51

Blitz Scaling, which you put out in

16:53

2018. And even though it was put

16:55

out sevenish years ago, it's still super

16:58

relevant. So I did want to cover

17:00

it. So you talk about blitz scaling.

17:02

And basically it's a concept that is

17:04

about achieving market dominance quickly. So can

17:07

you go over some of the key

17:09

principles of blood scaling? And I'll ask

17:11

you some, I've got like lots of

17:13

questions about it, but I'll let you

17:15

summarize it first. The pithy way of

17:18

saying what blood scaling about is it's

17:20

prioritizing speed over efficiency in an environment

17:22

of uncertainty. And to unpack that a

17:24

little bit, it's... that when you're playing

17:27

games where we call in the book

17:29

Glenn Geri, Glenn Ross games, which is

17:31

first prize as a Cadillac, second prize

17:33

as stick knives, and third prize as

17:36

you're fired, you have to have speed

17:38

and speed to scale. And this is

17:40

one of the things that Silicon Valley

17:42

has learned more intensely than anywhere in

17:44

the world other than maybe China. China

17:47

is one of the few areas where

17:49

I've also learned blitz scaling games. And

17:51

it's one of the reasons why when

17:53

you look at Silicon Valley for the

17:56

tech industry, the whole population of Silicon

17:58

Valley is like three and a half

18:00

million. That's like Ireland. And yet, the

18:02

number of global tech companies that come

18:05

out of Silicon Valley versus anywhere else

18:07

in the world, and as some agree,

18:09

including China, because we're talking global here,

18:11

although there's obviously bite dance and tick-cock

18:13

and so forth, is just enormous. And

18:16

why is that? And that's the answer

18:18

is because this hyper-competitive game of split-scaling

18:20

is something that we have learned to

18:22

do. And you don't do split-scaling as

18:25

a goal into itself. You do it

18:27

as a competitive tool relative to being

18:29

first prize versus second or third. because

18:31

your particular industry, your particular company, your

18:34

particular potential industry transformation is worth it.

18:36

So you were just talking about how

18:38

you have to basically prioritize speed. So

18:40

when we're bloodscaling and we're prioritizing speed,

18:42

lots of things can go wrong, right?

18:45

Because You're prioritizing just hiring really fast,

18:47

making fast decisions, things are not perfect.

18:49

So talk to us about some of

18:51

the operational risk that is involved with

18:54

blitz scaling and some of the fast

18:56

decisions that people have to make. Typically,

18:58

obviously people in business schools teach reduce

19:00

uncertainty and prioritize learning for efficiency. But

19:02

if what you're doing, you're saying, well,

19:05

we really need to get to scale.

19:07

very fast relative to either our market

19:09

because of a scale mechanic or because

19:11

of competition, you'll say, which risk can

19:14

we take to get to that scale

19:16

product market fit much faster than our

19:18

competition? And so, for example, classically what

19:20

happens in a lot of these split

19:23

scaling companies is people who are traditionalist

19:25

business people will say, what's your operating

19:27

margin? And you need to prove your

19:29

operating margin. We did this. I myself

19:31

sat in early Airbnb meetings where one

19:34

of the VCs was saying that. And

19:36

I had to speak up and say,

19:38

nope, bad question, not a question off

19:40

to answer right now, because we're in

19:43

a software business, we don't have these

19:45

capital hard assets, even though they're being

19:47

rented and transacted in it, that's on

19:49

our balance sheet. What we just need

19:52

to do is get this to scale.

19:54

be the growing marketplace of that and

19:56

we'll figure out operating margins later. But

19:58

that's of course what the size of

20:00

your operating margins are is how valuable

20:03

your business is. And when you get

20:05

to the operating margins, we'll be when

20:07

people start valuing your business more. And

20:09

you're like, so that's a very counterintuitive

20:12

thing you say is I don't know,

20:14

we'll take the risk on wherever our

20:16

operating margins will end up because getting

20:18

the scale more quickly. and fast and

20:21

taking experiments with like, for example, what

20:23

you're doing in marketing, what you're doing

20:25

in hiring, what you're doing in product

20:27

development, you'll just try it and we'll

20:29

iterate and move quickly and we'll abandon

20:32

the things that aren't working. And that's

20:34

essentially, and that's part of the reason

20:36

why like Airbnb is one of the,

20:38

as you know, is one of the

20:41

examples that we open bloodscaling the book

20:43

up with to kind of show a

20:45

modern example of these are a set

20:47

of decisions that you make and then.

20:49

I forget which chapter, but there's like

20:52

eight counterintuitive rules, in but scaling in

20:54

the middle, which is like embracing chaos

20:56

and hiring Ms. Right now versus Ms.

20:58

Right in three to five years, because

21:01

again, with a learning curve, those are

21:03

all things you're doing to go fast

21:05

now, go fast now, go fast now,

21:07

go fast now, and iterate and change.

21:10

And that's part of why Silicon Valley

21:12

produces just transformational technology companies for the

21:14

world. So it's really what you're saying

21:16

is about speed over profitability. Yes, or

21:18

any form of efficiency. One of the

21:21

things that I learned remotely from Uber,

21:23

because they were another bloodscaling company we

21:25

covered elements of in the book, is

21:27

one of the things when Uber's like,

21:30

oh my God, we need to hire

21:32

engineers really fast. So what they would

21:34

do is they'd interview an engineer, a

21:36

reference check on engineer, and they'd offer

21:39

engineer Sarah, a job. And then when

21:41

they offer engineers their job, they say,

21:43

okay, well, we re-elect our interview with

21:45

you, who are the top three people

21:47

you work with at your current company?

21:50

And then just send those three people

21:52

job offers. That's split scaling, because it's

21:54

like, well, maybe they're not going to

21:56

really work out. Maybe they'll think it's

21:59

a little weird and creepy. got a

22:01

job offer out of the blue with

22:03

a pitch, but it's part of the

22:05

going fast. And so it's not just

22:08

profitability, it's efficiency and everything. Let's hold

22:10

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all you need. When you're hiring that

26:49

fast, like you just gave that example

26:52

of Uber, I have to imagine that

26:54

your company culture might suffer and it

26:56

might become a little bit chaotic. What's

26:59

your guidance for when you're scaling really

27:01

fast, hiring really fast, how can you

27:03

maintain a healthy company culture? You have

27:05

to intentionally try to do it, and

27:08

by the way, Uber. is an example

27:10

of something that had a very chaotic

27:12

and challenging company culture and had to

27:15

refactor it to be a good stable

27:17

public company you're getting. But and the

27:19

usual heuristic rule of thumb is that

27:22

refactoring culture is actually factually hard. It

27:24

is hard. It's not necessarily impossibly hard.

27:26

Dar really demonstrated with Uber. Actually, we

27:28

had a master's scale episode on that

27:31

because it was the question of, okay,

27:33

so you inherit something that's got a

27:35

lot of really broken parts, what do

27:38

you do? The punchline was, you don't

27:40

show up and say, new sheriff in

27:42

town, you say, hey, we did these

27:45

great things, we already have what's greatness

27:47

in this, let's focus on the parts

27:49

that are great and use those to

27:51

refactor the other parts. So as opposed

27:54

to saying, now for something entirely new,

27:56

we're returning to the central roots of

27:58

our greatness and then refactoring the other

28:01

ones. And that's actually, I think, a

28:03

good change. Now, that being said, we've

28:05

allowed a lot of culture episodes, and

28:08

part of that's because you should be

28:10

intentional about it. And the intentionality can

28:12

be not hiring as fast as Uber

28:14

did, so with like Work Day and

28:17

Anil Busry, it was he and his

28:19

co-founder Dave Duffield. did a cultural interview

28:21

at the end, even though he is

28:24

being the CEO, did a cultural interview

28:26

at the end of every hiring process

28:28

for the first 500 people. That slows

28:30

you down some, but that's one way

28:33

to do it. Another way is the

28:35

culture deck for read Hastings, which actually

28:37

just started as when they were looking

28:40

at the attrition of like, why are

28:42

people leaving? It was like, well, they

28:44

didn't understand our culture when they got

28:47

here. So let's first create a culture

28:49

deck to on board them, and then,

28:51

shit, we should publish it, we should

28:53

publish it, publish it. Right, because don't

28:56

come here. If you're looking for a

28:58

family, go to other companies. If you're

29:00

looking for a team, like a professional

29:03

sports team, come here. Because our culture

29:05

is, we ask ourselves a question every

29:07

quarter, every quarter, every quarter, every quarter,

29:10

every quarter, every quarter, if you wouldn't

29:12

hire this person right now, give them

29:14

a severance package, go hire somebody else.

29:16

And so you create these cultural moments,

29:19

and these are all the different tool

29:21

sets that you create for your particular.

29:23

founders, management team, product market fit, competition,

29:26

landscape, etc. because it's not one culture,

29:28

one size fits all, but being intentional

29:30

is very important. Everything has a consequence,

29:33

right? There's pros and cons to everything.

29:35

You can implement all these systems, like

29:37

I'm thinking about my own company right

29:39

now. I used to hire so quick.

29:42

I would just go on LinkedIn, find

29:44

somebody, poach somebody, DM them, do an

29:46

interview, hire them. Now it's... months long

29:49

process and I can feel that sometimes

29:51

it's really hurting us and I'm like

29:53

I just want to go poach somebody

29:56

off LinkedIn you know it's just like

29:58

really just pros and cons and you've

30:00

got to figure out what is the

30:02

right thing for your business and make

30:05

the right decision. So why is first

30:07

mover advantage so important? The whole point

30:09

of split scaling is so that you

30:12

can basically build a moat around you

30:14

as a company, but why is that

30:16

so important? Well, first mover to scale.

30:18

gives you all kinds of advantages. It

30:21

doesn't actually necessarily need to be first

30:23

mover out of the gate, but the

30:25

first mover to scale part of but

30:28

scaling is really critical. Now sometimes, by

30:30

the way, the way that you become

30:32

first mover to scale is you're the

30:35

first mover at the gate because you

30:37

just keep going, right? But that kind

30:39

of getting the scale can have all

30:41

kinds of advantages. One is capital markets

30:44

who award you versus whoever's in second

30:46

place as part of the Cadillac and

30:48

steak knives. employees more want to work

30:51

there, that when you're, when customers or

30:53

members, if it's consumer or anything, think,

30:55

well, what's the one that everyone's talking

30:58

about? It's the one that's the first

31:00

to scale. And so in all of

31:02

these fields, you have advantages. Now, you

31:04

may also have a business with network

31:07

effects, where those network effects become a

31:09

really important, growing, superlinear kind of competitive

31:11

mode, whether it's like Airbnb or Uber

31:14

or others, LinkedIn. Or if it's just

31:16

a, well, I'm ahead, and so by

31:18

default, all of the different forces that

31:21

come together to make a company successful

31:23

are more aligned and believing you're number

31:25

one. Because part of what entrepreneurship does

31:27

is I have this vision, it's currently

31:30

not operative, I'm persuading multiple different constituencies.

31:32

to come invest in my vision. It

31:34

could be investors with money. It can

31:37

be employees with their time in ownership.

31:39

It could be pressed with their belief

31:41

in what's going to happen. It can

31:43

be customers who go, okay, you're a

31:46

startup, but I'm going to start using

31:48

you now anyway, because I believe you

31:50

will be the right thing in the

31:53

future. All of these things is what

31:55

you do as an entrepreneur. you persuade

31:57

people to come and help build your

32:00

vision when you're the first mover to

32:02

scale, you have a lot more of

32:04

those people believing in you and therefore

32:06

investing in you, your cost of customer

32:09

acquisition is lower, your cost of speed

32:11

of recruiting employees lower, your cost of

32:13

cost of capital is lower, your cost

32:16

of capital is lower, etc., etc. The

32:18

weight of your brand is giving you

32:20

all of this advantage, like the brand

32:23

recognition, like the brand recognition. So it's

32:25

a little bit different. I mean, brand

32:27

is also what is your brand promise,

32:29

what are you going to become, and

32:32

you know, awareness is part of it,

32:34

but it's like, okay, we think you're

32:36

going to win. Now, when you have

32:39

dynamics, like a network effect, then your

32:41

brand might be mediocre, but a network

32:43

effect is incredibly good within a business

32:46

or within a, you know, any kind

32:48

of entity that has it. It's a

32:50

very strong amplifier. Networks are usually, but

32:52

not always. So LinkedIn has one, Facebook

32:55

has one, WhatsApp, and Instagram. For example,

32:57

when you look at Google, the network

32:59

effect isn't the search index. That's a

33:02

scale index. What it is is the

33:04

adwords. Because the adwords begin to get

33:06

when you're kind of that large and

33:08

differentiated and have the data and intelligent

33:11

enough, you end up with a better

33:13

cost. You can provide an ad. at

33:15

what is a lower cost to you

33:18

and a higher price to your customer

33:20

and have a higher margin revenue, then

33:22

your competitor that's trying to sell something.

33:25

And so its network effect is in

33:27

the adwards. So part of when you're

33:29

looking for these mega scale businesses, usually

33:31

there's some interesting network effects that really

33:34

power them. I know that there's different

33:36

stages involved with blitz scaling. So there's

33:38

family stage, tribe stage. village stage, city

33:41

stage, nation stage. So I was thinking

33:43

about my company and I think we're

33:45

right in between tribe stage and village

33:48

stage. I think there's probably... a lot

33:50

of growing pains in that stage, right?

33:52

Like we're doing amazing, but I feel

33:54

like it's just like scaling is really

33:57

hard and I feel like that is

33:59

the first instance of really scaling. So

34:01

talk to us about each one of

34:04

these stages, what do we need to

34:06

think about? And you can be high

34:08

level or as deep as you'd like,

34:11

but if you can just break down

34:13

how companies generally scale in the stages

34:15

that they have. So the basic idea

34:17

was to say. When you're hyperscaling to

34:20

a market, obviously everyone wants to have

34:22

as much revenue and as much customers

34:24

and animals per employees is one of

34:27

the ways to benchmark businesses, but almost

34:29

all businesses also get to growing their

34:31

employee base for various reasons. It's sales

34:34

and new products and features, new product

34:36

lines and customer service and account management

34:38

and finance and everything else. So you

34:40

generally speaking need to be scaling your

34:43

employee base at some rate. with your

34:45

business. And so the thought was, as

34:47

you're getting the scale product market fit,

34:50

one of the challenges you have is

34:52

you're scaling the size of your operation

34:54

in all of these different vectors. And

34:56

so that proxies to number of employees.

34:59

And so we broke it up into

35:01

the five categories that you just outlined.

35:03

Thank you. And we said, look, when

35:06

you're getting to each of these things,

35:08

what got you here won't get you

35:10

there? When you're at the earliest stage,

35:13

it's like, you know a couple people,

35:15

maybe you met one of them, you

35:17

hired them, you're all in a room,

35:19

communication isn't really an issue, company culture

35:22

is usually like, well, we went out

35:24

for... beats in a beer and we

35:26

talked about it and that's our company

35:29

culture like we figured out what we're

35:31

doing and as you get larger all

35:33

of these things changed in the various

35:36

earliest everyone's working and then you get

35:38

to there's people who are working and

35:40

being managers then you get there's people

35:42

just being managers then you get people

35:45

who are managing managers and each of

35:47

these things change at levels of scale

35:49

as you go up of how you

35:52

run communications how you make decisions how

35:54

you pivot or readjust something all of

35:56

this changes which risks are you willing

35:59

to take? Like for example, Facebook went

36:01

and people thought this was different but

36:03

it was like move fast and break

36:05

things to move fast with scalable infrastructure.

36:08

There was a oh you got wise

36:10

and you changed your theory of moving

36:12

faster than narrow. What we realized was

36:15

in our early days move fast and

36:17

break things was the way to optimize

36:19

speed. And then in our later days,

36:21

the way to optimize speed was move

36:24

fast with stable infrastructure, because we broke

36:26

the infrastructure, it was too hard to

36:28

fix. And we suddenly were moving slower.

36:31

So it's still both speed principles. But

36:33

those changes, because for example, move fast

36:35

and break things, work totally fine when

36:38

you're 40 people. When you're 500 people,

36:40

and the infrastructure breaking and everything breaks.

36:42

you know, let's keep the infrastructure running,

36:44

however many other things we may be

36:47

breaking as we're moving fast. So all

36:49

of those things go into the different

36:51

levels. And nation is kind of the

36:54

placeholder for public company, you know, thousands

36:56

of employees, etc. And just saying, hey,

36:58

this... The rules here change too, and

37:01

your mistake is trying to run the

37:03

same way as you might be even

37:05

in the village when you're in a

37:07

nation, even though you're of course trying

37:10

to keep speed, you'll definitely keep a

37:12

vibrant culture and high performance and high

37:14

quality talent. The nature of the game

37:17

changes as you change size. It's so

37:19

interesting. I highly recommend that everybody read

37:21

bloodscaling. I loved reading through it. I

37:24

want to read it in even more

37:26

detail, because I feel like it's just

37:28

so relevant, especially as like... a newer

37:30

entrepreneur scaling your business. If you've never

37:33

done it before, build a company that's

37:35

a nation-sized company, it's definitely a good

37:37

read. So when you're thinking about making

37:40

intelligent risk, this is something that we

37:42

were talking about earlier. Do you have

37:44

anything that you think through questions that

37:47

you ask yourself to make sure that

37:49

you're not just taking any risk and

37:51

that you're taking a risk intelligently? Well,

37:53

there's a couple of quick hacks on

37:56

every major decision. Maybe not surprising from

37:58

the co-founder of LinkedIn is, I think,

38:00

who are the three to five people

38:03

I'd most want to talk to about

38:05

this? Because it's kind of like,

38:07

where would they give me knowledge,

38:09

expertise, different cognitive tools set, different

38:11

analytic framework, etc. And would that,

38:13

would I predict that would be

38:16

very helpful in this particular decision?

38:18

And frequently, those people, while you

38:20

have a lot of great people

38:22

in your company, there's a lot

38:24

of them where in any particular decision

38:26

outside your company. And that's part

38:29

of the thing of like, okay,

38:31

what would it take to go get

38:33

that, when I get the right, what

38:35

kind of information I get, would I

38:37

be unknown, and I would try, except

38:39

that's one, because analyzing the risks

38:41

is knowing which only few things

38:43

to focus on and which other

38:45

things to really just ignore, because one

38:47

of the, as you know, split

38:49

scaling rules or like embrace chaos

38:52

and let fires burn, because... You're

38:54

like, we'll solve that later. We don't

38:56

have to solve everything right now. We

38:58

can only focus on a few things.

39:00

Another one is to think about, all

39:02

right, even if it's painful to solve

39:04

something later, like for example, we were

39:06

talking about the Uber hiring thing, can

39:09

we solve that one later because the

39:11

ordering of problems that we need to

39:13

solve? And some of the risk is

39:15

we're not going to solve that problem

39:17

right now. We're not going to be

39:19

able to measure it right now. The

39:21

only way to really measure this is

39:24

to do it. One of the things

39:26

that modern consumer internet mobile entrepreneurs have

39:28

learned is this thing that's paradoxically called

39:30

paper testing, which is you put up

39:32

an ad and you say, here's our

39:34

thing, and you see what the click

39:36

through is, even though you don't have

39:38

anything behind the ad, because you're

39:40

measuring it and trying to get

39:43

data, because you're trying to figure

39:45

out what the thing is. This

39:47

is the toolbox of the cost

39:49

of de-risking. taking a paper ad, doing other

39:51

things. Can I do to de-risk this?

39:53

And then at the end of the day,

39:55

you'd make the risk bad. Now some of

39:57

the red teeming thought is, well, if I'm wrong.

39:59

on this decision? What are my plans

40:02

be? How do we recover? If I

40:04

go, ooh, this one, we're just dead.

40:06

Not, oh, it's painful. We're dead if

40:08

it doesn't work, oh, okay, well, let's

40:10

invest a little bit more on the

40:12

risk decision if we can. But by

40:14

the way, part of what startups do

40:17

is you're making the bet. If you're

40:19

not making the bet, you're ultimately gonna

40:21

fail. We'll be right back after a

40:23

quick break from our sponsors. I

40:29

want to talk about AI, but before

40:31

we do that, I've got a little

40:33

quick fire section. I've pulled out some

40:35

of my favorite quotes that you've said

40:37

about entrepreneurship, and then I just want

40:39

to get some more color on each

40:41

one of these quotes. Okay, if you

40:44

aren't embarrassed by the first version of

40:46

your product, you shipped too late. Well,

40:48

this one I talked about a little

40:50

bit already with, which is, look, the

40:52

number of people who are product geniuses

40:54

that go, oh, when I pull back

40:56

the curtains, you are, you are perfect.

40:59

That's less than 1% of entrepreneurs and

41:01

product people, and yet everyone thinks they

41:03

are. And it obviously should be a

41:05

good product person, otherwise you shouldn't be

41:07

doing the product side on the entrepreneurship,

41:09

doing something else. But the right thing

41:11

is, how do you learn from your

41:14

customers? How do you go which things?

41:16

And that's part of the reason why

41:18

minimum viable product, product market fit, all

41:20

of these things, you know, kind of

41:22

testing your hypotheses, using other data as

41:24

a way of doing it, because if

41:26

it's speed. to market and speed to

41:29

learning. And part of the reason why

41:31

embarrassment is because our natural instinct is

41:33

people, as entrepreneurs, is we want you

41:35

to tell us, oh my God, we

41:37

love what you did. And actually, in

41:39

fact, you want them to grow to

41:41

love what you did. And obviously, the

41:44

more they love it at the beginning,

41:46

that's great. But your speed of learning

41:48

it and deploying it and scaling it

41:50

is the game. I'm like smiling because

41:52

I'm just thinking about me being an

41:54

entrepreneur and something that my business partner

41:56

always says is my favorite thing is

41:59

just this announce something. Even before it's

42:01

ready, before I have any idea how

42:03

to do it, I love to just

42:05

announce we're doing this, and I'm like,

42:07

well, we got to figure it out.

42:09

Exactly. Okay, so don't wait for something

42:11

to fail before you learn or before

42:13

you consider a change or pivot. The

42:16

best pivots are to take advantage of

42:18

an upside rather than to avoid a

42:20

downside. So obviously people are familiar with

42:22

pivots because it's not working, right? And

42:24

there's different ways to get to the

42:26

conclusion. before it totally is a train

42:28

wreck. You want to make the decision

42:31

that's not working before the train wreck

42:33

happens, you know, change tracks. But one

42:35

of the things that people under-describe is

42:37

a pivot to a new opportunity. And

42:39

in some sense, this is the PayPal

42:41

story that we were talking about a

42:43

little earlier, because they said, well, we

42:46

have this really great unique technology, and,

42:48

well, we're figuring out that it's not

42:50

really going to work, and we're pivoting

42:52

away from it, because we already get

42:54

to market. And then what happened. is

42:56

you release this kind of palm pilot

42:58

plus a synchronizing payment service. And what

43:01

happened is eBay people started using it.

43:03

And I remember the first week in

43:05

the conversation of PayPal was, who are

43:07

these eBay people? Should we stop them

43:09

from using our product? And it was

43:11

like, no, no, no, those are our

43:13

customers. None of these people are customers.

43:16

Those are our customers. We're going to

43:18

pivot entirely towards them. And so pivoting

43:20

towards opportunities, seeing what happens. And sometimes,

43:22

by the way, it's like, oh, you've

43:24

been working on the software product, and

43:26

now AI's here, and you're like, okay,

43:28

I'm going to do AI. Yeah, I

43:30

know I did this last 18 months

43:33

of work, maybe three months if it's

43:35

recoverable, because that's the opportunity. heroic story

43:37

where she or he had this original

43:39

vision that came down from on high

43:41

and they came down with the two

43:43

stone tablets and they said I've got

43:45

this vision that goes on forever and

43:48

that's reason I'm a genius. And it's

43:50

like, well, actually, in fact, a lot

43:52

of things happen based on, well, I

43:54

was in the game, I was learning,

43:56

and I saw this new opportunity that

43:58

emerged from the market, a technology, a

44:00

set of things with competitors, and I

44:03

moved towards that. Like, for example, Google,

44:05

its theory of when it launched say

44:07

was, we're going to sell enterprise search.

44:09

That's our theory of the game. Then

44:11

they saw, and then it's not working.

44:13

Oh, our backup plan is to put

44:15

double click ads on top of it

44:18

on top of it on top of

44:20

it. Oh shit, the whole ad market

44:22

went. What do we do? Oh now

44:24

we invent adwards. And they pivoted from

44:26

enterprise to consumer and then consumer to

44:28

using elements that they'd seen from the

44:30

market but inventing their own version of

44:33

how to make a really powerful business

44:35

and it's one of the most powerful

44:37

business models that's been invented in human

44:39

history so far. And so that pivoting

44:41

towards opportunity is one of the things

44:43

that entrepreneurs really need to keep in

44:45

mind. It's not always that you're failing,

44:48

your company could be doing good, but

44:50

you just want to go towards even

44:52

a bigger opportunity. Yes, exactly. No matter

44:54

how brilliant your mind or strategy, if

44:56

you're playing a solo game, you'll always

44:58

lose out to a team. Again, we

45:00

tend to tell these heroic myths of

45:02

the individual entrepreneur or she or he

45:05

is like, like, I am the person,

45:07

the creator, that innovator, etc. And actually,

45:09

in fact, all of these... projects are

45:11

the result of teamwork. There's almost nothing

45:13

as an individual. And you know, part

45:15

of the thing is you want to

45:17

be, to somebody, you're the best entrepreneurs,

45:20

the people who recruit and bring around

45:22

them the most amazing teams, who work

45:24

with them for a long time. And

45:26

actually, obviously, part of the thing is

45:28

the truism tends to be higher, slow,

45:30

fire fast. The hire slow, you can

45:32

see whether it works. If you're really

45:35

going to hire slow, you better be

45:37

hiring all the time so that your

45:39

pace of hiring is it matched. Not

45:41

like, oh, I need a person now.

45:43

I'm going to start looking. It's like,

45:45

I start recruiting for people I think

45:47

I'm going to need six to 12

45:50

months from now today. as an instance.

45:52

And so that team sport is really

45:54

important, but it's not just the employees,

45:56

it's also the people around you. So

45:58

like the advice to give entrepreneurs is

46:00

not to go up to people and

46:02

say, hala, what do you love about

46:05

my idea? What do you think about

46:07

my idea? Because I'm kind of asking,

46:09

tell me good, what's wrong with my

46:11

idea? What thing could make it break

46:13

that kind of learn from it? And

46:15

so having those teams built around you

46:17

outside your company. advisors, investors, experts, industry,

46:19

people, etc. is really, really important. And

46:22

that's why entrepreneuring as a team sport

46:24

is a network sport, not simply an

46:26

individual sport. Okay, last one. Just as

46:28

the Industrial Revolution created new opportunities for

46:30

collaboration and new capacities for innovation, creativity

46:32

and productivity, the cognitive revolution will do

46:34

it as well. This is, I guess,

46:37

bridging into our AI discussion. The thing

46:39

that happens that we've learned with entrepreneurship

46:41

is new technologies completely change industries. Sometimes

46:43

every industry like AI with general purpose

46:45

technologies and the parallel between chat gBT

46:47

models and general purpose technology is always

46:49

something I'm finding a little entertaining. But

46:52

you look at these technology changes as

46:54

changes in market landscapes. It's changes in

46:56

how what the real shape of product

46:58

and services. are going to be. It

47:00

changes in how companies operate, it changes

47:02

in what business models are available, and

47:04

all of these things. You really look

47:07

even if you're not yourself, purely the

47:09

technology company, you look for changes in

47:11

the technological landscape because fundamentally if you

47:13

don't have a technology strategy, it's not

47:15

an IT strategy, not am I using

47:17

PCs or Max or IOS things, it's

47:19

a technology strategy and that you're going

47:22

to need to evolve with. And so...

47:24

AI, which is the cognitive industrial revolution,

47:26

and my belief is going to transform

47:28

probably every industry, and if not every,

47:30

almost every, it's between almost every and

47:32

every. So. Everybody needs

47:34

to be looking at

47:36

it to say, to

47:39

say, what does this

47:41

mean this mean my

47:43

product service? service, competitive

47:45

landscape, the way that

47:47

we operate as

47:49

a company, is how

47:51

we do sales and

47:54

marketing, sales how we

47:56

do account management,

47:58

how we do customer

48:00

service, what other

48:02

ways in which we

48:04

operate what supply chain,

48:06

finance, whether risk chain,

48:09

et cetera. What are

48:11

all the ways

48:13

that this can come

48:15

in that this give

48:17

me a competitive competitive

48:19

for how the new

48:21

world is gonna

48:24

look? look?