Reid Hoffman: LinkedIn Co-Founder on Building and Scaling Massively Valuable Companies Fast | Entrepreneurship | E332

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Speaker 2 You have to have speed. And this is one of the things that Silicon Valley has learned more intensely than anywhere in the world other than maybe China.

Speaker 1 You were a truly prolific entrepreneur. PayPal, LinkedIn, Airbnb, OpenAI.
What were some of the learnings that you learned at PayPal that helped you become a great entrepreneur?

Speaker 2 People are familiar with pivots because it's not working. But pivoting towards opportunity is one of the things that entrepreneurs really need to keep in mind.

Speaker 2 Split scaling companies is prioritizing speed over efficiency in an environment of uncertainty.

Speaker 1 Speed over profitability.

Speaker 2 Yes. And by the way, through speed of learning it and deploying it and scaling it is the game.
Sometimes entrepreneurs are told, oh, ignore risk. And you're like, no, no, no, take smart risk.

Speaker 1 When you're scaling really fast, hiring really fast, how can you maintain a healthy company culture?

Speaker 2 You have to intentionally.

Speaker 1 Yap fam, welcome back to the show. Today we have a true legend on the podcast.
Reed Hoffman, who is the co-founder of LinkedIn and Inflection AI, is joining us.

Speaker 1 He's also a renowned venture capitalist. He's been behind companies like Airbnb, PayPal, so many great huge companies that have moved the world forward.
He is also a partner at Greylock.

Speaker 1 He hosts a podcast, Masters of Scale, and he's a prolific author. He's got a brand new book out on AI called Super Agency, which we're going to dig into in this conversation.

Speaker 1 Me and Reed talked for well over an hour and 20 minutes, which you guys know I love to do when somebody is just absolutely amazing. I want to keep them on for as long as possible.

Speaker 1 And Reed was one of those guests. In part one of this conversation, we really focus on entrepreneurship.
So I talked to him about his early entrepreneurship endeavors.

Speaker 1 We learn about his failures and big learning lessons. And then we go into scaling, all of his strategy for scaling businesses.
And guys, he's scaled huge companies.

Speaker 1 Like I mentioned, LinkedIn, Airbnb, PayPal. He's behind some of the biggest companies in the world.

Speaker 1 So he's got a lot of great content when it comes to scaling businesses, specifically his Blitz scaling methodology. And then in part two, we really focus on AI.

Speaker 1 He wrote a new book called Super Agency. It's all about how humans are going to have agents moving forward, AI agents.

Speaker 1 And I really pick his brain on his optimism towards AI and how he imagines the future to be with AI in the picture. And everything's going to be changing.

Speaker 1 So in part one, like I mentioned, we're talking about entrepreneurship. So stay tuned for that and enjoy my conversation with the amazingly talented Reid Hoffman.

Speaker 1 Reed, welcome to Young and Profiting Podcast.

Speaker 2 It's great to be here. I've been looking forward to this.

Speaker 1 Me too. And first of all, I want to say I feel very honored to have you on the show.
You were a truly prolific entrepreneur. You've literally helped push the world forward for decades.

Speaker 1 You've been a leader at companies like PayPal, LinkedIn, Airbnb, now Inflection AI. You also were a part of Open AI.

Speaker 1 So you've just been behind so many huge companies that have pushed the world forward, like I said.

Speaker 1 So I wanted to ask you, when you think of all your contributions to the world and all the companies that you work with, because you don't have to work right now, you choose to work.

Speaker 1 And so you must be thinking about like, okay, what makes me want to work with a company? What is your mission? And what is the red thread with everything that you're doing in the world right now?

Speaker 2 I guess probably it's like I'm to put it like philosophically a humanist, which is how do we make ourselves better individually? and as a group.

Speaker 2 So it's empowering a bunch of different individuals' lives, but also leaving the world world much better than we found it. And how do we do that?

Speaker 2 And that's the red line through everything I do, including companies, because you want to do companies that, of course, have all the normal company things of providing great products, services, and jobs and all the rest.

Speaker 2 But you also want it to be the impact that you have in the world. leaves the world in a much better place.
You transform industries, you transform societies.

Speaker 2 And like all the companies you mention that I've been involved with from the earliest stages, whether it's it's personally LinkedIn and PayPal or as an investor and board member, Airbnb, Open AI, all of it has a theory of how does this improve human life, human work, quality of experience?

Speaker 2 How do we elevate ourselves, become more the people we aspire to be?

Speaker 1 And in a similar way, in a similar token, I'd say, you've said in the past, society flourishes when people think entrepreneurially.

Speaker 1 So talk to us about why you believe that the more entrepreneurs that we have in the world, the more that mankind is better off.

Speaker 2 It's part of how you create the future. Everything that we have in our lives, I mean, this podcasting stuff, these computers, these phones, all come about through entrepreneurial innovation.

Speaker 2 And it's part of how the new. future is created and it's part of how prosperity is created.
It's part of how life is improved.

Speaker 2 And basically, we wouldn't get to, you know, even when you say, well, wait, there's also science, which invents vaccines and other kinds of things.

Speaker 2 Although a lot of vaccines are commercial these days and have an entrepreneurial event like Moderna.

Speaker 2 And so it's this invention of new things and it's envisioning the way the world could possibly be.

Speaker 2 How could you create something that would be of service to, this is one of the things I think people always forget about. the process of Adam Smith and capitalism is this theory of moral sentiments.

Speaker 2 How are you being of service to other people? And that entrepreneurial creation of business and products and services is a really key part of it.

Speaker 2 And, you know, when you look around our lives and all the things in it, it was earlier entrepreneurs that we were building upon their work.

Speaker 1 So speaking of building on entrepreneurs of the past, my career has totally skyrocketed from LinkedIn. I was able to become a full-time entrepreneur with my social agency and my podcast network.

Speaker 1 And so my question to you is LinkedIn has blown up into this huge platform. It's one of the biggest social media networks in the world, 135 million daily active users.

Speaker 1 Was your vision for LinkedIn what it is today? What was your initial vision? And did you ever imagine it would scale to what it is today?

Speaker 2 So when you start a business, you should think about this as a kind of probabilities of outcomes. So I did think that LinkedIn could could become what it is today.

Speaker 2 I actually even think things that were could be bigger and could be on path. And you could be asking me this question in five years when it achieved a bunch of new things.

Speaker 2 And I would also say, hey, yes, this is possible. Now, are we in a low probability, but high result future from when I started LinkedIn? Absolutely.
You have to be rational as an entrepreneur.

Speaker 2 And part of what sometimes entrepreneurs are told, oh, ignore risk. And you're like, no, no, no, take smart risk, manage it smartly.

Speaker 2 And so when I started it, it was like, well, well, look, we could be this big.

Speaker 2 And, you know, there's all of these outcomes between here and there, which include not succeeding at all, that you manage your way towards, even as you have the moonshot, the, if you shoot for the stars, maybe sometimes you only get to the hills, right?

Speaker 2 But you have to be shooting for the cars. You have that, but you're wise about it.

Speaker 2 And so, yes, you know, there's learnings and we can go into the depths of which things I made mistakes on or which things turned out to be new surprises with LinkedIn.

Speaker 2 But I would say that we're within the probability set that I thought was possible.

Speaker 1 I love that. And I'm definitely going to be asking you about scaling a business and all of your guidance around that.

Speaker 1 But first, before we do that, I do want to talk about your early entrepreneurship days because a lot of the listeners tuning in, they're young entrepreneurs.

Speaker 1 They're failing every day, which is a big part of eventually becoming a great entrepreneur is failure at first. So you can learn and get better.

Speaker 1 So you started a company called Social Net, which actually was a failed startup when I read about it.

Speaker 1 You could tell me what you think, if it was a failure or not, but it was a social app for dating way before we had the dating apps of today, like Bumble and things like that.

Speaker 1 So it was like a really innovative concept. Tell us about what happened with that company, why you ended pivoting to something else, and some of the failures and learnings that you had from that.

Speaker 2 So a lot of the writings I've done are all the learnings from mistakes. There was almost never anything like, I just got it right the first time.

Speaker 2 It was that you iterated at speed and you kept adapting and you kept learning. And that's one of the rules of entrepreneurship: always be learning.

Speaker 2 So, Social Net, you know, I started with the kind of this theory of, oh, I've learned how to create software products. I know what a really good thing would be.
I've got a great product idea.

Speaker 2 Let me go raise some venture capital. Let me release the product.

Speaker 2 Well, a huge number of things, everything from, you know, if you're not embarrassed by your product release, you've released too late relative to software and consumer internet, because I thought I would polish it and get it just

Speaker 2 so right and beautiful before getting out. And when we released, we quickly discovered half the things we'd spent months on were completely useless.

Speaker 2 We thought that the game was entirely about, well, did we have a vision for product quality?

Speaker 2 And we didn't spend that much time thinking about like our go-to-market strategy, which is fundamental to entrepreneurship. And so it was just failure after failure in recovery.

Speaker 2 But the two ways that I kind of kind of learned to summarize this was one is I've perhaps never learned so much in my life, except for between the ages of two and three, because when you're falling over and learning it and standing back up.

Speaker 2 And then the other one is every Friday there were things I wish I had known on Monday.

Speaker 2 And those things I wish I'd known weren't person X is going to return your phone call or this partnership pitch won't work out. It's literally how to play the game, what to do.

Speaker 2 And so it was a tremendous learning experience, which of course means lots of scars, tissue, and a lot of blood on the floor. And I'd say that it was, you know, in Silicon Valley terms, a failure.

Speaker 2 We returned the investors' capital, but that was all we were able to do fundamentally.

Speaker 1 And so I love that you started as an entrepreneur and you learned a lot with social net. And then you went to PayPal, right?

Speaker 1 And you learned as an executive there before you went and co-founded LinkedIn. So talk to us about that.

Speaker 1 What were some of the learnings that you learned at PayPal that helped you become a great entrepreneur?

Speaker 2 So part of what happened is two friends of mine, Peter Thiel, Max Lovechen, came to me and said, hey, we're starting this business. You've been doing this for a year and a half with social net.

Speaker 2 We'd really love you to join the board. We'll have you and Scott Bannister join the board.
And could you do that?

Speaker 2 And I said, yes, because I've just gone through a year and a half of learning every week.

Speaker 2 And so a bunch of the stuff PayPal had an initial booster pack on, which is all the various lists, which is hire people who are high talented learners more than people who've had a ton of experience.

Speaker 2 I mean, they must know how to do the job, but as opposed to like, I've done this job for 10 years, I've done this job for at least a year or two, and I'm an intense learner.

Speaker 2 So PayPal started as an encryption technology on mobile phones, went to cash on mobile phones, went to cash on PalmPilots, then went to cash on PalmPilots plus an online synchronizing payment service, and then quickly converted to an online master merchant.

Speaker 2 And that was after the last pit was after it launched. And so all of that initial cryptology on mobile phones was completely thrown out the door and useless.

Speaker 2 Because again, it was kind of this, don't just build something because it's an interesting product. What's the market need? How are you getting into it?

Speaker 2 And so there were just tons and tons of experiences. I'd say one of the central things that I learned about entrepreneurship from PayPal was the speed of execution, speed of making decisions.

Speaker 2 And so one of the things, I mean, there was a whole stack.

Speaker 2 Again, we could take this entire podcast, things things I learned from Social Net, things I learned from PayPal, things I learned, you know, like just each one of them.

Speaker 2 But part of the thing was basically I kind of adopted there, which I wish I had had at SocialNet,

Speaker 2 this decisioning mode where when I'm confronted with a decision, I say, can I make this decision right now? And if I can make the decision right now, I go, great.

Speaker 2 And by the way, usual answer is, what decision would I make? Okay, okay, I would decide X, not Y. Okay.

Speaker 2 Is there anything that I could learn by researching, researching, talking to people, et cetera, that would change from X to Y? Okay, what's the cost and time to do that?

Speaker 2 And if the cost and time is too great, you just make the decision, you go with X and you live with it. And maybe sometimes part of X and Y is, is it a one-way door or two-way door?

Speaker 2 Because if you can recover from it, you're less likely to go do the research about should you decide Y versus X.

Speaker 2 Part of this practice, it gets you comfortable with making decisions at a really intense

Speaker 2 speed where you're uncomfortable with it because you don't know everything when you're making the decision.

Speaker 2 And that was one of our many ethoses at PayPal that allowed us to navigate this just like lots of things almost blew us up. And it was definitely a X-wing fighter going into the Death Star.

Speaker 2 Oh my gosh, are we going to live or die on this? And we succeeded.

Speaker 1 Yeah, and I'm sure you've gotten really comfortable with uncertainty and taking these risks without really knowing if it was the right or wrong decision.

Speaker 1 And like you said, prioritizing speed over anything else, which is so important. And I know you say that in your book, Blitz Scaling, which you put out in 2018.

Speaker 1 And even though it was put out seven-ish years ago, it's still super relevant. So I did want to cover it.

Speaker 1 So you talk about Blitz scaling and basically it's a concept that is about achieving market dominance quickly. So can you go over some of the key principles of Blitz scaling? And I'll ask you some.

Speaker 1 I've got like lots of questions about it, but I'll let you summarize it first.

Speaker 2 The pithy way of saying what blitz scaling about is it's prioritizing speed over efficiency in an environment of uncertainty.

Speaker 2 And to unpack that a little bit, it's that when you're playing games where we call in the book Glenn Gurry, Glenn Ross games, which is first prize is a Cadillac, second prize is thick knives, and third prize, you're fired.

Speaker 2 You have to have speed and speed to scale. And this is one of the things that Silicon Valley has learned more intensely than anywhere in the world other than maybe China.

Speaker 2 China is one of the few areas where I've also learned Blitz scaling games.

Speaker 2 And it's one of the reasons why when you look at Silicon Valley for the tech industry, the whole population of the Silicon Valley Bay Area is like 3.5 million. That's like Ireland.

Speaker 2 And yet, the number of global tech companies that come out of Silicon Valley versus anywhere else in the world, and to some degree, including China, because you're talking global here, although, you know, there's obviously bike dance and TikTok and so forth, is just enormous.

Speaker 2 And why is that? And the answer is because this hyper-competitive game of blitz scaling is something that we have learned to do. And you don't do blitz scaling as a goal into itself.

Speaker 2 You do it as a competitive tool relative to being first prized versus second or third.

Speaker 2 because your particular industry, your particular company, your particular potential industry transformation is worth it.

Speaker 1 So you were just talking about how you have to basically prioritize speed. So when we're blitz scaling and we're prioritizing speed, lots of things can go wrong, right? Because

Speaker 1 you're prioritizing just hiring really fast, making fast decisions. Things are not perfect.

Speaker 1 So talk to us about some of the operational risk that is involved with Blitz scaling and some of the fast decisions that people have to make.

Speaker 2 Typically, obviously people in business schools teach reduce uncertainty and prioritize learning for efficiency but if what you're doing is saying

Speaker 2 well we really need to get to scale very fast relative to either our market because of a scale mechanic or because of competition you'll say which risks we take to get to that scale product market fit much faster than our competition and so for example classically what happens in a lot of these split scaling companies is people who are traditionalist business people say what's your operating margin?

Speaker 2 And you need to prove your operating margin.

Speaker 2 Where you do this, I myself sat in early Airbnb meetings where one of the VCs was saying that, and I had to speak up and say, Nope, bad question, not a question to answer right now, because we're in a software business.

Speaker 2 We don't have these capital hard assets, even though they're being rented and transacted in it. That's not on our balance sheet.

Speaker 2 What we just need to do is get this to scale and be the growing marketplace of that. And we'll figure out operating margins later.

Speaker 2 But that's, of course, what the size of your operating margins are: is how valuable your business is. And when you get to the operating margins, will be when people start valuing your business more.

Speaker 2 And you're like, so that's a very counterintuitive thing you say.

Speaker 2 So no, no, no, we'll take the risk on wherever our operating margins will end up because getting the scale more quickly and fast and taking experiments with like, for example, what you're doing in marketing, what you're doing in hiring, what you're doing in product development,

Speaker 2 we'll just try it and we'll iterate and move quickly and we'll abandon the things that aren't working.

Speaker 2 And that's essentially, and that's part of the reason why like Airbnb is one of the, as you know, is one of the examples that we open blitz scaling the book up with to kind of show a modern example of these are a set of decisions that you make.

Speaker 2 And then I forget which chapter, but there's like eight counterintuitive rules in blitz scaling in the middle, which is like embracing chaos and hiring Ms. right now versus Ms.

Speaker 2 right in three to five years, because again, with the learning curve, those are all things you're doing to go go fast now, go fast now, go fast now, and iterate and change.

Speaker 2 And that's part of why Silicon Valley produces just transformational technology companies for the world.

Speaker 1 So it's really what you're saying, it's about speed over profitability.

Speaker 2 Yes, or any form of efficiency.

Speaker 2 One of the things that I learned remotely from Uber, because they were another Blitz-Galen company, we covered elements of in the book, is one of the things when Uber is like, oh my God, we need to hire engineers really fast.

Speaker 2 So what they would do is they'd interview an engineer, reference check an engineer, and they'd offer engineer Sarah a job.

Speaker 2 And then when they offered engineer Sarah a job, they'd say, okay, well, we would like to interview with you. Who are the top three people you work with at your current company?

Speaker 2 And then just send those three people job offers. That's blitz scaling because it's like, well, maybe they're not going to really work out.

Speaker 2 Maybe they'll think it's a little weird and creepy that they got a job offer out of the blue with a pitch.

Speaker 2 pitch but it's part of the going fast and so it's not just profitability it's efficiency and everything

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Speaker 1 When you're hiring that fast, like you just gave that example of Uber, I have to imagine that your company culture might suffer and it might become a little bit chaotic.

Speaker 1 What's your guidance for when you're scaling really fast, hiring really fast? How can you maintain a healthy company culture?

Speaker 2 You have to intentionally try to do it.

Speaker 2 And by the way, Uber is an example of something that had a very chaotic and challenging company culture and had to refactor it to be a good, stable public company as you're getting.

Speaker 2 And the usual heuristic rule of thumb is that refactoring culture is actually, in fact, really hard. It is hard.
It's not necessarily impossibly hard. Dara really demonstrated with Uber.

Speaker 2 Actually, we had a master's scale episode on that because it was the question of, okay, so you inherit something that's got a lot of really broken parts. What do you do?

Speaker 2 The punchline was you don't show up and say, new sheriff in town. You say, hey, we did these great things.
We already have what's greatness in this.

Speaker 2 Let's focus on the parts that are great and use those to refactor the other parts.

Speaker 2 So as opposed to saying, now for something entirely new, it's we're returning to the central roots of our greatness and then refactoring the other ones. And that's actually, I think, a good change.

Speaker 2 Now, that being said, we've had a lot of culture episodes. And part of that's because you should be intentional about it.
And the intentionality can be not hiring as fast as Uber did.

Speaker 2 So with like Workday and Anil Bushry,

Speaker 2 it was he and his co-founder Dave Duffield did a cultural interview at the end, even though he is being the CEO. did a cultural interview at the end of every hiring process for the first 500 people.

Speaker 2 That slows you down some, but that's one way to do it.

Speaker 2 Another way is the culture deck for Reed Hastings, which actually just started as when they were looking at the attrition of like, why are people leaving?

Speaker 2 It was like, well, they didn't understand our culture when they got here. So let's first create a culture deck to onboard them.
And then shit, we should publish it, right? Because don't come here.

Speaker 2 If you're looking for a family, go to other companies. If you're looking for a team, like a professional sports team, come here.

Speaker 2 Because our culture is, we ask ourselves the question every quarter, every year, if you wouldn't hire this person right now, give them a severance package, go hire somebody else.

Speaker 2 And so you create these cultural moments.

Speaker 2 And these are all the different tool sets that you create for your particular business, your particular founders, management team, product market fit, competition landscape, et cetera.

Speaker 2 Because it's not one culture, one size fits all. But being intentional is very important.

Speaker 1 Everything has a consequence, right? There's pros and cons to everything. You can implement all these systems.
Like, I'm thinking about my own company right now. I used to hire so quick.

Speaker 1 I would just go on LinkedIn, find somebody, poach somebody, DM them, do an interview, hire them. Now it's a months-long process.
And I can feel that sometimes it's really hurting us.

Speaker 1 And I'm like, I just want to go poach somebody off LinkedIn, you know? It's just like really just pros and cons.

Speaker 1 And you've got to figure out what is the right thing for your business and make the right decision. So, why is first mover advantage so important?

Speaker 1 The whole point of blitz scaling is so that you can basically build a moat around you as a company, but why is that so important?

Speaker 2 Well, first mover to scale gives you all kinds of advantages.

Speaker 2 It doesn't actually necessarily need to be first mover out of the gate, but the first mover to scale, part of blitz scaling, is really critical.

Speaker 2 Now, sometimes, by the way, the way you become first mover to scale is you're the first mover out the gate because you just keep going, right?

Speaker 2 But that kind of getting the scale can have all kinds of advantages. One is capital markets reward you versus whoever's in second place as part of the Cadillac and steak knives.

Speaker 2 Employees more want to work there. But

Speaker 2 when customers or members, if it's consumer internet thing, think, well, what's the one that everyone's talking about? It's the one that's the first to scale.

Speaker 2 And so in all of these fields, you have advantages.

Speaker 2 Now, you might also have a business with network effects, where those network effects become a really important growing super linear kind of competitive moat, whether it's like Airbnb or Uber or others, LinkedIn, or if it's just a, well, I'm ahead.

Speaker 2 And so by default, all of the different forces that come together to make a company successful are more aligned in believing you're number one.

Speaker 2 Because part of what entrepreneurship does is, I have this vision. It's currently non-operative.
I'm persuading multiple different constituencies to come invest in my vision.

Speaker 2 It could be investors with money. It can be employees with their time and ownership.
It could be press with their belief in what's going to happen.

Speaker 2 It can be customers who go, okay, you're a startup, but I'm going to start using you now anyway, because I believe you will be the right thing in the future.

Speaker 2 All of these things is what you do as an entrepreneur is you persuade people. to come and help build your vision.

Speaker 2 When you're the first mover to scale, you have a lot more of those people believing in you and therefore investing in you.

Speaker 2 Your cost of customer acquisition is lower, your cost of speed of recruiting employees is lower, your cost of capital is lower, et cetera, et cetera.

Speaker 1 The weight of your brand is giving you all of this advantage, like the brand recognition.

Speaker 2 Brand can definitely be a strong part of it, but it's also the question of who do each of these groups think is going to win. So it's a little bit different.

Speaker 2 I mean, brand is also what is your brand promise? What are you going to become? And, you know, awareness is part of it, but it's like, okay, we think you're going to win.

Speaker 2 Now, when you have dynamics like a network effect, then your brand might be mediocre, but a network effect is incredibly good within a business or within a, you know, any kind of entity that has it.

Speaker 2 It's a very strong amplifier.

Speaker 1 So talk to us about that. I know Airbnb had a network effect.
What's a good example of one?

Speaker 2 Networks are usually, but not always. So LinkedIn has one, Facebook has one, WhatsApp and Instagram.
For example, when you look at Google, the network effect isn't the search index.

Speaker 2 That's a scale index.

Speaker 2 What it is is the AdWords, because the AdWords begin to get when you're kind of that large and differentiated and have the data and intelligent enough, you end up with a better cost.

Speaker 2 You can provide an ad at what is a lower cost to you and a higher price to your customer and have a higher margin revenue than your competitor that's trying to sell something.

Speaker 2 And so its network effect is in the AdWords. So part of when you're looking for these mega-scale businesses, you usually there's some interesting network effects that really power them.

Speaker 1 I know that there's different stages involved with Blitz scaling. So there's family stage, tribe stage, village stage, city stage, nation stage.

Speaker 1 So I was thinking about my company and I think we're right in between tribe stage and village stage. I think there's probably a lot of growing pains in that stage, right?

Speaker 1 Like we're doing amazing, but I feel like it's just like scaling is really hard. And I feel like that is the first instance of really scaling.
So talk to us about each one of these stages.

Speaker 1 What do we need to think about? And you can be high level or as deep as you'd like, but if you can just break down how companies generally scale and the stages that they have.

Speaker 2 So the basic idea was to say when you're hyperscaling to a market, obviously everyone wants to have as much revenue and as much customers and analysts per employee is one of the ways to benchmark businesses.

Speaker 2 But almost all businesses also get to growing their employee base for various reasons.

Speaker 2 It's sales, and new products and features, new product lines, and customer service, and account management, and finance, and everything else.

Speaker 2 So, you generally speaking need to be scaling your employee base at some rate with your business.

Speaker 2 And so, the thought was as you're getting to scale product market fit, one of the challenges you have is you're scaling the size of your operation and all of these different vectors.

Speaker 2 And so, that proxies to the number of employees. And so, we broke it up into the five categories that you just outlined.
Thank you.

Speaker 2 And we said, look, when you're getting to each of these things, what got you here won't get you there. When you're at the earliest stage, it's like you know a couple of people.

Speaker 2 Maybe you met one of them and you hired them. You're all in a room.
Communication isn't really an issue. Company culture is usually like, well, we went out for.
beats in a beer and we talked about it.

Speaker 2 And that's our company culture. Like we figured out what we're doing.
And as you get larger, all of these things change. In the very earliest, everyone's working.

Speaker 2 And then you get to, there's people who are working and being managers. Then you get, there's people just being managers.
Then you get to people who are managing managers.

Speaker 2 And each of these things change at levels of scale as you go up. How you run communications, how you make decisions, how you pivot or readjust something.
All of this changes.

Speaker 2 Which risks are you willing to take? Like, for example, Facebook went, and people thought this was different, but it was like, move fast and break things to move fast with scalable infrastructure.

Speaker 2 And everyone's like, oh, you got wise and you changed your theory of moving fast. No, no, no.
What we realized was in our very earliest days, move fast and break things was the way to optimize speed.

Speaker 2 And then in our later days, the way to optimize speed was move fast with stable infrastructure because we broke the infrastructure. It was too hard to fix.
And we suddenly were moving slower.

Speaker 2 So it's still both speed principles. But those changes, because for example, move fast and break things work totally fine when you're 40 people.

Speaker 2 When you're 500 people and the infrastructure breaking and everything breaks, you know, let's keep the infrastructure running, however many other things we may be breaking as we're moving fast.

Speaker 2 So all of those things go into the different levels. And nation is kind of the placeholder for public company, you know, thousands of employees, et cetera.

Speaker 2 And just saying, hey, this, the rules here change too.

Speaker 2 And your mistake is trying to run the same way as you might be even in a village when you're in a nation, even though you're, of course, trying to keep speed, you definitely keep a vibrant culture and high performance and high quality talent.

Speaker 2 The nature of the game changes as you change size.

Speaker 1 It's so interesting. I highly recommend that everybody read Blitz Scaling.
I loved reading through it.

Speaker 1 I want to read it in even more detail because I feel like it's just so relevant, especially as like a newer entrepreneur scaling your business.

Speaker 1 If you've never done it before, build a company that's a nation-sized company. It's definitely a good read.

Speaker 1 So when you're thinking about making intelligent risk, this is something that we were talking about earlier.

Speaker 1 Do you have anything that you think through, questions that you ask yourself to make sure that you're not just taking any risk and that you're taking a risk intelligently?

Speaker 2 Well, there's a couple of quick hacks. On every major decision, maybe not surprising from the co-founder of LinkedIn, is I think, who are the three to five people I'd most want to talk to about this?

Speaker 2 Because it's kind of like, where would they give me knowledge, expertise, different cognitive tool set,

Speaker 2 different analytic framework, etc.

Speaker 2 And would that, would I predict that that would be very helpful in this particular decision?

Speaker 2 And frequently, those people, while you have a lot of great people in your company, there's a lot of them where in any particular decision are outside your company.

Speaker 2 And that's part of the thing of like, okay, what would it take to go get that? Would I get the right, what kind of information I get? Would I be unknown? And I would try, et cetera. So that's one.

Speaker 2 Because

Speaker 2 analyzing the risks is knowing which only few things to focus on and which other things to really just ignore.

Speaker 2 Because one of the, as you know, blitz scaling rules are like embrace chaos and let fires burn because

Speaker 2 you're like, we'll solve that later. We don't have to solve everything right now.
We can only focus on a few things.

Speaker 2 Another one is to think about, all right, Even if it's painful to solve something later, like, for example, we were talking about the Uber hiring thing, can we solve that one later?

Speaker 2 Because which are the ordering of problems that we need to solve? And some of the risk is we're not going to solve that problem right now. We're not going to be able to measure it right now.

Speaker 2 The only way to really measure this is to do it.

Speaker 2 One of the things that modern consumer internet mobile entrepreneurs have learned is this thing that's paradoxically called paper testing, which is you put up an ad and you say, here's our thing.

Speaker 2 And you see what the click-through is, even though you don't have anything behind the ad because you're measuring it, trying to get data, because you're trying to figure out what the thing is.

Speaker 2 This is the toolbox of the cost of de-risking. Which low-cost things can you do? Talking to someone, taking a paper ad, doing other things, can I do to de-risk this?

Speaker 2 And then at the end of the day, you make the risk bet. Now, some of the red-teaming thought is, well, if I'm wrong on this decision, what are my plans be? How do I recover?

Speaker 2 If I go, ooh, this one, we're just dead. Not, oh, it's painful.
We're dead if it doesn't work. Oh, okay, well, let's invest a little bit more on the risk decision if we can.

Speaker 2 But by the way, part of what startups do is you're making the bet. If you're not making the bet, you're ultimately going to fail.

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Speaker 1 The link is in our show notes. I want to talk about AI, but before we do that, I've got a little quick fire section.

Speaker 1 I've pulled out some of my favorite quotes that you've said about entrepreneurship, and then I just want to get some more color on each one of these quotes.

Speaker 1 Okay, if you aren't embarrassed by the first version of your product, you shipped too late.

Speaker 2 Well, this is what I talked about a little bit already with SocialNet, which is, look, there's the number of people who are product geniuses that go, oh, when I pull back the curtains, everyone's going to go, ooh, la-la, you are perfect.

Speaker 2 That's less than 1% of entrepreneurs and product people. And yet everyone thinks they are.

Speaker 2 And it obviously should be a good product person. Otherwise, you shouldn't be doing the product side, the entrepreneurship, doing something else.

Speaker 2 But the right thing is, how do you learn from your customers? How do you go, which things?

Speaker 2 And that's part of the reason why minimum viable product, product market fit, all of these things, you know, kind of testing your hypotheses, using other data as a way to do it, because if it's speed to market and speed to learning.

Speaker 2 And part of the reason why embarrassment is because our natural instinct as people, as entrepreneurs, is we want you to tell us, oh my God, we love what you did.

Speaker 2 And actually, in fact, you want them to grow to love what you did. And obviously, the more they love it at the beginning, that's great.

Speaker 2 But your speed of learning it and deploying it and scaling it is the game.

Speaker 1 I'm like smiling because I'm just thinking about me being an entrepreneur and something that my business partner always says is my favorite thing is to just announce something even before it's ready, before I have any idea how to do it.

Speaker 1 I love to just announce we're doing this. And I'm like, well, we got to figure it out.

Speaker 2 Exactly. Okay.

Speaker 1 So don't wait for something to fail before you learn or before you consider a change or pivot. The best pivots are to take advantage of an upside rather than to avoid a downside.

Speaker 2 So obviously people are familiar with pivots because it's not working, right? And there's different ways to get to the conclusion before it totally is a train wreck.

Speaker 2 You want to make the decision it's not working before the train wreck happens, you know, change tracks. But one of the things that people under-describe is a pivot to a new opportunity.

Speaker 2 And in some sense, this is the PayPal story that we were talking about a little earlier because they said, well, we have this really great, unique technology.

Speaker 2 And oh, we're figuring out that it's not really going to work. And we're pivoting away from it because it's hard to get to market.
And then what happened is

Speaker 2 you release this kind of Palm Pilot plus a synchronizing payment service. And what happened is eBay people started using it.
And I remember the first week in the conversation of PayPal.

Speaker 2 was who are these eBay people? Should we stop them from using our product?

Speaker 2 And it was like, no, no, no, those are our customers.

Speaker 2 None of these people are our customers. Those are our customers.
We're going to pivot entirely towards them. And so pivoting towards opportunities, seeing what happens.

Speaker 2 And sometimes, by the way, it's like, oh, you've been working on the software product and now AI is here. And you're like, okay, I'm going to do AI.
Yeah, I know I did this last 18 months of work.

Speaker 2 Maybe three months of it's recoverable because that's the opportunity. And that pivoting.
towards big new opportunities is one of the things that really creates these successful businesses.

Speaker 2 Because we want to tell this heroic story where she or he had this original vision that came down from on high and they came down with the two stone tablets and they said, I've got this vision that goes on forever.

Speaker 2 And that's the reason I'm a genius. And it's like, well, actually, in fact, a lot of things happen.

Speaker 2 based on, well, I was in the game, I was learning, and I saw this new opportunity that emerged from the market, a technology, a set of things with competitors, and I moved towards that.

Speaker 2 Like, for example, Google, its theory of when it launched the site was we're going to sell enterprise search. That's our theory of the game.
Then they saw, and then, oh, it's not working.

Speaker 2 Oh, our backup plan is to put double-click ads on top of it. Oh, shit, the whole ad market went.
What do we do? Oh, now we invent AdWords.

Speaker 2 And they pivoted from enterprise to consumer and then consumer to using elements that they'd seen from the market, but inventing their own version of how to make a really powerful business.

Speaker 2 And it's one of the most powerful business models that's been invented in human history so far.

Speaker 2 And so that pivoting towards opportunity is one of the things that entrepreneurs really need to keep in mind.

Speaker 1 It's not always that you're failing. Your company could be doing good, but you just want to go towards even a bigger opportunity.

Speaker 2 Yes, exactly.

Speaker 1 No matter how brilliant your mind or strategy, if you're playing a solo game, you'll always lose out to a team.

Speaker 2 Again, we tend to tell these heroic myths of the individual entrepreneur where she or he is like, I am the person, the creator, the innovator, et cetera.

Speaker 2 And actually, in fact, all of these projects are the result of teamwork. There's almost nothing as an individual.

Speaker 2 And, you know, part of the thing is you want to be, to some degree, the best entrepreneurs, the people who recruit and bring around them the most amazing teams who work with them for a long time.

Speaker 2 And actually, obviously, part of the thing is the truism tends to be hire slow, fire fast. The hire slow, you can see how, you know, whether that works.

Speaker 2 If you're really going to hire slow, you better be hiring all the time so that your pace of hiring is it, is it matched? Not like, oh, I need a person now. I'm going to start looking.

Speaker 2 It's like I start recruiting for people I think I'm going to need six to 12 months from now today as an instance. And so that team sport is really important, but it's not just the employees.

Speaker 2 It's also the people around you. So like the advice to give entrepreneurs is not to go up to people and say, Holla, what do you love about my idea? What do you think about my idea?

Speaker 2 Because, you know, I'm kind of asking you, tell me good.

Speaker 2 It's like, what's wrong with my idea? What thing could make it break to kind of learn from it?

Speaker 2 And so having those teams built around you outside your company, advisors, investors, experts, industry people, et cetera, is really, really important.

Speaker 2 And that's why entrepreneuring is a team sport, is a network sport, not simply an individual sport.

Speaker 1 Okay, last one.

Speaker 1 Just as the industrial revolution created new opportunities for collaboration and new capacities for innovation, creativity, and productivity, the cognitive revolution will do it as well.

Speaker 2 This is, I guess, bridging into our AI discussion. The thing that happens that we've learned with entrepreneurship is that new technologies completely change industries.

Speaker 2 Sometimes every industry, like AI with general-purpose technologies and the parallel between chat GBT models and general purpose technology is always something I'm finding a little entertaining.

Speaker 2 But you look at these technology changes as changes in market landscapes. It's changes in how, what the real shape of products and services are going to be.
It changes in how companies operate.

Speaker 2 It changes in what business models are available and all of these things.

Speaker 2 So you really look, even if you're not yourself purely the technology company, you look for changes in the technological landscape because fundamentally, if you don't have a technology strategy, it's not an IT strategy.

Speaker 2 It's not my using PCs or Macs or iOS things. It's a technology strategy and that you're going to need to evolve with.

Speaker 2 And so AI, which is the cognitive industrial revolution, in my belief, is going to transform probably every industry. And if not every, almost every.
It's between almost every and every.

Speaker 2 So everybody needs to be looking at it to say, okay, what does this mean for my product service, my competitive landscape, the way that we operate as a company, how we do sales and marketing, how we do account management, how we do customer service, what other ways in which we operate, whether it's supply chain, finance, risk mitigation, et cetera.

Speaker 2 What are all the ways that this can come in and give me a competitive differentiation for how the new world is going to look?

Speaker 1 Well, Yap Gang, that concludes part one of my interview with Reed Hoffman. We're going to be talking about AI in part two.
And believe me, you're going to want to come back and check that out.

Speaker 1 Now, Reed is as seasoned as you get as an entrepreneur and executive, and he's truly seen and been through it all. Yet he remains such a compelling evangelist for the entrepreneurial spirit.

Speaker 1 I love the way he talks about the power of entrepreneurs to not only transform industries, but also entire societies.

Speaker 1 From the printing press to automobiles to smartphones and now AI, we entrepreneurs drive innovation, prosperity, and even the future.

Speaker 1 And often, as Reed explained, this process involves making big decisions at remarkable speed. And sometimes you have to prioritize speed over efficiency in an uncertain environment.

Speaker 1 But for those who can succeed in this hyper-competitive game of blitz scaling, they'll have all kinds of advantages in the market.

Speaker 1 When you're the first to scale, you'll have a lot more people investing in you, your cost of customer acquisition will be lower, and so will your cost of capital.

Speaker 1 Even the time it takes for you to recruit good employees will be reduced. So it pays to shoot for the stars.
But like Reed said, you still got to be smart about it and take informed risks.

Speaker 1 And it's the same optimistic but measured mindset that informs Reed's truly invigorating approach to AI. And guys, we're going to cover all of that in part two.
We go super deep on AI.

Speaker 1 And it was one of my favorite conversations about AI on this podcast so far. I learned so much.
You guys are going to love it. I can't wait for you to hear it.

Speaker 1 So make sure you tune in to part two of my episode with Reed Hoffman coming out next week. And until then, Thanks for listening to this episode of Young and Profiting Podcast.

Speaker 1 If you listened, learned, and profited from this conversation with the legendary Reed Hoffman, please share this episode with somebody who would love it.

Speaker 1 And if you guys enjoyed this show, if you learned something, if you feel like this is the best entrepreneurship podcast you've ever listened to, write us a review.

Speaker 1 I read your reviews every single day on Apple, Spotify, Castbox, wherever you listen to the show. Let me know how you feel about it.
Let me know what you've learned.

Speaker 1 Let me know your favorite takeaways. I love to hear your feedback.
It motivates me to continue to do this show and give it my full effort.

Speaker 1 And if you want to watch this podcast on video, check us out on YouTube. I just interviewed Mel Robbins in person.
I interviewed Gary Vaynerchuk in person.

Speaker 1 If you guys want to see those in-person interviews, they were awesome. Go check it out on YouTube.
Just look up Young and Profiting.

Speaker 1 You can also find me on Instagram at Yap with Hala or LinkedIn by searching my name. It's Hala Taha.
Of course, I got to give a big shout out to my Yap team. I've got the best team in the world.

Speaker 1 I love you guys so much. Thank you for all your hard work on the show.
This is your host, Hala Taha, aka the podcast princess, signing off.