#14. Brian Chesky: Do Things That Don't Scale

25:51So Brian and Joe returned to California with a hard drive full of photos and a notebook full of insights. They update the listings with the new professional photos and they watch the numbers. Within a week, revenue doubles. From$200 a week to$400 a week. They upload more photos. Revenue doubles again. It's working. Not because of some brilliant algorithm, not because of some clever growth hack, but because they went to New York, because they knocked on doors, because they did the thing that absolutely, positively did not scale. Paul later writes an essay about this moment called Do Things That Don't Scale.

26:28And as I mentioned a moment ago, becomes one of the most influential essays in startup culture. In it, he specifically talks about how Brian and Joe took photos of their host apartments. He says, this is exactly what I mean. This is the work that doesn't scale, but it's the work that matters most. He writes that startups don't fail because they can't scale. They fail because they try to scale before they've figured out what they're actually scaling. I think that's worth repeating. The fact that startups don't fail because they can't scale, they fail because they try to scale before they figured out what they're actually scaling.

27:04They optimize too early, they build systems too soon, and they lose the manual work that actually creates value. But here's what I think is even more important. This inflection point represents a fundamental shift in how Brian thinks about building a company. Before Paul's advice, Brian was trying to build Airbnb the way everyone told him to build it, remotely, analytically, at scale, sitting in an office, looking at data, trying to optimize conversion rates. But now Brian understands something different. In the early days, you don't win by doing what scales, you win by doing what's right for your users, even if it's messy, even if it's manual, even if you have to do it yourself.

27:46And that lesson sticks with Brian forever. Years later, when Airbnb has millions of listings, he'll still insist on getting into the details, on understanding the user experience firsthand. He'll actually live in Airbnb listings himself for months at a time. He'll obsess over every part of the product because he learned in 2009 that great companies are not built from a distance. They're built by founders who get their hands dirty, who show up, who do the unscalable thing when it's needed most. By February 2009, Airbnb is finally starting to grow. And on February 22nd, Brian says pull an email that means everything.

28:25In his own words, he says, we're ramen profitable. So Brian is making light of the fact they're burning through ramen noodles instead of their credit cards. It's not a victory lap, but it's a victory and they're airborne.

28:45Let's jump forward to summer 2011. Airbnb is now a real company. We're talking millions of dollars from Sequoia Capital, hundreds of thousands of users. The growth is absolutely exponential. And Brian is the CEO of one of the hottest startups in Silicon Valley. Everything should feel great. The company's thriving, the press is glowing, and the future looks massive. But then, on a day in late June 2011, Brian gets a message that makes his stomach drop. A host in San Francisco, a woman using the pseudonym EJ, she's just returned from a business trip. She opens the door to her apartment and immediately she knows that something is terribly wrong.

29:26This pungent smell hits her. The apartment is trashed, like completely destroyed. Furniture has been moved around. There are paintings hanging on the walls that were never there before. The kitchen is just piled high with dirty dishes, used gloves and comic cleaner, probably to white fingerprints. But the worst part, and this is where it becomes more than just about property damage, someone smashed through her locked closet door they stole her grandmother's jewelry her passport cash her laptop her external hard drive that had photos and journals her entire life basically her birth certificate her social security card and she believes all of these have been photocopied the host is devastated violated and she decides to do something that sends shockwaves through Airbnb.

30:13She writes about it publicly. She publishes a blog post and describes coming home to an apartment she no longer recognizes. And she talks about how her spirit was stolen from her. And the post starts to go viral. Brian is desperate for this to go away. He wants to protect the company he spent four years building. He wants to make this right for the host without admitting that maybe, just maybe, there's a big flaw in the business model. Because that's the terrifying part. If strangers staying in your home can lead to this kind of nightmare, then maybe the investors who rejected them four years ago were right.

30:50Maybe this idea is too dangerous. Maybe trust between strangers doesn't actually scale. And maybe this whole thing was a mistake. Brian needs to contain this and fast before it spirals into something that destroys everything they've built. At first, Brian tries to handle it diplomatically. He writes a short blog post saying Airbnb is shocked and that they're working with the authorities. A suspect is in custody and they're offering to help. But it's not enough. The story is still spreading. Tech blogs pick it up. Media outlets start covering it. The headline writes itself, Airbnb host apartment ransacked by guests.

31:29And then the host writes a follow-up post. And this one is really pointed. She says Airbnb's response has been tepid. They took 14 hours to respond to her initially, that they haven't been in regular contact, that she feels abandoned. Suddenly, other hosts start coming forward with their own horror stories. Someone finds meth pipes in her apartment. Another host talks about coming home to find their place thoroughly trashed. This is now a full-blown PR crisis, and Brian is facing the hardest decision of his life as a founder. what is Airbnb's responsibility here? Because technically, Brian knows this, Airbnb is just a platform.

32:09They're not liable for what happens between hosts and guests. They could hide behind that. They could say, we're not responsible. This is a direct transaction between you and the person you booked with. But if they do that, they lose trust forever. Hosts will be terrified to list their homes. Guests will be terrified to book. The entire thing falls apart. On the other hand, if Brian takes full responsibility, if he promises to cover damages to protect hosts, then he's setting a precedent. Every time something goes wrong, Airbnb is on the hook. That could be millions of dollars, which could bankrupt them.

32:43Brian is getting advice from all sides. Some people are telling him to minimize this, to lower up and to protect the company. Others are telling him to go big, to show empathy and to make this right, no matter what it costs. He's also getting hammered publicly. TechCrunch publishes an article titled The Moment of Truth for Airbnb. In that article, the writer says there's a very short window of time for Airbnb to deal with this before it's going to spiral out of their control. Hotel lobbyists are already trying to crush Airbnb before it becomes more of a threat. Ryan knows they're right, and this is his defining moment as a leader.

33:19What he does next, in the next few days, in the next few weeks, will either save the company or kill it. So Brian makes the decision. Airbnb is going to go above and beyond. They're not going to do the legally safe thing. They're not going to do the financially prudent thing. They're going to do the right thing, even if it's expensive, even if it's risky, even if it's radical. So on August 1st, 2011, Brian publishes a long blog post. The title is simple, Our Commitment to Trust and Safety. It starts with an apology, not a corporate one, but a real apology. He writes, last month, the home of a San Francisco host named DJ was tragically vandalized by a guest.

34:03When we learned of this, our hearts sank. We felt paralyzed. And over the last four weeks, we've really screwed things up. So he doesn't hide. He doesn't make excuses. And in the same article, Brian goes on to say, we let her down. And for that, we are very sorry. We should have responded faster, communicated more sensitively, and taken more decisive action to make sure she felt safe and secure. But we weren't prepared for this crisis and we dropped the ball. And then Brian announces something huge, something that could bankrupt the company. He says, a$50 ,000 Airbnb guarantee. Every single host is now covered for up to$50 ,000 in property damage or theft caused by a guest.

34:48And, and this is the insane part, they're making it retroactive. Any host who's ever had damage, you can come forward and claim it. That is a massive financial commitment, potentially millions of dollars of liability that Airbnb is taking on. And they're doing it because Brian believes it's the only way to restore trust. He also announces they're creating a 24-7 trust and safety team. They're upgrading their security infrastructure. They're taking this seriously at every level. But here's what's even more important than the guarantee itself. Brian changes his own mindset about crises. He later says something that sticks with him forever.

35:27I always thought that a crisis is a terrible opportunity to waste. And he says something else that's equally profound. He says, a crisis is a stage. It's a spotlight. It's your moment to demonstrate your values. Think about that. Most leaders see a crisis and think, How do I protect the company? How do I minimize the damage? But Brian sees a crisis and thinks, how do I show the world what we stand for? So the response is immediate. The media coverage shifts from Airbnb abandons host to Airbnb steps up in a major way. The trust and safety announcement, especially that$50 ,000 guarantee, becomes one of the biggest growth drivers Airbnb has ever had.

36:11Brian doesn't know if it's causation or just correlation, but after the guarantee launches, Bookings surge, confidence is restored, hosts feel protected, and guests feel safer. More importantly, Brian learned something about leadership that sticks with him forever. He says, the hardest thing to manage in a crisis is your own psychology. People look at you in the eyes, and if you think you're screwed, they see it in your eyes. In that moment in 2011, Brian could have played it safe. He could have protected the company legally. he could have minimized liability and hoped the story blew over, but he didn't.

36:48He took the risk, he made the bold move, and it worked. That decision doesn't just solve the crisis, it becomes a defining characteristic of Airbnb's brand. This is a company that will do the right thing, even when it's hard, even when it's expensive, and even when it's risky. And Brian carries that lesson forward because Brian's next inflection point is a crisis that's far more profound.

37:21Okay, final inflection point. It's March 2020. Airbnb is now worth$31 billion. Brian is 38 years old and one of the most respected CEOs in tech. The company's planning its IPO, the big exit moment every founder dreams about. Everything's on track. And then in a matter of days, everything changes. On March 11th, 2020, the World Health Organization declares COVID-19 a global pandemic. Travel bans start rolling out. Countries close borders, cities go into lockdown, and airlines' grand flights. Within eight weeks, Airbnb's business drops 80%. 80%, not 20%, not 50%, 80. Then revenue falls by 80 % in a single week.

38:12So revenue is collapsing. Meanwhile, they're burning through$250 million a month. Brian gets a phone call from Ken Cheneau, a board member who was CEO of American Express and navigated both 9-11 and the 2008 financial crisis. And Ken tells Brian something he'll never forget. Remember that conversation we had about 9-11? This pandemic is 10 of them. And then Ken says, this is your defining moment as a leader. Brian hangs out the phone and he realizes Airbnb could actually die. Everything they built over 13 years could disappear in a matter of months. So Brian is looking to get out of this crisis alive.

38:54But more than that, he wants to prove something. He wants to show that Airbnb isn't just another hyper-growth tech company that collapses when things get hard. He wants to show that the values the company was built on, trust, community, belonging, actually mean something. But Brian has to make decisions fast, really, really fast. And every single decision has massive consequences. The first decision Brian has to make is the hardest one of all. What do they do about the cancellations? In the early days of the pandemic, hundreds of thousands of guests are cancelling their reservations and they want refunds, full refunds.

39:33But here's the impossible situation. If Airbnb gives full refunds to guests, the hosts get nothing. And hosts are the backbone of the entire business. Many of them rely on Airbnb income to pay their mortgages. So if Airbnb screws over the hosts, the platform dies. On the other hand, if Airbnb doesn't refund guests, the guests will revolt. They'll leave bad reviews. They'll trash Airbnb on social media and trust will evaporate. So Brian has to choose and there's no good option. There's no decision where everyone walks away happy. He decides Airbnb will fully refund guests and waive cancellation fees.

40:11It's the right thing to do for people who are scared and can't travel. but it means hosts take the hit and the response from hosts is furious. They feel betrayed because Airbnb chose the guests over them. So interestingly, Brian Nater shares his thoughts on the decision to the hosts and he says, some of you are frustrated that we didn't consult you before making the decision. Your frustration made me see the gap that had grown between us, but the decision is made and now Airbnb has to deal with the consequences. The next decision Brian needs to make is even worse. Layoffs. By May 2020, it's clear that Airbnb can't keep everyone employed.

40:48They've cut costs everywhere. They've slashed marketing by nearly a billion dollars. They've paused expansion and they've refocused on their core business. But it's not enough. Brian has to lay off nearly 2 ,000 employees. That's a quarter of the workforce. And it's devastating. Because keep in mind, Airbnb's mission is to belong anywhere. The culture is built around community and connection. And now Brian has to tell nearly 2000 people you don't belong here anymore. Think about that from an employee's perspective. Some of them have been at Airbnb since the early days. They believed in the mission.

41:24They took lower salaries to be part of something special. And now they're being cut loose in the middle of pandemic when jobs are disappearing across the country. But here's where Brian does something different. Something that ends up defining his leadership in this moment. Most companies do layoffs badly. They're cold, transactional, and impersonal. Employees get an email or a calendar invite, HR reads a script, security excorts them out. It's brutal. But Brian decides to do it differently. On May 5th, 2020, he writes a long personal email to the entire company. It's honest, it's empathetic, and it's transparent.

42:03As a direct quote from that email, Brian starts by saying, when you've asked me about layoffs, I've said that nothing is off the table. Today, I must confirm that we are reducing the size of the Airbnb workforce. For a company like us, whose mission is centered around belonging, this is incredibly difficult to confront and it will be even harder for those that have to leave Airbnb. He explains the reasons. He takes responsibility and he doesn't hide behind corporate jargon. And then he announces a severance package that surprises everyone. Employees in the U.S. will receive 14 weeks of base pay, plus one additional week for every year at Airbnb.

42:42The company will cover 12 months of health insurance, and for international employees, Airbnb will cover health insurance through the end of 2020. That goes far beyond what's expected. It's exceptionally generous for a company that's burning$250 million a month. But Brian doesn't stop there. Airbnb creates a public directory of all the laid off employees with their skills, experience, and contact info so other companies can hire them. The email becomes a case study in how to handle layoffs with empathy and dignity. And media outlets call it a masterclass in leadership. But layoffs are just the beginning.

43:19Brian now has to reinvent the entire company. He brings in the leadership team and says, we're going back to basics. We're refocusing on the core. We're cutting everything that's not essential. Brian does this because he believes this is exactly what the company needs right now. He studied Steve Jobs. He studied Walt Disney. He knows that in a crisis, you need a clear vision and a clear direction. You need someone steering the ship confidently. And this is the beginning of what later gets called founder mode, a hands-on approach to leadership that goes against everything that you read in business school.

43:51And Brian says it plainly. He says, great leadership is not absence. Great leadership is presence. By summer 2020, something remarkable starts to happen. Airbnb's business begins to recover. Not completely, travel's still down massively, but people start booking again. Except now, they're booking differently. Instead of short city trips, people are booking long stays in rural areas. Instead of hotels, they want private homes where they can isolate safely. Airbnb is perfectly positioned for this new kind of travel. And because Brian refocused the company on its core, they're able to move fast and adapt.

44:30And in Q3 2020, Airbnb posts a profit of$219 million. Think about that, a profit during a pandemic of delaying off 25 % of the workforce? Yes, because Brian made the hard calls and he got back to what made Airbnb special in the first place. And then in August 2020, Brian makes an announcement that shocks the entire industry. Airbnb is filing for an IPO. Most people thought Airbnb's IPO was dead, cancelled for years, postponed indefinitely. But Brian sees an opportunity. The company is profitable. The future of travel is changing in Airbnb's favor. It's time to go public. On December 10th, 2020, Airbnb goes public on the Nasdaq.

45:14The stock is priced at$68 a share and by the end of the day is trading at$145, more than double the IPO price. Airbnb's market cap closes at over$100 billion, more than Marriott, Hilton and Hyatt combined. It's one of the most successful IPOs in history and it comes less than eight months after Airbnb was on the brink of collapse. Brian later says, I don't think this summer too many people expected to see an Airbnb IPO this year. We were planning on going public. We put our IPO on hold. And this has been the most unbelievable journey. It's been quite a comeback for our hosts and for what I hope will be travel.

45:54But here's what's most remarkable about this inflection point. Brian doesn't just save the company. He reinvents it. He made Airbnb leaner, more focused, and more resilient. And he proves something crucial about leadership. In a crisis, conventional wisdom doesn't work. you can't delegate your way out of a crisis you can't empower your way out you have to get your hands dirty you have to make the hard calls you have to be present and it's the lesson that defines his leadership to this day okay so let's step back for a second we've just walked through five massive inflection points in brian chesky's journey so let's explore the patterns that show up again and again.

46:37Because here's the thing, Brian doesn't just get lucky five times. There's something deeper here. There's a way he approaches problems that show up at every single critical moment. First, Brian consistently does the thing that doesn't scale, even when it seems absolutely crazy. Instead of trying to build some big automated platform, he inflates three air mattresses and hosts strangers in his apartment. When every investor on the planet says no, he hand folds cereal boxes and seals them with a hot glue gun. He flies to New York and knocks on doors taking photos himself, one apartment at a time.

47:13That is not what you're supposed to do as a CEO. The NBA textbooks tell you to hire people, to delegate, empower teams, and get out of the details. That's what the conventional wisdom tells you. But Brian learned something early on, something from Paul Graham, something from that first weekend with Kat and Michael and Amal sleeping on his floor that rewired how he thinks about scaling. This is a quote that we explored earlier. Most startups died not because they failed to scale, but because they tried to scale before they figured out what they're scaling. Think about that. They optimized too early.

47:46They build systems before they understand what actually matters. Brian got this intuitively. He knew that getting 100 people to genuinely love Airbnb was worth infinitely more than getting 10 ,000 people to think it was just fine. And here's what amazes me. He carries that lesson forward throughout his career. Even when Airbnb was massive with millions of users, billions in valuation, one of the most valuable companies in the world, Brian still believes in getting his hands dirty, in being in the details, in doing the unscalable thing, if that's what the moment requires. And that's not a coincidence.

48:20It's a choice over and over again. Second, Brian uses crises as opportunities to demonstrate his values rather than take the easy way out. Think about what happened in 2011 when that host's apartment got ransacked. The legally safe move, the move that any corporate counsel would have advised, is to say, we're a platform, we're not liable, sorry this happened, please don't sue us. That's not what Brian did. He went the other way. He went big. He launched a$50 ,000 guarantee and he made it retroactive. He said, if you're a host and you've ever had damage, come forward. We've got you. That's millions and millions of dollars of liability that could have destroyed the company.

49:02But Brian sees it differently. He sees the crisis as a moment to show the world what Airbnb stands for. Fast forward to 2020, Airbnb's business drops 80 % in eight weeks. The company is burning a quarter of a billion dollars a month. Any rational CFO would say, cut costs, lay off people quietly, do the minimum severance. But again, Brian does the opposite. He gave laid-off employees 14 weeks of severance, a full year of health insurance, and he created a public directory of all the laid-off employees with their skills and contact info so other companies could find them and hire them. That's the move of someone who understands that trust is everything, and trust is built by doing the right thing when it's hardest.

49:44That's the reason why people trust Airbnb even after things go wrong, because they know Brian won't hide. They know he won't make excuses. They know he'll do the right thing, even if it costs him. And third, Brian stays obsessively connected to the core experience, even as the company grows. This one might be the most important, actually, because here's what happens to most founders. The company scales. It grows from a garage to a team of 10 to 100 to 1 ,000. And with that growth, something changes. The founder drifts further and further from the product and the customer. You end up in board meetings all day.

50:20You're looking at dashboards and metrics and reports. You lose touch with what it actually feels like to use your product. You start making decisions based on data instead of your intuition. And you lose the connection to what made your company special in the first place. Brian refused to let that happen. And he was intentional about it. In 2020, during the pandemic, when the company was falling apart and everyone was panicking, Brian stayed in 18 different Airbnbs over six months. not for a photo op not for a pr moment because he needed to understand firsthand what was actually happening with the product on the front line because if brian loses touch with the core experience with that feeling he had with that very first weekend in october 2007 when cat and michael and amol slept on his floor then airbnb becomes just another corporate platform it becomes generic and it loses its soul and here's the thing he's right because every turning point the cereal boxes the door-to-door photos, the$50 ,000 guarantee, what happened during the pandemic, all of them required Brian to be present, to be in the details, to care deeply about what was happening.

51:27If he delegated those moments, if he had stayed at a distance, there's no way Airbnb would be what it is today.

51:42So here's what I keep coming back to about Brian Chesky's story. Brian's journey shows us something really important and a recurring theme on inflection moments. The conventional wisdom doesn't always apply. Sometimes the thing that seems crazy, that seems inefficient, unscalable or insane is actually the right move. And I think the reason Brian has been so successful is not because he's smarter than everyone else. It's not because he had some unfair advantage or lucky break. It's because he was willing to do the things that didn't make sense to anyone else. He was willing to stay obsessively connected to the product.

52:17When everyone told him to move into new categories and diversify, he stayed connected to that first weekend in October 2007, to Kat and Michael and Amal sleeping on air mattresses. And he never lost sight of what made that experience special. Never. And that's what separates the companies at scale and lose their soul from the companies at scale and become iconic. It's founders like Brian who refuse to let go of the thing that made it special in the first place that end up being successful. And it applies to firms just starting out, just as much as it does, for those worth hundreds of billions of dollars.

52:56Thank you for joining us on Inflection Moments. If today's story sparked a new perspective or challenged your thinking, be sure to share it with someone you know loves this stuff as much as you and I do. Maybe it's a college buddy, your water cooler buddy, or maybe even someone in the family group chat. If you enjoyed this deep dive, make sure to leave a five-star review and subscribe to our channels so you can be the first one to hear what we've got coming next. And if you're interested in insights, ideas and lessons from some of the world's greatest entrepreneurs, sign up for our newsletter.

53:27The link is in the show notes. Until next time, keep building and talk soon.