How great leaders respond in a crisis, w/Airbnb CEO Brian Chesky

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1:29And right now, you can get six months of Rippling free when you sign up at rippling.com slash scale. That's R-I-P-P-L-I-N-G dot com slash scale. Don't get sad. Get Rippling. Terms and conditions apply. I thought the hardest thing I would ever do in my life was start Airbnb. And I was certain of that. I came back from the holidays. It was January 2020. I thought my life was going down a certain road and I could predict it. We were a$30 billion company waiting to go public. And then all of a sudden, within eight weeks, we lost 80 % of our business.

2:19You can learn a lot about people in a crisis. I think the person you learn the most about is yourself.

2:35The voice you just heard belongs to Airbnb CEO Brian Chesky, one of my favorite scale leaders. I'm Reid Hoffman, partner at Greylock, co-founder of LinkedIn, and host of Masters of Scale. Recently, Brian sat down with my colleague Bob Safian on stage at the Master of Scale Summit in San Francisco to talk about how great leaders respond during a crisis. In their conversation, they analyzed clips of Brian's previous appearances on Master of Scale and talked about the first principles that carried Airbnb through its near-death in the pandemic. And how Brian has led Airbnb to its success today as a public company.

3:12It's a conversation that continues to be relevant to leaders of any kind. even CEOs. Stay tuned for Bob Safian's conversation with Brian Chesky. Please welcome to this stage the CEO of Airbnb, Brian Chesky.

3:44Brian has been listened to more times than anyone on Masters of Scale through his different episodes. So what we're going to do is we're going to play a handful of clips and then we'll chat about them. All right. So are you ready? Yes, do it. Let's play the first clip. I went to a school called the Rhode Island School of Design. And when I was at RISD, I never aspired to be a CEO. Do you know why? Because no one at RISD seemed to become a CEO. It seemed like not an available option. I was doing medical design once. I designed a children's ventilator. I had to sit in the shoes of the child. And so I had to imagine being a child, get in the operating table.

4:22You had to put yourself in the shoes of the patient or the person using your product. And if you're only doing A-B tests, like you're never designing with empathy.

4:33Wow, it's weird to listen to yourself in front of hundreds of people. So being a designer as a CEO is still pretty distinctive. Yeah. So what does it mean to think like a designer when you're a leader? Well, I think it probably starts by defining what is design. I think we should start there. because I think at the surface, design is how something looks. So designers design how things look. But I think at a deeper level, design is really how something fundamentally works. I think of design as just a way to assemble something to solve a problem. And so to think like a designer, I think the first thing you need is probably curiosity.

5:14Because you're trying to design for people. And so to design for people, you have to understand them. You have to care about them. And also, you don't have to design for people. You have to understand the industry and the history and why are things the way they are. And so you have to think about first principles. And so once you're curious, then the next thing I think a designer has to do is be holistic in their thinking. So, you know, we tend to, as designers, like to be really holistic and see the entire system. And so part of being a designer, I think, is to take a thousand things in your head and to try to, like, organize them and then make all these trade-offs.

5:47Because the final thing you have to do is distill them to its essence, to whatever is most important. We would often call this simplicity. And so ideally, when you get to the end of that process, you were curious, maybe you discovered something you could have never imagined, you weighed all these different outcomes, and you designed something that was really inevitable. And I think you can design not just objects. You can design not just clothing. You can design a company. You can design how people connect together. You can design communities. Almost anything can be designed. And to solve many of the hardest challenges today in society, I think we're going to need more designers at the table because you ever have a situation where there's like no good option?

6:29Sometimes a third option is the right option, which is something you haven't thought of yet. And that's where I think creativity and imagination come in.

6:40Second clip. It references you and your co-founder Joe Jebbia in the early days. We literally would knock on the doors of all of our hosts. And we had their addresses. And we'd say, knock, knock, hello, hey, this is Brian, Joe, we're founders, we just want to meet you. It's a little creepy just to knock on the door unannounced. We needed excuses to get in their home. So they came up with an offer that the host couldn't refuse. We'd send a professional photographer to your home and photograph your home. Of course, we didn't have any money and we couldn't employ photographers. So Joe and I, we'd show up at their door and they're like, wow, this company is pretty small.

7:14These home visits became Airbnb's secret weapon. It's how they learned what people loved. It's really hard to get even 10 people to love anything, but it's not hard if you spend a ton of time with them. So if I want to make something amazing, I just spend time with you. And I'm like, well, what if I did this? What if I did this? What if I did this? I love this story, this handcrafted experience, which is, by the way, one of the most compelling insights we've had on MasterScale. We all want the leverage of scale, but you sometimes have to start with things that don't scale. That's something that you've said.

7:46I'm curious how much of that perspective was learned versus instinctive and how do you keep handcrafted when the company gets much bigger? Totally. I think it's instinctive in all of us, don't you think? Like I think it's instinctive in all of us that we want to think about another person. And I think it's really hard to think abstractly about millions of people. But when I came to Silicon Valley, it was all about hyper growth and scale. And we had this instinct about trying to design for another person. But then people would say, but how would that scale? And so what ended up happening is you would end up editing your imagination.

8:23You'd be afraid to imagine something if you couldn't ever imagine scaling it. And so if you edit your imagination, it's like you take the stone, which is your idea, and you start carving it down. And pretty soon all you're left with is this tiny idea, this tiny stone. And we entered Y Combinator. And Paul Graham is the founder of Y Combinator. And the first day of Y Combinator, Paul Graham said something to us. He said, it's better to have 100 people love you than to have a million people that just sort of like you. Because 100 people that love you will tell their friends about you. And then they'll tell their friends, they'll tell their friends, and they become your marketing.

8:58And the reason that's great is because it's a lot easier to design for 100 people than a million people. How do you know what a million people want? It's pretty hard. But you could study one person. And so what we did was this exercise. Take a single traveler and design the perfect experience. And so if you go to the Airbnb app, we ask you like one through five stars, how was your check-in experience? But we did this exercise. We said, what if we made the check-in so great you added a six star? What would that check-in be? And you wouldn't just go in and the host wouldn't just open the door, but there'd be maybe a bottle of wine on the table and there'd be like some cheese and they'd learn about you a little bit.

9:36And that's a six-star experience. And then you ask, well, what would a seven-star experience be? Well, a seven-star experience, they would basically like send a limousine to the airport. You'd get in the car. There'd be champagne. You'd go to the house. They know you love surfing, so you have a surfboard in the kitchen. Well, I don't know why it's in the kitchen, but you get the idea. And so then I asked, well, what would an eight-star experience be? An eight-star experience, you show up to the airport. There's a giant elephant. You get on the elephant. It's a parade in your honor, and you basically have this huge ceremony for you.

10:07So what's a nine-star experience? A nine-star experience is the Beatles check-in. You get to the airport and 5 ,000 young women are cheering your name and they're hyperventilating. And then you have a press conference on the front yard of your Airbnb. So what's a 10-star experience? Very simply, Elon Musk shows up and he just takes you to space. The idea is that we're not going to design an eight-star, nine-star, 10-star experience. But if you can go through the mental exercise of taking a person, designing the journey for them, exaggerating, maybe eight or nine stars not possible, maybe six or seven stars is.

10:46So now you've designed the perfect experience. Now you need to scale it. The process of scaling is now taking that experience, breaking it down to its component parts, and then that's just like system design. I don't want to say it's easy, but the point is to separate those two processes. And if you do that, you hopefully will eventually create something that people love.

11:09Now, Brian makes it sound like this is all hypothetical. But we have an audio clip of you actually talking about a particular experience that you handcrafted for someone. We put up these flyers anonymously saying, Seeking a traveler, we'll photograph your trip to San Francisco if you let us follow you. This guy, Mark Ricardo, replied, What we learned was his trip was awful. We call him back. We say, Ricardo, we want to create the perfect trip to San Francisco for you. You fly him back. And we had the team storyboard, the perfect experience for Airbnb. We had a driver pick him up at the airport.

11:44And we took him to the perfect Airbnb. There were all these services. He went on these dinner parties. We got him the best seats at restaurants. We took him on this midnight mystery bike tour. Like 60 riders go on it. And nobody but the leader knows where they'll end up. And it's just like there was this crazy magical world. I see him at the end of the trip. I say, how was your trip? He says it was amazing. And then I walk away. Yells at me, Brian, one more thing. And he starts like crying. And he breaks down and says, thank you. This is the best trip I've ever had.

12:23This concept that you talk about of 11-star experience, like you tried it out like you're trying to do it. You're not just talking about it. And to be clear, we don't always get it right because you do face the realities of scale. There's like this old Pablo Picasso quote, I think he once said, the older you get, the stronger the wind gets and it's always in your face. And it might as well be a comment about companies. The bigger you get, the stronger the wind gets and it's always in your face. And I think the challenge with large companies is when you build a product, the first time you built it, you built it for someone else.

12:54Actually, when you start a company, you're actually building it for yourself. So it's a deeply personal thing. And now there's no employees or any other stakeholders, so you're making it for another person. And then one day you wake up, if you are so successful and you have a huge organization, and then you have employees to think about and a board and shareholders, and then one day you're in a company and you have meetings about meetings, and you're not really talking about the product. And I think it's really important, no matter how big a company gets, that you always go back to that small scale, that we're never maintaining something at the company.

13:28We're always going to the next version of it. And the next version always goes back to subscale. How do we get this perfect experience? Okay, that's this experience. Now we're going to scale that. And that's essentially what we try to do. It doesn't always work, but I think that's a way to continue to kind of keep your soul, keep your humanity and do something that people really love. This is Mike Nicholas, Capital One business customer and co-founder of Ansett Uncles, a plant-based restaurant and community space in Brooklyn, New York. And he's telling us how they started a product line. We already had a space in the community.

14:02The food was an extension of our lifestyle and our values. So we know we wanted to create something that was an offshoot to that. Our pepper sauce. That's my grandmother's recipe. That's like a liquid gold, right? If someone wants to approach us and ask us, what do we do? We provide flavor. Growing a product line is no small investment, but Mike and his wife and co-founder Nicole were able to manage with the help of their Capital One Business Card. Working with Capital One Business, we're able to leverage our limits and utilize those points, making sure we can continue the scale at the speed that we need it to go.

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15:56Tune into Sequoia's new season of Crucible Moments to discover how some of the most transformational companies of the modern era were built. Crucible Moments is available everywhere you get your podcasts and at cruciblemoments.com. Go listen to Crucible moments today. Before the break, we heard Airbnb CEO Brian Chesky talk with my colleague Bob Safian about how designing a business for delight instead of scale can actually fuel scale growth. Now, Brian talks about the hardest thing he's ever done and how a near-death business experience changed him and Airbnb for the better. So you take this ridiculous idea that people are going to sleep on each other's couches, right?

16:39And you turn it into not just a business, but a company that's growing, that's thriving. It's all over the world. People know what Airbnb is. You're steaming towards an IPO, right? And it just happens to be March, April of 2020. Amazing timing. Right? Perfect, perfect timing. And you were gracious enough to get on and talk with me at that time. I mean, we have a clip of that also that we can play here. We were preparing to go public. We had a plan, and I felt great about the plan. And all of a sudden, it felt like I was a captain of the ship and a torpedo hit the side of the ship. The world changed irreversibly.

17:22It just felt like everything was breaking at once. And so we had this really, really difficult choice. Never thought I would have to make a choice like this before. My principles were do more than people expect. Be remembered for how we conduct ourselves. Be nimble. Pivot to where we think the world is going. It feels like you're in a house and it's on fire. And you've got to put out the fire while you're having to rebuild the house.

17:53So like we talk a lot here about having to pivot. But like this was a situation where the pivot, you don't even know where you're supposed to pivot to when you're in the middle of uncertainty. was there something that you reached to to steady yourself, to steady your team? How do you stay nimble in the face of a crisis that's like that? I mean, you've emerged stronger out of it. Yeah, I thought... I'm bringing you back to the pain. Yeah, no, no, no. I'm bringing you back to the pain. I'm trying to... I thought the hardest thing I would ever do in my life was start Airbnb. And I was certain of that.

18:29And I came back from the holidays. It was January 2020. And I think like most of you, I thought my life was going down a certain road and I could predict it. And we were about to go public. We had mostly finished our S1 about a business that I was feeling pretty confident about. And we were kind of a success story at that point. We were a$30 billion company waiting to go public. And if you told me 14 years earlier, when I was 25, unemployed, my parents were social workers, that would happen, I would have told you were crazy. I thought we'd made it. And then all of a sudden, within eight weeks, we lost 80 % of our business.

19:09And when you're like our size and you lose 80 % of your business in eight weeks, it's like an 18-wheeler going 80 miles an hour and then having to slam on the brakes. Nothing good happens. And it was a really actually terrifying time in some ways. I mean, there were like major journalists saying, is this the end of Airbnb? Will Airbnb exist in the future? This is eight weeks after the preparation for what was supposed to be a huge IPO. So I'll bring you back to what was happening for me. It's actually pretty intense. You can learn a lot about people in a crisis, and I think the person you learn the most about in a crisis is yourself.

19:48And things get really clear to you in a crisis. I've never thankfully had a near-death experience, although what it's been described is your life flashes before your eyes, and then suddenly everything becomes really clear to you. And I felt like we had a near-death business experience, and then suddenly everything became more clear to me, and not everything mattered. It was like our company was a burning house. If I could go in the house and only take half the things, which things do I want to take with me. You suddenly have to do that. And the other thing I've learned about a crisis, a lot of people now ask me, what's the hardest thing to manage in a crisis?

20:28You know what the hardest thing to manage in a crisis is? And this surprised me. It's your own psychology. The hardest thing to manage in your crisis is your own psychology, if you're a leader. Because the psychology of the leader, I found, becomes the psychology of the organization. And if you think you're screwed, people see it in your face, and they say, well, you have the most information, so we must be screwed. But if you are optimistic, and not optimism that's blind optimism, because then you'll lose faith, but optimism rooted in like some basis of facts, that people still want us to exist.

21:02We're not going to be as big as we used to be, but this is why we're going to exist. Then that becomes the optimistic mentality that permeates the organization, and you need to be optimistic to have creativity, and you sure as hell need creativity in a crisis because often there seems like no good solutions. And then the next thing you need to do in a crisis, I found, is communicate about four times as frequently as a non-crisis. I talked to every executive every day, every board member every week. I did all hands meetings every single week. And I would totally be open in Q &As. And that was counterintuitive because in a crisis, you kind of don't want to have to face every employee because they're going to ask, are we going to do layoffs?

21:41And you really don't want to have to answer that question. But I would try to just go through that process. And the final thing, you get a crisis, you have to be decisive and fast. But the problem with decisiveness is that a lot of people, especially a lot of data-oriented people, they get a little bit paralyzed. Because in a crisis, everything's changing. And how can you make a decision when you don't have the core data? And that's when you need courage. But courage needs to lean on something. What do you lean on with courage? And so courage must lean on principles. In other words, in a crisis, I don't think you make business decisions as much as you make principle decisions.

22:17And principle decisions become things like, if I can't predict the outcome, how do I want to be remembered? And if you always just imagine a crisis, this is my defining moment. This is how I want to be remembered. It sometimes helps you separate from the craziness and the chaos of that moment. And then suddenly, you can point a way forward. And you can become better than you ever were. So to end the story, people then thought we were going out of business. A thousand of us went in a foxhole, rebuilt the company from the ground up, miraculously eventually went public at a valuation five times our nadir.

22:56And now a design-led company did more than$3 billion in free cash flow in the last 12 months by not even really trying to make money. There's a number of lessons here, but I think the most important lesson that I learned is the thing you learn most about in a crisis is yourself, and you've got to be true to who you are. Don't apologize for how you want to run the company because when you are in your darkest moments, the principles in who you are is what you have to lean on.