Learn from every "no"

24:52So if you're scaling, make it simple with Deal. Go to deel.com slash mos and get up to three months free. We're back with a special remix episode of Masters of Scale, revisiting my theory that if you're hearing a chorus of no's, it may actually be a good sign. So how can you tell a truly bad idea from a bad sounding idea? How can you be sure your ugly duckling could become a swan? This is the key. You have to pay attention to the quality, not the quantity of rejections. you want to see at least a teeny minority of investors squirm. You don't have to get them to a yes, but you should detect some friction as they reason their way to a no.

25:40I mean, a lot of people say that they're trying to build the Procter & Gamble for people of color. Let me talk about this for a second, because it's really funny. Number one, I've never said that. And then two, it's interesting. I think folks talk about it as if it's a niche kind of thing, but people of color are the majority of the world. So if we're the Procter & Gamble for people of color, what the hell is Procter & Gamble? That's Tristan Walker, the founder and CEO of Walker & Company. He re-engineered the single-blade razor, specifically for coarse or curly hair. He called it the bevel, and it became the flagship product for Walker & Company, and the first step in his grand plan.

26:14He envisioned a health and beauty company on par with global brands like Procter & Gamble, a company that devoted its attention to men and women of color. It was blindingly obvious to him that this company should exist. But when you're pitching a room of mostly white, mostly male investors, it can be hard to convey the urgency of this market oversight. So how did the best and brightest VCs respond to Tristan's idea? I don't know. It's niche. I don't think it's scalable. It was a terrible idea for me to kind of jump into the bevel thing because it was a consumer group who didn't want it. An industry that is dominated by the multi-blade use case with billions and billions and billions of dollars to attack you with patent protection, etc.

26:58Right? And to do it in like Silicon Valley. Right? That's crazy. Tristan has a keen ear for this quality in his conversations. He can pinpoint down to the PowerPoint slide number the moments his audience stops paying attention. I had a slide in there. I think it was like slide 14 where I talked about proactive, the acne system. as like a kind of a good analogy to what we're trying to do. You know, it's the difference between kind of Gillette and Bevel as like Neutrogena and Proactive. It's a system. It solves a very important issue. And this VC looked at me, and I'll never forget this, said, Tristan, I'm not sure issues related to raisin bumps, shaving irritation are as profound and big an issue for people as acne.

27:43At which point I said, you know, I kind of understand what you're saying, but all you had to do was get on the phone with 10 black men and eight of them would have said, this is a permanent thing I have to deal with. All you had to do was get on the phone with 10 white men, and four of them would have said the same thing. Could have done it for women, too, and you would have got the same ratios. So it wasn't that it was a bad idea or not as important. It was just that that person was unwilling to acquire the context necessary to understand what we're working on. That's just laziness. And at that point, I can't fix that.

28:08So I just got to move on until I find somebody who understood it. Notice how quickly Tristan's mind moves onto the next investor. When the quality of the questions drops, he knows mid-pitch that the conversation's over. The rest is noise. Those half-hearted questions are like the elevator music of the pitch process. It's meant to pacify entrepreneurs. In fact, it grates at them. It also wastes their time. Tristan will tell you he prefers a hard no to a comforting maybe. I mean, Silicon Valley investors will tell you all the time. We want to invest in people who can execute with some symbols of pedigree, chasing a significant white space and a big opportunity.

28:46For us, it was like check, check, check, check. And we heard 99 % no's. Like, how much is this b****, right? And you just like trying to say something that I want to hear as opposed to telling the truth. And I wish that Silicon Valley would tell the truth a little bit more. Tristan raises a really interesting question here. How much of this investor hemming and hawing as well? Bulls***. So what's really going through their heads? As a partner at Greylock, I want to share what happens after an entrepreneur leaves the room and investors left them all over. Crazy idea. It begins with a debrief of the investors' partners.

29:22If I'm presenting an idea to my partners at Greylock and they all go, that's great, we should do that. I'm like, s***. Here's a bunch of hyper smart people and no one's saying, oh, watch out for this or watch out for that. It's too easy. The idea is so obviously good. I can already hear the stampede of competitors trampling over our hopeful little startup. On the other hand, you don't want every person in the room to say, Reed, you're out of your f***ing mind. Because then you're wondering, hmm, am I drinking the Kool-Aid in a very bad way? What you want is some people going, you guys are out of your minds, and some people going, I see it.

29:58You want a polarized reaction. In fact, the one piece of advice I give most often to early-stage entrepreneurs is to go out and ask the smartest people you know, what's wrong with my idea? Why won't it work? I asked this question when I was first building LinkedIn, and my most trusted advisors had the same answer. They said the problem would be in getting the network flywheel going. After all, a professional network is only valuable if other people are there to network with. This response didn't make me say, okay, nevermind. Instead, it showed me what my number one obstacle was going to be. Asking smart people what's wrong with your idea is the best deal on data you'll ever get.

30:43But what happens when you gather together thousands of smart people, give them a lovingly crafted introduction to your product, and then they all yell no in unison? Alexa Von Tobel, founder and managing partner at Inspired Capital, experienced exactly this when she was launching LearnVest. Founded in 2008, LearnVest was a proto-fintech platform that offered money management resources from budgeting boot camps to spending trackers to consultations with human financial planners. When they were acquired by Northwestern Mutual in 2015, it was a clear sign that the fintech era had arrived. It was September 2009, and LearnVest had been invited to launch their closed beta at the TechCrunch 50 conference.

31:27Alexa can set the scene. They fly you out. You get to get on stage, 3 ,000 people. And by being selected, it's because you're one of the best and biggest ideas. And so you get to go on stage and present. I was so nervous. I emailed everyone I could think of to be like, we're going to launch the business. Come watch it. It's going to be live streamed. So all my family, all my friends are watching from afar. I get on stage and I start talking about how the future of the wallet's going to come online. It's going to be on your phone. You're going to have access to advice. There's going to be gamification.

32:05You're going to be able to, almost in a way that doesn't feel like work, learn and interact with your money. In my head, I'm like, I'm going to win like an award. The panel judges read, we're like, this is the worst idea I've ever heard.

32:25They shredded the idea live and basically said, people aren't going to trust bringing their money online. The gamification just seems stupid. No one's going to be interested. The primal brain in my head was like, oh, my God, this was not how this was supposed to go. Alexa had hoped for some constructive advice or perhaps admiration and more investment. Instead, the advice she got was maybe don't bother. Alexa defended her idea to the judges and the assembled crowd. I just sat there and was like, well, first of all, 80 % of the country lives paycheck to paycheck. Nobody has money. Retirement, we're going to live an extra decade longer.

33:08It's a massive problem for the country. We have to figure it out. And I kind of just like went into all of the work I had already done and spewed it out of my brain. And ended up getting like a standing ovation. People were clapping, which was great. I got off the stage, went into a closet, and literally started bawling.

33:29Called my boyfriend, who's now my husband, Cliff. And I was like, I don't know what just happened, but they hate the company. They hate the idea. It wasn't TechCrunch, it was TechPunch. Like, I literally got TechPunched. Did you notice the detail she shared about what happened next? I kind of just, like, went into all of the work I had already done and ended up getting, like, a standing ovation. The judges didn't see LearnVest's potential, but the audience did. And when LearnVest officially launched less than four months later, in January 2010, the site got 50 ,000 signups in the first month. That was when I was like, there is something here.

34:07People do want to learn about this. And then we raised lots of money. Then life got easier. However, sometimes you'll face something more implacable than a chorus of no's, a seemingly impenetrable wall of no's. Her Royal Highness, Princess Rima bint Bandar al-Saoud, faced just such an obstacle. Princess Rima is a member of the Saudi royal family and Saudi Arabia's ambassador to the United States. But before that, she was a CEO, an entrepreneur, and an advocate for women's empowerment in Saudi Arabia. I grew up in the States. I arrived in the States, I was seven years old and 30 with two children when I went home.

34:47And I recognized that the experiences I had when I was younger weren't available to my children. I fell into the world of business because of the word no. And the no was women can't be employed. And I couldn't understand that. I said, what do you mean? And so I had to sit and think and recognize I'm a woman born of privilege. I'm born into a royal family. I'm born into the ruling family. And I couldn't get a job. So what is then the state of women and every other woman? And how many other women are being told no, but don't have opportunities? But I had an opportunity to make that shift, to make that pivot, and try to use skills that I had learned to tell another story.

35:25And so I tried to do that. I was hired into the Ministry of Sports, and I was told that my mandate was female inclusion. And I said, that's great, but do you mean myself sitting in an office and we tick a box? Or do you mean that we actually have a mandate to create change for female inclusion? I was told, no, it's a mandate. Fabulous. The only issue was there was no offices. So I actually worked from home for the first year. I would go to the ministry and there's no bathroom. So I was lucky that my home was five minutes away. That's still just not convenient. So we used to put a sticker on one of the bathroom doors with a little female sign and we'd come back every day and it would be removed and then we'd put it back and then, not to be crass, but we put ladies' products in the bathroom and they never took the sign off again.

36:11We were like, all right, we got you. You know, we got you. And so I was hired to push the envelope. I was hired to make change. I was hired to push back on either the stereotype that we had for ourselves or the limiting beliefs that we had for ourselves or the boundaries that we were always told no, because I was told there is no no. We took four women as wild cards to the Olympics. FYI at that time, no facilities for women in sports. So they actually, we ended up doing their boot camp in my home. They trained in my home gym. They stayed in my parents' guest house. Because we just needed to get it done.

36:49Get it done before somebody says no. Because once you break the ice and you take that first step, it is what it is, it's precedent. And I will tell you that the women of my country today are leaders. their CEOs, 40 % of all small and medium-sized businesses are women. Today, not a true statement five years ago. Women are in the military. Women are in leadership positions in government. We have deputy ministers and vice ministers. The challenge for women in my country today is no different than the challenge for women in your country. And the limiting belief that we hold ourselves to is what will hold us back.

37:30not the limiting beliefs other people have.

37:38I couldn't agree more with Princess Rima's strategy here. When faced with a huge, all-barring societal no, she looked for ways to set a precedent that would lay the basis for a huge-scale change down the line. Now I want to take some time to consider how and when you should say no. How do you tell when your no is helping you avoid a bullet and when it's dooming you to miss a huge opportunity? This is something I spoke about with model, producer, and entrepreneur Tyra Banks. Part of maintaining a firm handle on her personal brand was learning when and why to say no. Why? For the same reason it's important to say no when making decisions for a corporate brand.

38:20Because with focus comes clarity of purpose. try to be everything to everyone, you'll end up standing for nothing. So one of the things was time. There's only so much time in a day to do so many things. And then a lot of things I said no to because of beliefs. Like which beliefs? Like what mission and so forth? Yeah. So it was offered millions of dollars to wear furs. I'm not the person that's throwing paint on people, but I just don't want to wear furs, right? Real fur. Millions of dollars to sell alcohol. I always said no to that. I did one drink responsibly campaign, but I was like, it has to be a drink responsibly campaign.

38:56My grandmother died of lung cancer when she was 50 years old. So I said no cigarettes. So those are my three main categories of no. And also the three main categories that paid you the highest. So I always would say no. And my agents are like, are you serious? Do you understand what you can make in four days is what you can make in four years? I'm like, I know, but I just not going to do that. But through that, there was just so many no's. I mean, oh Lord, Reed, there's so many that I look back on and I feel like as precious as I was about personal brand, I think there was a lot of protection there, but I think there was a lot of dumb no's.

39:33What are like one or two of those that you most regret? One of the top magazine companies, they came to me and wanted me to do a magazine. How Oprah has her magazine, how Martha The steward has magazines. Rachel Ray has magazines. And they wanted me to do a magazine. I remember being in that meeting with these 12 people in this huge, beautiful conference room and me saying, I don't have time for that. I'd have to look at every single page and approve of myself. And, you know, I'm hosting my modeling show and I'm doing this and I just don't have time. I didn't understand that true leaders, they're the visionary, but they don't have to do every damn page and do the typesetting.

40:12I mean, I just felt like I needed to be so close. And I said no to something that I think would have been extremely beautiful, powerful in the way that I see power of giving knowledge. And so I think that was a huge mistake. Of course, magazines are hurting right now. Today it would have been an online community. But I think that was a huge mistake. We've all had our share of dumb no's. And that's actually okay. What sets a great entrepreneur apart isn't a perfect batting average. Far from it. Rather, it's the speed at which you learn from your mistakes. It's the infinite learner mentality that allows for rapid recovery after an error.

40:48For another case study, in a no, that felt like it could have been a huge mistake, let's hear from Dropbox founder Drew Houston. In this story, Dropbox had just started to rapidly scale, and was attracting attention from the tech giants, including Apple's Steve Jobs. We got the invitation to see Steve, and I was not expecting that. And so I remember we get in our zip car and I'm typing in one infinite loop. Getting directions to Apple Campus. And I'm like, oh, great, it's already in my iPhone. Shocker. And so we get down there. And I remember going to the sign-in thing and being like, what do we say?

41:28Like, okay, we're here to see Steve. They're like, okay, have a seat. And we're like, oh, God, maybe he hasn't seen the product. so Arash and I had this elaborate demo ritual and so we're like furiously trying to configure which of course occurs to us right two minutes before the meeting to like set up our computers to do all the incantations to make the demo thing work but we get up there and we have a seat and then Steve comes in and has a seat and he sort of leans back and there's like this massive pause and he's like, where to begin? You guys have a great product and I'm like under the table I'm like, alright, bucket list Steve thinks our product is great.

42:06And then in so many words, he's like, and you should really join us because we are like a startup with infinite resources and, you know, goes through his pitch. And before this, I was a little bit terrified. I talked among my friends who had had their Steve encounters, and they fell squarely into two categories. You get like chill Steve or I'll just call him mean Steve. And you never know which one you're going to get. And so he finishes his pitch of why we should join Apple, and I'm like, oh, boy, here we go. I'm like, Steve, I really admire everything you've done, and if there's any way we could find a work together, I totally would love to, but we're really enjoying building this company, and we want to keep going.

42:49I'm sure you understand. And I didn't know if he was going to start throwing stuff or there would be an explosion or lightning bolts or whatever. And then what happened was he just started trolling us a little bit. He's like, you know, okay, you guys are a feature, not a product, and you're not going to be able to get distribution, and you have to pick partners, and that's going to be really risky, and, oh, God, we've got our own thing, and I guess we're going to have to build that and kill you, and da-da-da-da-da. So my two goals were like, leave a good impression and don't piss him off. So I'm like, all right, well, you know, agree to disagree.

43:25While most founders would take a threat of extinction from Steve Jobs as a show-stopping obstacle, Drew took it as a vote of confidence. Unfortunately, few leaders of large companies are visionaries. Some are happy to ignore smaller companies encroaching on their field until it's too late. Shelley Archambault, former CEO of MetricStream, saw this firsthand when she joined Blockbuster to head up its online operations. At the time, it was a giant of movie rental. So here I am at Blockbuster, and my job is to build blockbuster.com. They had started to build website, et cetera, but we had to get a website launched.

44:09We had to figure out what were our services going to be. It was really building a business and building a whole team. So as I'm learning the industry, I'm going to conferences, and I meet Reed Hastings. Reed, with a couple others, has started Netflix. And at that point, it's pretty fledgling. Even though it was early days in the Netflix story, Shelly could see the huge potential. Unfortunately, her boss could not. You know, we got to know each other, and Reed said, listen, we talked about it. Reed came out to Blockbuster and pitched, let's take Blockbuster.com, the brand. let's take Netflix the technology, put them together and spit it out and have Blockbuster.com Inc.

44:50And I'll never forget, my boss, the CEO at the time of Blockbuster, he just sat back and said, ah, if that ever becomes anything, we'll just buy it. Because Blockbuster was a big business at that time. And I'm sitting there thinking, what? Are you crazy? And that's when I knew that this was just not the place for me to stay. They just didn't have the vision. And history is written. Blockbuster is long out of business, and Netflix is one of the top brands in the world. Blockbuster said no thanks to Netflix for the wrong reasons. But Drew said no to Steve Jobs and his passive-aggressive offer for the right ones.

45:35That brings us to the end of this special remix episode of Masters of Scale. The no's have been flying at us thick and fast, but so has the inspiration for how to deal with all manner of rejection. This understanding isn't just about resilience. It's about knowing how and when to use a chorus of no's to catalyze innovation, pivot strategically, and fuel your determination to succeed in the face of adversity. I'm Reid Hoffman. Thanks for listening.

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47:17Masters of Scale is a Wait What original. Our executive producer is Chris McLeod. Our producers are Chris Gauthier, Adam Skuse, Alex Morris, Tucker Lagersky, and Masha Makotunina. Our editor-at-large is Bob Safian. Our music director is Ryan Holiday. Original music and sound design by Eduardo Rivera, Ryan Holiday, Hayes Holiday, and Nate Kinsella. Audio editing by Keith J. Nelson, Stephen Davies, Stephen Wells, and Andrew Nault. Mixing and mastering by Aaron Bastinelli and Brian Pugh. Our CEO and chairman of the board is Jeff Berman. Masters of Scale was created by June Cohen and Darren Triff.

48:00Special thanks to Jodyne Dorsey, Alfonso Bravo, Tim Cronin, Erica Flynn, Sarah Tartar, Kitty Blazing, Meryl Kareker, Chinime Ezequena, Colin Howarth, Brandon Klein, Sammy Oputa, Kelsey Saison, Luisa Velez, Nikki Williams, and Justin Winslow. Visit masterthescale.com to find the transcript for this episode and to subscribe to our email newsletter.