Best of 2023: 15 Untold Stories From Tech’s Inner Circle

27:21And so that to me is a really high-quality signal about the kind of person they are. Whereas conversely, if they're incredibly thoughtful in saying, I was really happy here, but I saw this new emerging trend, I was really intrigued by this new technology trend. I talked to five or six different companies. Of those five or six companies, this company seemed the most interesting. I cold called them, got a bunch of meetings, and then they ultimately offered jobs. And now that's a person who's incredibly thoughtful. I automatically assume if someone's been in a job for two years or less, they failed.

27:52Unless there's clear evidence that there was another reason why they left. I either got married and had to move to another city or there's some personal event in their life or the company got acquired and they shut down that operation, whatever. Why two years? Because in most companies, it takes about a year to figure out that someone's not working out and then another year to get rid of them. So if you've been at a company for less than two years, unless you can convince me, clearly convince me why I've automatically assumed you failed. My philosophy on that is you can usually fool the people above you.

28:22You can sometimes fool the people around you. You can never fool the people below you. And the biggest tell for me, if a leader is not scaling is how frustrated is their team becoming? Are good people starting to leave? Is the quality of the new people that the leader's recruiting is now no longer A's, but now B's and B minuses and C's? That to me is a huge tell about what not a leader is scaling. Because the people who work for you clearly know how effective you are, clearly know the quality of decisions you're making, clearly know if you're being a hindrance or an asset in terms of enabling them to get their jobs done.

28:54And so that will show up very quickly to them. And so that to me is the best tell. And in fact, when I joined MongoDB, one of the first thing that I did was review all the organizations and I tried to understand who was in these teams, what the level of turnover was, and the quality of the people in those teams. And that gave me a great map about where the problems were in the organization. How annoying is it to have someone with the last name Alt-Men out there in the press all the time making all this noise? Have you ever met him? Who? Sam. What's he do? I hear his name a lot. He runs this AI.

29:30Oh, he's like a brother of that HR software guy? Yes, that's right. That guy. Yeah, yeah. That's right. What is the most annoying thing, not about Sam specifically, but about Sam Altman, the CEO of OpenAI? There was a funny, so just the most classic brother thing to do. When I tweeted about our HRS, he quote tweeted it. Like, I don't know what an HRS is, but happy for you. And somebody in his comments is like, you know, like how brutal is that to build a big company or whatever and have your brother invent AGI. And I was like, eh, that's funny. But I don't know. Like, I'm really proud of him. It's really cool.

30:06Like, it's like such an important thing for the world. And he's earned it. Like, he's worked so hard to make it happen. And I see all the work he does to keep this going and to, like, keep pushing it. And, like, look what it's done for tech. Like, where would we be right now without it? Like, what would be happening in tech in 2023 without AI? Venture capitalists wouldn't know where to put money. Where would they put money? They wouldn't. It would be such a weird time. And it's not just about like, it's honestly, to me, it's not even just about what's happened in VC. It's like, it's possible that what's happening with AI is going to be so much bigger than like SaaS getting a big booster pack.

30:44Like, it's just so cool. So like, you know, is there ever a moment where I'm like, oh God, I like just like can never do enough by comparison? Maybe. But like, it's really awesome. And I'm very proud. Does it scare you at all in a weird way that like somebody you shared a house with growing up is now I don't know where he would rank on like most powerful, influential people. It's high, at least at this exact second. Super high. I think it's it's good because I thought what you were going to say is, am I scared about AI? Well, we can talk about that, too. and like I am maybe a little bit but like the good thing is I'm I'm glad that I know that the person who is at the front of a lot of this like that I that I know his character so I'm like well at least if someone's doing it there's a good person to be doing it um so that quells some of my just like generally I fears in terms of him being like super powerful I've kind of just you know it's like if you like watch your kid grow up and you just like see them get a little bigger every day you like don't notice it like he's been doing well for a long time i've like gotten used to it yeah yeah yeah i mean obviously in the last year it's changed yes it seems it's gone to a new degree i uh he does seem weirdly um thoughtful cerebral like not self-serious in a way i forget i sent you the quote where he was like well my sensibilities are that of a midwestern jew yeah i was like that's funny that's a good joke that's right i like that yeah we gotta get him on this podcast.

32:11Yeah. That's a good question. I hadn't thought of that. I'll call him. Hey guys, I'm Jacob Efron, a partner of Logan's at Redpoint. Wanted to take a quick break from the episode to let you know that Redpoint's AI podcast, Unsupervised Learning, now has its own YouTube channel. We have an incredible set of guests really at the forefront of the AI revolution. So if you're interested in what's happening in AI, what it means for businesses in the world, definitely subscribe. Now back to the show. I literally went from kind of having no money at all, basically just trying to survive to six months later, having more money than I knew what to do with.

32:47And actually, I'd read somewhere that if you had$5 million, you were economically independent for the rest of your life. And I, by that time, accumulated more than that. And you're 22, right? At the time. Yeah. I was exactly 22. This is the dream, right? You've made it. You should be as happy as anyone. This is what everyone aspires to. Yeah, exactly right. And for me, it was like even more so because I literally came from the projects in Sweden. Like I had no money at all. I was growing up with my single mom. And on top of that, I had this winter where I sort of between 2000 and 2004 and five, where things were really rough.

33:28Like you were basically just trying to survive paycheck to paycheck and doing whatever jobs you could to pay your rent, basically. And so obviously I had this kind of dream of one day, maybe I can get to this level. And I thought maybe if I work really hard, I can get there if I'm lucky 50 and then I'm going to retire and so on and so forth. And obviously here I was 22 and I reached that milestone. And it sounds perhaps a little bit sort of obnoxious to say it, but as a society, we're fighting to get to that limit of economic independence. but no one actually talks about what happens when you get there.

34:08Instead, you're just hearing from these rich people how money doesn't mean that much and so on. Well, it certainly does if you have none. I can tell you that. And they don't really teach you what to do and what actually matters. So it feels like a very foreign concept where you're thinking that they say that out of a sort of false humility when in fact, you know, they're probably very happy about having it. And they probably are to a certain extent, but to a certain extent they were right. But no one taught you that. And for me, you know, as a funny sort of side note, I actually learned how to speak English through watching MTV.

34:53And my favorite program at that time was like Yo MTV, which is the rap part. And so you watch MTV Cribs and you watch kind of all of these like great places that these rappers are living in and rock stars are living in. And it's always these kind of well-filled fridges with like all the drinks in different colors and like all that stuff. And so I was like, you know, I made it. This is the life. So now I'm finally going to be able to get to the really cool nightclubs. I'm going to get all the girls that could never get beforehand. And I'm going to be one of the cool people. and I thought literally for a while that that would make me happy.

35:33And so I spent a bunch of time doing that spring champagne on people in central Stockholm. I tried to hook up with the girls I could never get before, somewhat embarrassingly, and some of them you could actually succeed with. But I realized that they didn't want me for me. They wanted me for the status that it provided, because I probably offered them free champagne and hung around the cool people. And I realized many of these people probably wouldn't be there unless I had money. And that got me to be pretty depressed because, again, I didn't get into tech to get rich in the first place.

36:18And it wasn't one of the things that made me happy either. So tech in itself made me happy. Music made me happy. And so I went on a number of months of soul searching of what I really wanted to do. And I realized up until that point in my life, there's basically been two interests in my life. One was music and one was technology. And I was thinking about that. And during the same time, I met my co-founder and we started spending more time because he had just left the company that acquired my other company. And we started hanging out together and he had made an IPO. and he made even more money than I made by an order of magnitude more.

36:59And he too was quite depressed because he too didn't have anything really that tied him up. And so we talked about maybe we should do something new. Maybe we should do something that is different. And what we centered around was really this three core concepts. We wanted to do something that we thought we could get passionate by. We wanted to do it with people we could learn from. And three, we wanted to have fun while doing it and have a positive impact in the world. Those were the kind of three things. And he said, what are you really passionate about? And I said, well, really, I'm passionate about music and technology.

37:44That's my two kind of main passions. And he said, well, why don't we do that? And I said, well, that's a really dumb idea because, you know, music piracy, it's really hard and so on. And then he kept asking why, you know, okay, well, why is it hard? Why is piracy such a big problem? And basically through these series of why, we eventually said, well, maybe if you did this, you could sort it out. Well, why isn't someone doing it like that way? And I said, well, probably labels are going to be very hard. okay, well, why is that? If they're losing so much money as it is, shouldn't they be interested in doing it?

38:23And eventually we centered on the idea of Spotify for all of those reasons. Hey, one question in the early days of Spotify I had from you, and I'm not sure how much this is like a metaphorical story versus a real one, but I've heard about you sleeping outside of record labels offices. And I'm wondering, like quite literally, were you inside their building and in front of their doors? Is this like one of those stories that gets retold and it's like maybe an allegory, but was it actually like, how did that actually come to be? No, I didn't actually sleep outside of their offices. It's more of a sort of expression and a sort of mental analogy, as you said, or allegory.

39:13But just to paint the picture, I literally slept in hotels where the wallpaper fell down on me and I had cockroaches everywhere. Not one of these finer five-star hotels or even four stars. I think I had minus one-star hotels. um so and and uh there's funny stories in the beginning where i and the guy who helped negotiate the licenses we even shared bed um and and uh bed covers because literally and he was snoring horribly so we didn't sleep very much um so so that's uh sort of painting the picture but what was true is i literally sat outside of the office waiting for opportunities to arrive where i could come in and pitch because they wouldn't take the meetings.

40:02And so I took whatever slots I could get. And the best way was to sit. They had a Starbucks just outside of Broadway, in this case, in New York. And I literally sat outside of that Starbucks, which was right on the border. and I befriended the assistants to the point by giving them enough free coffee and free gifts and other things that I, whatever I could do to bribe them basically so that they would tell me when the CEO was about to leave or about to enter or if they had sort of a spare moment where I sort of just by accident would be next to the coffee machine as they were getting the coffee.

40:48So it was directionally true, although it wasn't technically true that I slept outside of the office. Maybe touch on the zone of genius and how that relates to this and sort of finding as a methodology that you talk about. Well, that's it. The thing is the zone of genius, there's four zones. There's a zone of incompetence, which things that you're not good at, you should outsource to someone else, like fixing your car. You probably don't know how to do that. You should have a mechanic do that. There's a zone of competence, things you could do, but you don't love them. And someone else can do them just as well as you can, like cleaning your bathroom.

41:18Zone of excellence. Now, this is a dangerous one. This is where you're really good at it. You don't like it, but you're really good at it. And people value it a lot. They're willing to pay you a lot of money for it. And they also really want you to keep doing it because they're dependent on you to get it done. That's the dangerous one. You're getting lots of praise and lots of accolades and lots of compensation to it, but you actually don't like it. Probably a lot of lawyers and bankers exist in that bucket, right? Absolutely. Absolutely. And there's a lot of actions that CEOs are taking that are in that zone because they think that it's their responsibility to do these things.

41:55When in reality, it's the responsibility of the CEO to make sure these things get done, not that the CEO has to do them herself. And then the fourth zone is your zone of genius. This is the things that you do that you are uniquely good at in the world and you love them so much. You don't even notice that you're doing them. you may not even be aware of what these things are because time and space just disappear. So you don't even value it. So those things you actually have to ask other people, what do I do that you, you think adds unique value, but you, but, and I seem to be loving it and they'll list all kinds of things for you.

42:32And you'll be amazed. Like, really? Like when I sit and have long chats with, with you and with others, like that's adding value. Like I'm just doing that for fun. that's the kind of that zone of genius and if you then start to only do the things that are in your zone of genius and so you spend more and more time on those and take all the things that are in your zone of excellence and start giving those to other people or you say listen the monday meeting i've got to be in the monday meeting i'm the seat like i can't not be in it okay well then what would make that super fun for you well it'd be super fun and really valuable for me if everybody came with pre-written updates that we read ahead of the meeting and commented on.

43:13So in the meeting itself, all we had to do was like the last five minutes of any issue. Great. Make that happen. Person does. All of a sudden, the Monday meeting becomes fun. Or it'd be really great if everyone, you know, said one minute on the fun things they were doing at home so we could feel like we're buddies. Great. Make that happen. And all of a sudden the meeting becomes fun. So that's the zone of genius idea that you either do the things, you eliminate all the things that are de-energizing because the fact is, is that you're not good at them if you're doing them or the meeting itself is not fun for anybody if it's not fun for you.

43:52And if it's not fun, it's not productive. It sounds like fear is one of the commonalities across all CEOs and figuring out how to manage that, maybe not all, but at least the vast majority and figuring out how to manage that is a big input into what you're able to help people with. Does fear, like you've won this bet every time, does fear always lend itself to making the wrong decision in the vast majority of the time? Or are you picking the situation that you know fear is leading them to make the wrong decision? No, fear is almost always leading people to make the wrong decision. And it's not that fear is completely irrational.

44:29There is some thing going on here, which is, hey, red flag warning. There's something new here, something unknown, something potentially a little dicey, a little spicy. Okay, pay attention. That's valid. But then the amygdala goes far further and it starts making predictions that if you tell this person that they're not performing, then they will be outraged and rage quit and you can't afford to lose this person because there's no one else can do this job and then you'll be screwed. And so what they do is they don't give feedback. They don't tell the person, hey, this isn't working for me. And they just hold back.

45:09And then, of course, the person continues to do. And you can see that that's insanity. The only way that the person can improve is if you let them know, hey, what you're doing over here needs to change. Now, of course, there's a way to share that with them in a positive manner. Hey, I want you to succeed. I want the company to succeed. In order to do that, you need to do X, Y, and Z. That's positive. instead of, ah, you're an idiot. Like, of course, no, they'll react badly if you say that. But most people just won't say anything at all. Or this person's not performing, letting them go. That's the big issue.

45:44The big issue that almost everybody has is a difficult conversation around someone's performance and either telling them that they need to change or actually letting them go. And usually it's some member for some reason. And but once they do it once and they let that person go and then afterwards, everything's fine. Then they're like, oh, my God. Now they can see all the places where they're holding back from doing the thing that they know is the right thing to do. But they're afraid of the implementation. The decision is easy. It's the implementation that's hard. When you're calling someone into your office for this, and I've heard this before from other people in sales in particular, where you end up managing people out quite a bit, but is telling them that you're going to have a hard conversation.

46:34And I've heard you say that as well, like this is going to be a difficult conversation. And then you just cut right to the chase. Why is leading with that an empathetic thing that they're now braced for what's going to come after that? Yeah. It's a weird thing. It's all about surprise. So when something happens that startles me, my amygdala reacts so quickly. It's like a visor that shuts over my face that I don't even notice that it happened. And I'm already in that emotion. Let's say it's fear or anger. It happens instantaneously. And now, as far as I'm concerned, I'm just having thoughts. Whereas if someone says, hey, you're about to feel fear.

47:26You're about to feel anger. Get ready. Like, and they give you three seconds and you go, oh, okay. Now I'm sort of seeing that this thing might be coming. And then when it comes, you go, oh, now I sort of sense the emotion. Okay. I'm not going to, I'm not going to buy into it. I can, I can see the fear coming. Like it makes it much easier to handle and much less likely that they'll actually go into full anger or full fear. And they'll notice what amount of anger and fear they do go into. That's it. It's just about, Do they get surprised or not surprised? And three seconds is all they need to prepare.

48:11What are the other things that you brought up earlier in this when you were listening to the executives or the people that stayed behind talking about hearing them out from their feelings? But it sounds like one of the tactics that you really use in the methodology and some of the empathy that you're able to communicate is also repeating back to the people what was said to them. And why is that? It seems like it's this human nature thing that you really utilize in your methodology of, hey, I'm listening to you. I understand. Did I get this right? Why is that so effective? I mean, it's shocking.

48:53First of all, it's shocking how effective it is. it's shocking that someone will say, I don't know if I want to say that to somebody that feels like it's going to be really patronizing. And I go, okay, before you make a decision, let me do it to you. See how it feels to you. I think what I heard you say is that feels really awkward. And it's going to be really, the person is going to think it's really patronizing. Is that right? And they go, yeah. And then they say, Ooh, that actually felt really good. It makes me feel like you really get me. There you go. That's what it is. People want to be understood.

49:27And we have so much experience of going through life where people don't understand us. They'll say things like, yeah, I got you. I understand. I understand what you're saying. But then they go do something completely different. So we all have the experience of not being understood. So when someone proves to us, that they actually understand our thoughts and even more our emotion. It's such a welcome relief. That's why it works. And frankly, it works everywhere. It works with customers. It works with investors. It works with recruits. It works with teammates. It works with spouses. It works with children.

50:08It works. It works everywhere. What I'm hearing you say is this actually works everywhere. You got it. You know, there's certain companies where all the best people go to in certain moments of time. And then Silicon Valley really runs in little clicks or networks. And if you fall into one of those networks, you can basically work with those same people for the next 30 years in different formats. Right. And you look at, for example, all the COOs across Silicon Valley for a period of time all came out of Google. It was like Cheryl at Facebook and Dennis Woodside at Dropbox and, you know, Lexi at Gusto and Claire Hughes Johnson at Stripe.

50:45And I mean, literally, most many of the main COOs all came out of one company. And you see that over and over and over again, where different generations of either founders, of investors, of operators all come from the same small subsets of networks. And then they help each other throughout their careers because they were kind of battle tested together. And so joining Google was really formative from that perspective. And one of the pieces of career advice that I give people is, especially early in your career, don't worry about the role. Don't worry about the compensation. Just go to the right company.

51:16And that will solidify your career for the next decade. And that's way more important than getting a secondary role with a better role with better comp at a company that isn't going to matter as much. I have a theory that the center of Silicon Valley now is some combination of the Collisons, the Altman's, uh, yourself, like there's some center orbit of, uh, of people in Silicon Valley that like had this tightly integrated network of, you know, investing together and deals and all that stuff. So, um, no, it makes a lot of sense. Yeah. There's definitely generational cohorts. And I think, um, I actually just for my own sake, um, made like a, a slide recently for myself, um, or like a spreadsheet, which is basically what did I, what do I think are the generational circles over the last few cycles and how are those shifting?

52:00And you could think of it by company. You could think of it by leaders that people look up to or founders people look up to. You can view it by investors. You can view it by founder networks. And so every six, five to seven years, the network flips and certain people remain relevant and other people flip over. And the question is, why do certain people have so much longevity? And it's very few people. If you actually think about it, some platforms have longevity, but very few people are actually relevant over multiple cycles. And the question is, what's the common characteristic of those people?

52:30And was there any takeaway of what was the common characteristic? It's one of two things. They either have a platform company that continues to evolve in interesting ways, which in most companies and technology tend to stale out, or it's people who reinvent themselves, right? It's sort of like Sam doing looped and then running YC and then doing open AI and that, you know, and so he's reinvented himself over multiple cycles. Naval Ball has done that, right? Early super angel, early into crypto, has done a bunch of AI stuff more recently. Like he's constantly reinventing himself. And so I think the people who focus on that reinvention, and often I think those people are technology driven, right?

53:07They care about the tech and therefore they follow what all the interesting technologies are focused on. And that tends to be what drives waves. And that's very different from the person who's just interested in it because they want to make money or because of some other factor, right? And so it tends to be people I think who are technology minded and they tend to survive these multiple cycles because they follow the technology innovation and shifts and the smart, where are the like really interesting builders working? The people, you know, at the heads of the operations building this stuff do not appear to be taking it anything remotely like what I would call seriously.

53:37Some of them are records on going like, record like, well, you know, the earth might get destroyed, but first there'll be some great tech companies or, you know, just like, ha, ha, ha, la, la, la. that's not what you want when you're trying to do an unprecedented feat of science and engineering and having it work correctly on the first try or the entire human species dies. So yeah, it's not actually all that complicated. You've got a bunch of people who are in the short term getting excited looks at parties, which is why they do everything they do. And they can get that by building scarier and scarier AI.

54:15and some actual uses, some very important uses. I don't want to minimize that, that this, you know, some of the technologies coming out of this would be an enormous spoon. But if you were taking this seriously, you would, you know, put the whole thing on international lockdown and, like, have the good uses, the most important good uses, like the medical stuff, AlphaFold, the future, the successor versions of AlphaFold do that without training the general systems much more powerful than GPT-4. Try to get the benefits of that. Get benefits from the systems that are only as smart as GP24, which is a lot of benefit.

54:54And then just shut down all the giant training runs. They don't know what they're doing. They're not taking it seriously. There's an enormous gap between where they are now and taking it seriously. And if they were taking it seriously, they'd be like, we don't know what we're doing. We have to stop. That is what it looks like to take this seriously. You published an article in Time calling for a pause on training AI models. To clarify, you want... Well, not a pause, a permanent moratorium. A permanent moratorium. But you want people to be able to keep using GPT-4 in all AI models and capabilities that exist today, but you don't want GPT-5 and the subsequent ones coming online?

55:27Is that... I mean, if it were up to me, I might possibly... If it were entirely up to me, I might possibly go down to GPT-3.5. But, you know, 4 seems like an okay place to stop. It is probably not going to destroy the world, I hope. You know, compromise. Still use GPT-4 instead of going down to GPT-3.5. Why do you think, why is that where you draw the line? Because it looks like the current system should not be able to destroy the world, even if people hook it up in particular clever ways. And I don't know what GPT-5 does. And neither will the creators at first, because whenever anything at this level of arcaneness gets released, there's a period as people figure out how to hook it up in new clever ways and get more utility out of it than the creators realized was in it at first.

56:12From a practical standpoint, I guess, did you write that as a sort of an expression and sentiment and characterization of the way that you felt? No, I don't do the emotional expression thing. My words are meant to be interpreted semantically. They're supposed to mean things. I guess at a very literal level, then, how would that actually, let's say China says no, right? and we do it, the U.S. does it. Do we go to war with China over them saying no? China has published AI regulations. I don't know how seriously they take it, but they have published AI regulations more stringent than the United States ones.

56:53So the first thing I would say is that it is not at all obvious to me that China does not go on board with this. I am not super happy with the current chip controls that prevent China from getting real GPUs, Although NVIDIA is apparently allowed to export GPUs to them that are only like one-third as powerful as their real GPUs, which it's not clear to me that there's a whole lot of point in that. I'm not quite sure what anybody's thinking there, unless it's just like, ah, slap China in the face or something. But anyways, yeah, like I'm not super... The problem is not China getting the GPUs. The problem is anybody getting the GPUs.

57:32And if we are in the world where the UK is like, we need an international coalition to track all the GPUs, put them only into internationally monitored data centers and not permit giant training runs. If the UK goes to China on that, and the UK and China bring in the United States, I might worry a bit about Russia. Russia, I think, would have a harder time getting the GPUs and putting them to data centers than China would. But if Russia manages to do that anyways, then... The thing I would say there, the posture that I would hope for international diplomacy to take is like, please be aware Russia that if you do this we will launch a conventional strike on your data center.

58:23if we cannot convince you to shut it down, if it is up and running and we do not know what is running on there or we know that dangerous stuff is running on there. Like, we are not doing this in the expectation that you will back down. We are not doing this in the expectation that you will not go to war. We are not being macho and being like, this is us threatening you because we expect you to back down. We will launch a conventional strike on the status center in terror of our own lives and the lives of our children, and exceeding the terror that we have, even of a nuclear retaliation by you.

58:53This is not a macho thing. This is us being genuinely scared. Please work with us on not wiping out the human race here. And if they're like, well, no, we're tough, then you launch a conventional strike on the data center. And, you know, what comes, comes. And the thing in international diplomacy is if this is what you are going to do, be very clear in advance that that is how you will behave. Do not let anyone get a mistaken impression about what you will back down from. You know, my thesis on any industry is like there's a set of information that's available that you can like read. And then there's the inside information.

59:26And the inside information is typically not written down because, A, it's complicated and annoying to write it down. So most people don't do it. And then it's only available to like the people who really understand it. And like, why are they going to write it down? It's an incentive thing, right? If you know something special, why would you share it with everybody else? And so the trick is to understand the physics, I think of it as like of an industry is not to try and read everything, but to just go find the people who know it the best and then convince them to teach it to you. Because you're going to learn faster from, I think of it as like information, right?

1:00:04Like I can go and read all these things and try and piece it together myself, or I can go find the five people who have already read all of the things. Plus they have their own knowledge and have synthesized it. And I can just ask them to teach it. And neither of us are big fans of reading large amounts of stuff, right? Much easier to learn talking to people in that way, right? Like I'll read, but the only thing I get from reading this stuff typically is like topic areas. I don't know. It prepares you to go ask questions. but then the actual learning sort of comes from the questions and answers.

1:00:37Yeah, so we just ran a process. We did a Flatiron, and then we just did it again, which is like, all right, let's just go learn everything there is about this. And the way you do it is you go find the people. It's all about the experts. And what you were mentioning is the hit rate on those experts is really low because most people aren't experts. They think they are, but they're not. Or they think they understand something, but actually what they understand is something someone else told them. And you've got to go find that person. So yeah, we would just meet this person, meet this person, meet this person.

1:01:06How do you figure out if someone's full of shit? Like they have all these, you know, Dr. MB, whatever, big job at HSS, but they actually don't know the incentive structure of the health system. Yeah, so we did this intuitively at Flatiron, meaning I didn't realize I was doing this. And so as a result, it was like less effective. And then at Curie, we do this explicitly. Those are maybe not the right, whatever. One we planned, the other one we didn't plan. uh the non-planned one with with flat iron was we just asked people like how does it work and when you got an unsatisfying answer of like how something worked and you said well how does that part work and then you realize like okay this person actually doesn't understand because you just kind of keep asking like but how does that work and how does that work and the beauty for us at least i think and i'll talk about the better way but at flat iron was we actually didn't know how it worked and we weren't doctors.

1:01:59So it was really easy for us to show up in a room and be like, I don't know anything about this and not give up our credibility because we could basically be like, hey, remember we sold this company to Google? So like we're not morons. And so people would engage and then we were just very comfortable saying, I don't know. And to me, that was the trick. I was like, I don't know. I'll just show up in a room and say, I don't know how this works. Can you explain it to me? And then when someone says this, I'd be like, I don't really know what That means either what I learned from one of my Curie co-founders is there's a better way to do this or a little more efficient, which is you ask people how they know.

1:02:35And it's just like the dumbest, simple. I can't believe I spent 10 years of my life not asking this question. And then after we had sold the company for$2 billion, I still didn't know how to do this. That's how I knew there's always somebody better than you. And Tom taught it to me. and he's basically like, yeah, if you talk to somebody and they say, well, this thing is true, just ask them how they know it. You're like, oh yeah, that's like the best. And then most people will say, well, I heard it or I read it and then you say, okay, where did you read it? And then they're lying or they don't really know.

1:03:07But the ones who do know, they're like, oh, I'll show you exactly how I know it and I'll teach it to you. But you just have to be very comfortable asking that question because it's a very awkward question to ask somebody because you're kind of insinuating that you don't believe them. And so you just have to get really good at asking the question in a non-antagonistic way, which is more of an EQ skill. It took me a while to figure that out because I know if I'm with somebody, I can definitely come off as aggressive, which I'm aware of. So I try to mute it with a joke or something. We just worked on these skills.

1:03:40It's like, all right, how do I get someone to explain how they know something? And then the other thing Tom taught me was, if you ask somebody, like, if I said to you, you know, what's the average contract value of Ramp or whatever? And you're like, well, it varies. Most people will just stop at that. Oh, I don't know. It varies. And actually, you can get, you can kind of guide people to give more specific answers. So I say, okay, well, is it like closer to$1 or$100 ,000? And they say, oh, okay, it's like way closer to$1. And you go, okay, is it like closer to$5 ,000 or what? And you can kind of guide people to a more specific answer if you give them choices.

1:04:19Parameters within. It's a funny thing. If someone doesn't want to tell you something, right, and you throw something out that you know is wrong, but you're not exactly sure. You know, Zach, how, whatever, how big do you think Curie can be? And you're like, oh, I don't know. It could be big. And I'm like, right, but like$10 million probably, right? And you're like, no, no, no. Way bigger. Way bigger. Like at least five. And you didn't want to tell me originally, but when I framed it so low, it forced you to correct me, right? No one wants to let you sit out there with false information as well.

1:04:49It's like an interesting thing to get information from you. And this little tactic, not the only one, but we used at Curie when we were first doing homework on it, which was this core thesis that, yes, drug discovery is expensive, but the cost to do it was coming down. And you would talk to people and they'd say, oh, well, drug discovery is expensive. It's really expensive. It's really expensive. It's really expensive. How expensive? And they're like, I don't know. It's like millions and millions of dollars. Is it$5 or$30? And you would just kind of like slowly and then say, well, this part's really expensive.

1:05:22OK, how expensive is that part? And then you figure out, oh, the cost is over here. The cost is over here. You're kind of building this mental model of what the actual true facts are rather than like people's perceptions of those facts. The other thing, there's this like subtle, I think of it as a momentum thing, which is as you, this is a third thing I learned from Tom. So he's the one that taught me to ask, like, how do you know? And he's the one that taught me to do the size. By the way, this is all post-Flatiron. to be very clear. This is all things I learned after we had sold it. The third one is that as you do this little fact-finding mission, now you become an interesting source of facts.

1:05:58And so now when you go to the next person, you have something compelling to share with them that gets them engaged and gets them interested because you know something they don't know. And you see this momentum build where now when you're talking to an expert, you actually have something to share, which gets them to engage, which gets them to share more. And that's how you get to the cycle where you know everybody. Because by the 15th or maybe it's 50th or whatever conversation, you've learned little nuggets all along the way. So I can tell you really interesting things about the cost of drug discovery or the failure modes or how the economics of these venture funds work.

1:06:36Because I learned them as I was doing it. I could use that in the next conversation, share it. That person's like, oh, okay, maybe this person isn't an idiot. Like, I just learned something. And then they're more like, they are more likely to share. You just have to do the work. And you got in a snowmobiling accident? That happened two winters ago. I had a really, really bad snowmobile accident and didn't, didn't think I was going to live. I didn't think I was going to live through it. You were up in Vermont with your son. I remember my son, we went kind of off the trail, went down about a mile and slammed into a tree.

1:07:12He confused the buttons or something. I mean, not that there's culpability in this. Let's not get into that. But anyway, we went off the edge of a small cliff. Small cliff. Not, you know. I think a cliff is a cliff. Certainly when you're flying off of it in a projectile. And I don't remember it. We both passed out and we're kind of lying in the snow passed out. and I'm going to say something I was ever said in your show in a minute.

1:07:40And we woke up, and we're both, you know, I had a lot of broken bones. Are you wearing a helmet? Oh, yeah, helmet cracked. We both smacked our heads in a lot of pain. And it's 4.30 in the afternoon in Vermont, middle of February, freezing cold day. and I never bring my phone snowmobiling because there's just no signal in the whole darn state never mind on the snowmobile trails and so it was about 45 minutes of sitting there in the cold that I was like well maybe I do have my phone and I reached in pulled kind of semi pulled my phone on I had just enough signal no one knew where we were I had just enough signal to go 911 I never called 911.

1:08:27911, by the way, that's the killer app. That thing works. And the lady called the two local fire stations. They're both volunteer. Fire station people called the volunteers at their home. They took their showmobiles. It took them about an hour to find us. Pitch Black by the time they found us. Are you guys talking? Yeah, but I was in and out of consciousness. Just in a lot of pain. Because you were concussed. In a lot of pain. And he broke his femur? He broke his femur. Which I've done. his kneecap and hit his head pretty bad and he was 17 yes 16 or you guess he was 17 at the time and you what were your injuries concussion i broke 13 different bones um i ended up i got metal i have i have three plates and 30 something screws in me i'm i'm a walking metal factory when you go through the airport are they no they're non-ferrous slip right through them um and then they sort of drag you like if you get a ski accident and like they wrap you in a toboggan drag you up and then helicoptered us to dartmouth university hospital and i love dartmouth university hospital they saved our lives it's a trauma center i had five surgeries in there for a long long time um so you're sitting there and you're drifting in and out of consciousness you think you're not gonna make it i was pretty sure we weren't i I was like, we're going to freeze to death.

1:09:50I didn't think like a coyote was going to use. I thought we would just die of exposure. And then I remembered I had a phone. And the thing that I'm going to say that I'm sure no one's ever said on your podcast is AT &T saved my life. Because of the cell service. I had cell service. And it's rare to have cell service in Vermont. I just had enough cell service. It saved my life. Now that would be different because the phones and the iWatches have that collision signaling that will happen. But back then, it didn't have that. So that was a dark moment. I was like, I don't know how we're going to get through the night.

1:10:23We were too badly injured to move. But yeah, very, very thankful I made it through. And the volunteer firefighter that came and got you recognized, or he was the guy that clears your driveway or something? It's a small world, but the first person who found us, so they sort of spread out to find us. He's asking me questions, and he's like, Brian? Is this Brian Halligan? I'm like, yeah, I'm Joe. I'm your driveway guy. I'm like, Joe, thank you. Better that than like, I went to inbound 2014. Totally. Brian Halligan. Wow. So you're sitting there. What's going through your head? What's going through my head is life short.

1:11:10It could be very short here. And then if I get out of this alive, I don't want to just keep on the path I was going. I want to zig off that path and live a different life and make some big decisions in my life. That was going through my head. And so then that led to how long were you? You had five surgeries? Yeah. I was in the hospital for a while, rehab for a while. I was in a wheelchair for a long, long time. time and i'll tell you we we did something turns out kind of smart at hubspot we had a board meeting two weeks before the accident and we had the conversation of what happens if brian gets run over by a bus or you know that expression run over by a bus and we said well yamini will take over we all agreed it wasn't a debate by any means was that just coincidental that it happened two weeks before you had this obviously coincidentally yeah it wasn't like a plan but it's not like something do you do every year or like a refresh on, hey, this contingency of?

1:12:08Maybe we do. I don't remember. Yeah. But we definitely had just finished it. And so I wasn't able to talk to anyone or anything like that. It was COVID. People couldn't visit me. And so it's kind of break glass. So Yamini took over. And I was pretty much out of commission for six months. And I had a pretty bad concussion. I couldn't work. And so she ran and did a fabulous job while I was there. How long had she been at HubSpot? She had been at HubSpot. She started like three weeks before COVID. So she hadn't been there that long. No, but she was doing great. She helped us get through COVID, the deep, deep down and the up, up, up of it.

1:12:49When she took over as CEO, things were smooth. She did a great job. And so when I came out of it, one of my goals, I didn't want to go back to being public company CEO. I've been doing it for a long time. It's rewarding to a certain extent, but I wanted to do something new. Approaching 10 years in the public markets, right? Eight years, I think. And I was just ready for a new challenge. And that was kind of clicking around the back of my head, but I wasn't planning on doing anything about it. But I'm like, this is the time. I'm going to do it now. And so as I'm getting ready to come out of my, what do we call it, my medical leave, I called my co-founder Dharmesh and I told him I'm not coming back as CEO.

1:13:32I'll come back as chairman, but not coming back. What do you think about Yamini as CEO? He's like, he was super cool. He's like, sure. And then I remember a bunch of conversations, but I had a conversation with Yamini about it. And she did not see it coming and didn't want it. But it was actually a struggle to convince her to take the CEO gig. She's like, I know you've been through a lot, but let's not rush this. You know, I'll be a COO. We'll work together side by side and we'll build up to this. I say, you basically got two choices. You can be the CEO. We're going to go find some schmuck from the outside to be the CEO.

1:14:06I think you should do it. You're ready. And so, unfortunately, she did. She's done a really nice job. How do you think about fitting the founder to the story then in that case? Like, how do you know what they need? So there's two different comments. One is, I think I'm looking for an extraordinary trait. The reason why is the chance, if you think about what's the likelihood that someone starts a company and reinvents the world or an industry in the proverbial garage with their college roommate. Sure. Rounds to basically zero. So unless you have a trait that is so extraordinary that the probabilities shift off rounding to zero, you should not invest.

1:14:40So that's why I need a top 1%, top 10 basis points, something spike, or I'm not going to invest. Then you want to ask a question. The second question is, does what the person spikes on relate to the skills that are required to build this particular company? Some of these traits are transferable, like if you can recruit better than anybody else on the planet. Like if you can assess people, close people, that will apply to any company, whether you're building SpaceX or Facebook. Some skills don't translate. Like, for example, if you're the savviest technologist in the history of the world, there are some companies where you could, like, let's say you were doing a database company, a new novel architecture for a database.

1:15:15Sure, that's a perfect company to fund for that kind of founder. They want to do a photo sharing app. I'm not sure they can really leverage that trait. So you do ask that, but that's usually the second question, not the first. And when is domain expertise a good thing versus a bad thing? So in my view, it's never a good thing. I don't fund people with domain expertise. I do like them to be able to answer the Balaji and the Chris Dixon blog post that summarizes it. Intellectual maze question, which is Balaji, when he's teaching startup engineering at Stanford, had this great paragraph. They explained how the most amazing founders can walk you through the roadmap from where they are to super success and know how to avoid the pitfalls, trap doors and navigate.

1:15:52And when you hear the clarity of a roadmap, it's extremely rare. It happens once a year or so. That's a reason to invest, maybe independent of the traits. but the traits that are exceptional plus the intellectual roadmap is like a home run. It's like instant investment. Here's your money. Do not pass go. You don't have to meet my colleagues. Here's your money. Please, please, please do not take any more meetings. That rarely happens. That can be based upon some experience. So for example, one of the founders we work with in Miami, before he left Uber to start his company, had been a warehouse supervisor before he went to Uber.

1:16:28and he started a labor marketplace that connects workers to light industrial warehouses. So the fact that he'd started his career out of college as a warehouse supervisor was insightful, but it's the other traits about this founder that make him extraordinary and a top 1 % founder in the planet. And if not in the founders, at some of these companies, you need domain expertise brought in so that you don't fall in. So you can borrow it. This is the trick. You can always call up people with domain expertise and ask them questions. They're actually pretty happy to talk to you usually. And then you just say, why can't this work?

1:17:03So the question I always ask when I do diligence, like let's say I invest, occasionally invest in some pretty deeply technical things like autonomous driving or genomic sequencing. So when I call up experts, what I'll ask them is, tell me why this can't work. I don't want to know whether it can work. I want to know metaphysically, point to something that will make this impossible to solve. And if they can't articulate a specific blocker, then I'm pretty comfortable backing a world-class founder to try to solve it. You said something interesting once. The only reason you ask about TAM is to understand the ambitions of the founder.

1:17:35Can you tell me why you approach investing in that way or why you approach thinking about TAM in that way? What was the TAM of live reality television? Whatever Justin was willing to pay you at the time. Yeah, yeah, yeah. Like nothing, basically. And yet, live streaming shows are a pretty big business. I ask people about TAM a lot, and I'll push them on it. But it's because what you're trying to figure out is, do they have a story that might have a lot of holes in it and really questionable assumptions? Where they're trying to build something really great and big? Or do they have a story that's like, oh, yeah, yeah, well, no, don't worry about the TAM.

1:18:21We're just going to flip this to Google in two years once we hire the talent. That's a really bad sign. Companies don't get built by people who are looking for the exit. You want people who are looking to build something big, something great. Because to even build something medium-sized, you have to be trying to build something really great. And if you're aiming for the aqua hire, you're probably not even going to get that. And so it's a very important question. But the point is not to like that you can actually analyze the TAM per se. And I think that's a little different for more established founders, especially.

1:19:01It's a little different in places where there's more, you need more commitment up front, more capital up front to get going. Because the other thing I look for is there's founders who, there's this trap you can wind up in where you start, is the, if you're building for a customer that doesn't exist or like, that hates buying software or that like doesn't want to, doesn't want any, anything to do with this whole thing. That's bad. So like, I don't care if your thing credibly, you know, isn't, is every developer on earth is actually going to use your product, but building software for developers is a good plan.

1:19:40There are a lot of developers and they spend a lot of money on software. And so even if you're wrong about your exact thing, it's going to be okay. Like the software developer market is big. If you're building market for software, that's like really for public school librarians, and that's the only people and you're like, and I'm pushing you on like, no, but isn't this bigger than that? And you're like, no, no, it's for public school librarians. I'm really worried for you. Cause even if you like crush it, that's not actually, they don't, nothing wrong with librarians. They don't even buy, they don't like buying software in the first place.

1:20:09And there aren't that many of them. So like, that's maybe not a great idea. And so like, and founders can kind of get trapped in these ideas where they're building okay businesses targeted at very small groups of people who don't want to buy their product. And so it's more about your, just in theory, if you executed like crazy and figured out six things that we didn't even think of in this room on a pivoted idea that's like halfway, only halfway connected to your idea, would that be a big business? No? Okay, maybe we should change ideas. Yeah. There's two options for companies. You can either be – generally, you can either be early or late.

1:20:46And I get the feeling being early is probably better. How do you think about timing a market and making sure that you're there to ride that wave and the differences between being too early and too late? Every startup that wins pretty much – not everyone, but like 98 % is too early. because if you're not too early, you're usually too late. If you think about it, you're trying to like – there is some optimal day, like literally it's probably a day where like if you start the company on this day, everything will be available as you need it. There will be sufficient bandwidth to do your idea. There will be sufficient this to – the monetization techniques will work.

1:21:34The distribution will be in place. But if you start it on that day, someone else, when everything actually becomes available, someone else will have started it a year earlier stupidly, just by random chance. Because every idea is getting started over and over again. And they will be in motion and they will have infrastructure and they will have a product built. And suddenly their product will be working and you will be too late. And so what you're trying to do is like – so if you think about it for Justin TV, we were too early. Bandwidth was too expensive to make our business work. And honestly, most people couldn't even watch, didn't have good bandwidth to even watch reasonably quality live video.

1:22:13And the video ad market didn't exist. We didn't have a business. It was impossible. But there were other startups that tried to compete with us, several that started later. And they just got destroyed because we'd built global live video infrastructure for the past four years. And they hadn't. and so you know from when the start gun went off on like oh no no the business works now there's just how do you catch up with someone with a four-year head start still led by the founder ceo still like grinding super hard trying to make it work like you're just screwed um so a big part of it is if you if you have faith that your thing is going to work and the pieces are going to come into place the question for startups is how do you survive that's why you read so much about like why C's advice is like be a cockroach.

1:22:59Like don't be a graceful swallow, be a cockroach because you're usually too early and you just have to survive and survive until it's a combination of like you find the secret thing. But often it's actually like you didn't change anything. The market caught up with the future that you saw that you can't ever time exactly right. And suddenly your thing that wasn't good is good and boom. Like Airbnb is a good example of that actually, I think. Like they had a product. And yes, they did iterate and they did figure stuff out. But a big part of it was people got comfortable with the idea of listing stuff on the internet and renting other people's stuff.

1:23:41And a business that didn't work and wasn't good became a business that did work and was good. And I think that's a very common pattern. Talking about cockroaches, and you guys were certainly that with Justin TV. frugality being something that's important, but maybe not a virtue, that being able to use frugality, I've written down here, I assume you said it because it's in quotes, frugality isn't a virtue in itself, speed is. How do you think about the balance of speed and frugality and the ability to execute? The other thing I think you said, the blast radius of startups is low, which is to your advantage as a startup.

1:24:21Yeah. I mean, frugality, one of Amazon's core, like Amazon's leadership principles, the ALP, one of them is frugality. It's about how leaders should be frugal. And inside of Amazon, there's a saying about like, yeah, yeah, frugality, but you don't want to, oh, you're going to do avoid frugality because frugality and frugality are near and far aligned because you need to be willing to spend money and to invest for something that's important to do something. But wasting money is very bad. And the difference between one man's investment is – one man's waste is another man's investment and vice versa.

1:25:03The real thing that kills startups in terms of spending money is usually not overspending on like bandwidth or like server capacity or like even marketing. Obviously, you don't run marketing. It doesn't work. It's inefficient. But like what kills startups is hiring. You hire too many people. And that does kill you because you have this high burn rate and eventually you run out of money and the burn rate kills you. But it also kills you because more people means more slow. And speed is the essence. And like hiring is not in alignment with speed. Speed is in alignment with speed. And there is a point where you do need to hire more people to go faster.

1:25:42But like it is later than people think. It's less hiring than people think. And so I think a lot of the advice to startups about frugality is really better framed as advice about you need to be going fast. And that means don't grow your team too much. That creates a lot of drag. Let me tell you two experiences. So in both of my companies, so two separate boards, one in ad tech and one in infrastructure, not a single investor that ever sat on my board agreed to log into my product with me and see what it did. Why should I, as a founder, take anything that they're saying seriously when they don't seem to care about the product or the company enough to even look at it?

1:26:23So that's just one experience. Second experience, so I advise for a SeedSage VC fund, and they're invested in this company, so a completely distinct set of investors than I've ever had. This company raised at the froth of the market, also in the infrastructure space, and I'm observing these board meetings. And the investors have told the CEO exactly what they want to see. Young guy brought in as a co-founder later on. And he pulls this together and he spends days pulling everything that they've asked for together. And this meeting is four hours long. And I've heard the investors after the meeting complain about how long and tedious it is and how we're getting mired in the details and this and that.

1:27:03And so he's done exactly what they've asked. I can tell that the company is not doing well and he's six to nine months away from getting fired, just listening to what's happening. And not a single one of them, some of them career VCs, some of them former operators have turned into VCs, have gone to them and said, hey, I think this could go better and told them how they're actually feeling. What do you do in those instances? It's hard. We talk about VCs as an asset class. I don't know what it was. Jerry, when you were getting into it, it was probably, I don't know 50 people or 75 people or 100 people maybe like in new york well oh i don't i mean i maybe in 25 years ago right you've been doing this for 25 years oh 25 years ago you could get everybody who worked in the startup sector in new york city into one bar yeah one bar doing that yeah and like you throw so maybe there's i don't know you throw in silicon valley and it's 200 maybe it's it's not a it's not thousands and now now it's certainly thousands and so i guess i'm curious i haven't had we joke about the uh the vcs that are like this among my friends and uh we we hear these stories and what's what's the weird uh we we talked a little bit about like how the different constituents that you're solving for uh is is um founder friendliness right versus lp success those two things are very much at odds with one another and what people thought founder friendliness was was like being hands-off in 2021 right and now i think people are actually more and more amenable to having help uh in some way shape or form at least having people give a shit And whatever that is, maybe not overstepping, maybe stepping within the right degree.

1:28:56And I think it's hard because whenever these – every two years there's a VC review site that comes out, right? And it's like, hey, rate my VCs. And you'll come through. And it's just it's so interesting because we could all be talking about the same VC and assessing the same actions. And people could be totally taking it in different ways based on what their own unique experience was, what their failings were in that board meeting, what their expectations were. The best place to build a career as an operator is in hyper growth environments, like really fun and gnarly and challenging growth opportunities is when things are growing like crazy and there's not time to get the people that know what they're doing in the door.

1:29:44So they have to give smart, capable, eager people the chance to try it themselves. The difference between joining a really established tech company where there's hierarchy, there's order, there's people that know what they're doing, a startup where there's people banging their heads against the wall a lot of the time trying to find product market fit. And then there's lightning in a bottle. I'm like, go find that if you're a builder and figure out how to learn as fast as you can. I've been on the Duolingo board, I think, for nine years now. So these to me are like really long-term investments.

1:30:15So that is first and foremost. But the other thing that I think has stood out in almost all the investments I've made is that you look, there is something really compelling around the value to the customers or users that you can see in the data really early on. And that most commonly shows up in things like the cohort NDR, like compounding over time. I mean, look at companies like Stripe or whatnot, and you just see they're totally different businesses. But what you can see is just an engagement in their core customers. You saw the same in UiPath. And it shows up in really high engagement data, really high revenue growth data on the enterprise side.

1:30:58And to me, that signal is just this isn't just, oh, I bought a package of software and I kept it. This is, wow, this software or this new habit or service on the consumer side has really changed my life. And there is going to be a ton, from a business model perspective, a ton of future growth in existing customers that are going to – to me, those are the companies that have outlier growth is where there's just a huge embedded potential in their existing customers to grow. And those are the ones that grow at disproportionately fast rates that usually are in end markets that compound for much longer than you expect and are from a business model perspective, get to profitability and hyper growth in a much more efficient way.

1:32:03Give That Method Several

1:32:33Thank you.