EP 134: Eric Yuan (CEO, Zoom): What Zoom’s AI Strategy Can Teach Every Operator

28:48Is Zoom own large-longed model or federated approach? When we get those feedback customers say, you know, they want to pick up Zoom own large-longed model. It's one of the cloud-based large-longed model. At this moment do not support that. But based on feedback, we're going to support it very, very soon. You know, those kind of feedback we receive every day. That's the reason why, you know, our innovation speed, you know, truly help us stand out compared to any other competitors. Based on customer feedback, we can quickly innovate. And very soon we're going to give a customer flexibility. They can pick up whatever the last language model they want to use.

29:27In terms of your stylistic approach to running the business, there's been this refrain around, I think, founder mode was the term of Paul Graham. And I think he attributed a lot of the distillation coming from Brian Chesky. and for lack of a, or for a good synthesis of at least how I think about it, it's empowering the founders to sort of make centralized and maybe gut-based or forward-looking decisions that ripple through an organization, which I think stands in contrast to a lot of executive empowerment and probably elements of delegation as well. I'm curious, do you gravitate to being more hands-on and in the weeds of the individual functional areas?

30:20Or do you tend to stylistically approach it more from a delegation standpoint? Yeah, I like that conversation between Paul and LeBron. I really love that. I think most of the founders, I think probably, in my view, is extremely hands-on. And I know from the day when I started, you know, 2011 until today, you know, it's still very, very hands-on, And sometimes you need to delegate. Quite often, it's harder to delegate. As a founder, let's say when customer ask us a problem, I really look at it from customer perspective. I could have delegated to my direct report and then delegated to another manager and then talk to engineers.

31:06I cannot wait. I immediately had a Zoom call with one of the engineers as he's trying to say, what's the problem? When can we come up with a solution? Can we deploy this weekend? This is happening every week. Like a founder, you know, truly cares about everything. And also the speed is very important. That's the reason why sometimes you have to be extremely hands-on to talk with the individual contributors and get a thing done as quickly as possible. Because, you know, every day customers might be suffering in the form of those issues. That's the reason why you have to be extremely hands-on, sometimes a little bit of macro management.

31:46But again, the goal is to make sure they have a happiness to our customers. As long as I have that goal, I really do not care about a delegation or not a delegation. I just want to get a work done. That's it. You all have gone through different journeys over the course of the last couple of years. I guess every business has, But you guys uniquely certainly had we're enabling infrastructure for a lot of us just to survive with with friends and family and then also do our jobs over the course of the pandemic. I shudder to think of what the economy maybe looked like absent Zoom for all the stuff that you guys were able to enable.

32:29And then there was sort of a zero interest rate phenomenon that we all went through. And then we've sort of had the hangover of all of that stuff that's happened since then. I'm curious, as the dynamics in the market have changed, how has your culture evolved? How have you thought about shifting the internal values or whatever are the case? Or maybe not. Maybe you've kept them consistent all the way through. I'm curious, like in going through these different cycles, how you thought about what to iterate on versus what to keep consistent from a cultural standpoint? Yeah, Logan, that's a wonderful question.

33:07You know, speaking of a culture, that's one of the things that keep him up, you know, in the night. The reason why, you know, prior to the pandemic crisis, you know, we were a relatively small company, 2 ,500 employees. And I know almost all of them, right? And we had a great culture. And every day, we're working hard to truly deliver happiness to our customers. Look at everything from a customer perspective. Whenever we got an escalation, everyone wants to say, hey, can we deliver today? Can we deliver this week? We have that mentality. But during COVID crisis, given the service demand, we had to recruit so many new employees.

33:51Essentially, within an 18-month window, we hired around 6 ,000 employees. On the one hand, we had no choice, but we hired many employees. On the other hand, I made a mistake. We hired new employees too quickly. I can tell you the company, the culture was broken a few years ago. You know, we are almost, you know, fixed the company culture problem, right? The reason why is, you know, sometimes we do not look at everything from customer perspective, always from looking at it from internal perspective. Oh, we should add this process. Oh, we should do this, do that. We forgot everything we do here.

34:29We got to make sure customer feel happy. And we lost that. And now this, you know, we are trying to fix that problem. You know, recently, we just published our culture playbook. The goal is to make sure everyone really understands why we're working so hard here. What's the goal? You know, our company value just one word, which is care. Care about community, customer company, teammates, as well as ourselves. If we do not care about customers, no matter what we do, we still have innovation, customers they do not care. What they care is, what we can deliver our services and more value to our customers.

35:09When customers use our service, they feel very happy. It just works. That's the reason why we are working so hard. Again, we are almost there and to fix the culture, bring our previous greater culture back. We are not there yet. Hopefully by the end of this year, I told our team, it might take three years for us to bring the greater culture back. This is the third year. And one of the values or things that you guys think about is the continuous improvement element. And I think that's one of the things that you try to instill into the culture. Are there ways that you actualize that at a personal level, things that you do that you think enable you to continuously optimize and be a better CEO, leader, manager, whatever the case may be?

36:07Yeah, yeah. So here, again, as I mentioned earlier, we have a culture, a playbook, which is the nine principles. You know, one of them is in how to develop ourself to become a better one of ourself, myself included. You know, one of those, the cultural principle is daily self-reflection. You know, I want to become a better CEO every day. I want all of my, you know, the managers, engineers, they also become better engineers, better managers as well. You know, what's the formula? Right here, no matter how busy we are, and we always come out like 15 or 20 minutes time every day. You know, very likely at the end of the day, you know, think about, hey, if I start over today, what I should do differently?

36:51Do I miss anything? You know, do I receive a customer? You know, do I respond to this customer or not? Right, so it's more like a daily self-reflection. And this is one of our core principles. The goal is make sure all Zoomies will become better. then the company will become better. If our employees, myself included, we do not become better in a way of ourselves. There's no way for Zoom to move to the next level. You guys have moved back to more in-person, in-office culture and day-to-day of work. I'm curious, it seems like most of our companies have landed almost back to where they started the pandemic, that if they were remote, they're still remote.

37:34If they were in person, they've kind of moved back to in person plus or minus, I guess. One of the challenges that I see is there's still elements of this hybrid work that we haven't totally figured out. at least a lot of my companies haven't exactly figured out the best way of operating in a hybrid environment where some people are in person and other people are remote and making everyone feel like they're on the same team, albeit maybe the meeting is a little different because there's some people in one room and some people on the Zoom screen. I'm curious, are there tactics you guys have taken or anything that you've done to enable hybrid work to work better or make everyone feel like they're on the same page in a meeting?

38:26Yeah, yeah. So first of all, I would say every company, every business is different and the way for them to embrace hybrid work is different. It could be five days in office, five days remote, right? It's, you know, either way it works. You know, in the case of Zoom, and, you know, we are more like twice a week, you know, in office, three days, you know, remote work. The reason why we embrace hybrid, you know, like that, because a lot of our customers, they embrace hybrid work. We build features and services for the customers. If we do not eat our own dog food, how can we build a better service for our customers who live our service to embrace hybrid work?

39:07I'll give you a few examples. You know, like in the case of hybrid work, you know, quite often some customers, you know, they told us, hey, they need their employees to reserve a desk, you know, before you go to office. And that's the reason why we built a service, you know, Zoom Rooms, you know, a desk reservation feature, right, to have a customer reserve a desk, right? That's the kind of feature like that. Also, a lot of customers told us, hey, when they're back to the office, and the conference room experience is different. You know, they do not like the experience where, you know, if you're not in a comfort room, you're not a part of a competition.

39:45Based on that outcome, you know, the feedback, you know, we added lots of features to improve our comfort room experience. You know, like an intelligent director, you know, multiple camera support, and make sure every participant is sitting in the comfort room, you know, from a remote perspective side, they see a Zoom square. and more like when they all join a meeting remotely. A lot of features, because we support a hybrid, because the customer support a hybrid, because of the listening customers. That's the reason why we can launch a lot of innovations to support the hybrid work. There's a very famous story of your founding and working at Cisco and WebEx and all of that that I think has served as something of a template or an example of founders striking out from within a bigger enterprise when they have a unique insight or opportunity.

40:47I'm curious, if we go all the way back and look at the product insight that you had at that time, if you were to distill down like what the one to two things that you saw that were unobvious to the rest of the market, what were those things? And I guess how blaringly obvious were they to you? Was it a thesis or were you pretty convinced that it was inevitable that we were going to move in this direction? And so you were pulling your hair out trying to convince people that this is where we were headed. Yes, wonderful question. So I started 2011, right? The year before I started Zoom, which was 2010, at that time, I spent a lot of time on talking with the customers, already realized the future of the conference will be the video-centric.

41:39It's not a screenshot-centric. You know, that's very clear. And fortunately, you know, the web as architecture is not about video, really about data collaboration. You know, I realized there's no way you have a best video conference experience unless you build a formula grown up with a new architecture. Very, very clear. That's one thing. The second thing is really about the mobile experience. And also, meaning, you know, like, you know, let's say you and I, that joined like, back then, like Cisco Telepresence, you know, from the conference room. But some participants, they should join via their phone.

42:15At that time, don't know support. So meaning the second problem, meaning it's kind of more like no matter which device you're using, either laptop, desktop, mobile phone, the comfort room, you have to have a consistent, great video experience. That's the second thing I realized. You have to build it also from the phone app. Those two things I realized, and there's no way to tweak WebEx. You have to build a new solution. That's how I started Zoom. Did people disagree with either of those two insights? or did they just, or I guess, was it the first insight that people disagreed with that it needed to be fundamentally re-architected?

42:54And that was sort of the resistance within the organization? Well, I think good news, all the engineers agreed with me. Yeah. Everything else, it disagreed. What is the lesson? And I don't want to disparage Cisco, but I'm curious, what is the lesson in that for other companies that maybe would be faced with a similar situation that maybe isn't identical but has some rhyming elements to it? Are there things that you've internalized about that that you want to make sure you don't let ever occur within Zoom because it led to this outcome for Cisco? Yeah, again, don't get me wrong. Cisco is a great company.

43:44No, I know, I know. I want to use it more as an abstract example than Cisco. So my point of this is, this is a lesson I learned. It may not work for others. I would say sometimes if you really listen to customers carefully, you do not ignore them. You are not going to miss a big opportunity. That's why. Or don't ignore an engineer's feedback. Meaning you also, as a special founder or senior executive, no matter how big a company is, always, always keep a very close relationship with those individual contributors like engineers. Also very important. Everything going on. If you do not stay close, so many layers may not work.

44:33I long attributed something to Zoom's early days. I was at Battery Ventures and we were investors in BlueJeans, which for people that don't know, was an early competitor of yours. And actually, I think initially it was out in front, particularly in the enterprise market. But maybe this goes to the re-architecture point. One of the things that I always thought you guys got uniquely right, and maybe this is just me making it up in hindsight. So I'm curious your perspective on this was that video conferencing was as much about audio or maybe even more about audio than it actually was video in the early days, because there's an element of tolerance that people can have if your video cuts out a little bit.

45:19But if audio cuts out, it ruins the meeting altogether. I'm curious. I've long attributed that to an insight that you guys had in the early days, but I don't actually know if it's true or not. Is that actually a true observation that you guys had or if I just reverse engineered it? Yeah, so yeah, Polygian's founder and CEO, Chris, is a great friend. I think the insight from Polygian is right on. I completely agree. If a voice does not work, nothing matters. You have to nail a voice first. Again, that's very complicated. You know, voice OIP essentially, in my view, you know, it's sort of conflicts with the TCP IP.

45:57You know, it does not work. You have to figure out a way to make a voice OIP work. No matter what kind of banner is, no matter very long distance, there's a very unstable internet, how to make the voice OIP work. Again, that's not that straightforward. That's the reason why even today, some of our competitors, the voice quality is still not very good. So that's another reason why customers really like our service. It just works. So voice and video and extremely important when it comes to quality. I feel like companies often have a window of time that they could start and have the success that they did.

46:41Do you think if Zoom were started three years earlier, would it have been too early to the market? Or do you think it could have worked some period of time earlier? Yeah, wonderful question. I also thought about that question as well. So in my view, I think two or three years earlier, probably even better. But five years earlier, for sure, I'm already died, I think. And what was that? Just like the architecture primitives of building in the cloud decisions you would have made around that time had it been five years earlier versus two or three? Because five years earlier, at that time, let's say 2016, right?

47:21And if it started, even if you have normally two years, you have a solution, right? like 2017 or 2018, you have a solution ready. At that time, you know, mobile phone with a camera, not that, you know, popular, right? A lot of laptops don't have video camera yet, right? When you have a solution, you do not see a demand. You might have to, you know, sort of, you know, ask a question. Do I build the right solution? Why do you not see the demand? Actually, sometimes you're ahead of a market. It's very, very, you know, risky if you're ahead of a market. The reason why human nature, we do not have patience, right?

47:58Oh, we build a solution. If we do not see the market, the demand, we might be able to do something else. Then you might miss the market window. That's why timing is very tricky. For three years, I think it might be okay. Yeah. Yeah, I was, there's Emmett Shearer, who is the CEO of Twitch, founder of Twitch, said one time to me that the job, if you start too early, your job is to survive. And if you start too late, you might not have the opportunity. And so better to be early than late. And you just need to make sure that you survive long enough to catch the wave. I've always thought that's an interesting way of thinking about it.

48:38Yeah, right on. Yeah, I totally agree. I'm curious, in the early days when you were rejected a number of times, if I have this right from a visa in trying to come over? I guess, one, do I have that right? And two, if so, was there anything that you learned from that experience that you think has enabled you to be the founder that you are today? Or is that just an unfortunate circumstance that you don't want people to have to go through? I think looking back, seriously, that's a great practice. So meaning, I think that God already already engineered everything. When I was young, I already practiced, never gave up.

49:24If I gave up, you know, that's kind of, I never had a chance to build a company like Zoom. I tried it multiple times. At that time, I told myself, you know, I will try, you know, as hard as I can. You know, maybe a few years, as long as they told me I can. I just keep trying, keep trying. You know, once you learn and perseverance, extremely important when you start a business, right? You know, if you're the one partner that don't work, try again. If you're the one business that don't work, try again. Keep trying, keep trying. Someday, you know, you might achieve your, you know, what you want, right?

50:02You know, and dream might come true. Again, don't give up too early. That's what I learned. How did you maintain that confidence to keep plowing ahead, either with Zoom or with your visa process? Because I would say there's a thin line between crazy, stubborn people who never get to where they're going versus the people that build the iconic companies. And maybe it's just the success that's the determinant of which side you fall on on that. But I'm curious, just from a psychological standpoint, the fortitude to keep going, was there anything that you feel like uniquely enabled you to do that? That's a great question.

50:45So in my view, sometimes you are stopping on the right thing, you're lucky. Yes. Stopping on the wrong thing, oh my God, it's bad luck. But how to make sure you're working on the right things? I think, you know, in my view, in multiple things, you know, always look at everything from a customer perspective. put yourself into customer shoes. The second thing is you have to have, you know, a mentor. So maybe, you know, someone who's smarter, you know, you can count on. Always, you know, get their insights. That's the second thing. The third thing, you also need to, you know, talk to yourself every day.

51:21Like a Zoom, daily self-reflection. Always ask the question, am I working on the right thing? Am I, you know, becoming a little bit more stubborn? You know, should I pivot or not? Right? It's kind of every day you got to talk to yourself. You know, talk to the customers, talk with those people who are smarter than you. Then you try to make sure you're working on the right things. Try to make sure sometimes don't be too stubborn. So it's kind of, it's a little tricky. Yeah, that makes sense. I'm curious, the early days, were there things that were not scalable that you guys did in In the early days, that enabled the success that you ultimately had, kind of brute forcing some things initially?

52:06Yeah, there's so many, yeah, you know, examples. One example is early on, the capital market pressure, you know, we built a voice OIP, you know, and for the PhD in service, which is a phone call. We did not build it by ourselves. We were saying, ah, customer might be switching to the voice OIP. They do not use a phone to join a call anymore. We were wrong because we're part of a third party and we did not build it by ourselves. And when we open the launch of a service, the quality is so bad. You know, customers, you know, they complain. We realize, you know, don't look at it from our internal perspective.

52:43Look at it from a customer perspective. I think we quickly, you know, fix that problem, build our own service and fix that problem. The lesson learned, right? So quite often, you know, when you think and you do not need a PhD in service, You know, you do not look at it from a customer perspective. We did not validate it with many customers and we made a mistake. In terms of hiring, you've built out a leadership team. I know there's been different evolutions over the years as you've grown. Are there things that you specifically look for in any person that joins the company or specific things that you uniquely try to validate in an interview process that someone has?

53:26that will allow them to succeed within Zoom's culture? Yeah, so a little bit, we were, you know, sort of took a little bit of different approach early on. You know, the way for us to build each functional team, you know, quite often you might hire a leader first. Like, you know, let's take a marketing team, for example. You hire a CMO first. And a delegated CMO build a marketing team and so on and so forth, right? You know, we took a different approach. We want to build a team first with quite a few individual contributors. And afterwards, we hire a leader to make that department more scalable.

54:05We took a bottom-up approach. The reason why is, what if you hire a wrong leader? Wrong leader hired a wrong team. If there's no work, the entire team might be gone. So that's why we take a bottom-up approach. That's one thing. The second thing, when we try to hire the employees, we always look at it as self-learning and self-motivation. Because startup, you know, tons of work. Even if you do not sleep, you still cannot get work done, right? How to make sure every employee, they motivate themselves. They can learn everything by themselves. That's extremely important. When it comes to hiring senior leaders, and we like those leaders who have a greater potential, they can grow themselves along with the company growth.

54:50That's the reason why we did not hire any VP-level leaders from any other company. Since the medium-level managers or the record level, the journalism, very energetic. They learn a lot of things along with the Zoom growth. That works so well. But now we have to change. Given the size of the company, those seasoned leaders, for sure will help us more. That formula will not work anymore. So meaning a different, you know, time of the company grows, you have to look at, you know, that that formula is still working out, right? That's the reason why, you know, look at it, we just hired CFO for Microsoft, you know, the CTO also for Microsoft.

55:31They're all great leaders, you know, already in the corporate VP level, you know, from other companies. Is the insight on the VP side in those those scaling days and hiring people that maybe haven't done it before or trying to bring in people that were higher on potential than than experience? What was the insight or the desire to gravitate towards that? Was it so that they weren't calcified in their ways and that they could absorb Zoom's culture without being too stuck in how they historically did? Or was it something else? The cultural faith, for sure, always the number one. Assuming that, you know, all the leaders who hired there's a cultural faith, right?

56:10The second is really about experience. Sometimes you have great experience may not help you. If you don't know how to learn, because every company is different, right? The minor level of experience, the gain from working with others, they come to Zoom, you know, just tell us, I do this, we do that. Even without understanding our problem. We do not like that. We would like those leaders who come to Zoom in the very hands-on, really trying to stand at the problem. And then, you know, based on their experience and come up with the solution. And that's the learning, a self-learning mentality, extremely important.

56:44I think even more important than their experience. If they learn quickly, they can gain tons of experience, right? At a startup. So that's why, you know, we prioritize, you know, self-learning and self-motivation. I'm curious if you could go back in time and tell your 2011 self something that you now know 14 years into the journey? Is there one thing that stands out that you wish you could press that time machine and go back and impart upon yourself way back when? Great question. That's too many things. I made tons of mistakes, and I would like to tell the younger one of myself. And yeah, it's so many things.

57:27Maybe one thing I'll tell you. Actually, you know, we got a great support from VCs. We raised it in total of$145 million. And when we go to public, the day we made this, we became a public company. The money we had in the bank, you know, more than what we raised from VC. You know, I think looking back, that's a huge mistake. A huge mistake. You know, we should be more aggressive and build a lot of new services. Right. The reason why you get money from VC, you have to be smart how to use that, you know, and build new services, new features, you know, and new stuff. And I was too conservative and always try to achieve, you know, cash flow positive.

58:09Looking back, that's a big mistake. That's a great commercial for my business. I appreciate that. We need founders to continue to take our money. And some of these businesses are growing so fast these days. I yeah, it's a good it's a good lesson. I guess in in picking those those areas, do you do you think that like in using that capital and being more aggressive in going into different areas where there were there certain things that you ended up just doing later that you would have pulled forward? or do you think it would have been a different set of problems that you would have gone after had you done it in 2015, 16, 17 versus 2020?

58:53Yeah, because early on, again, I spent a lot of time talking to customers who already know what they need. They want to have a full, you know, UC solution, right? And then the meeting is the first one and the chat and the phone and a lot of things. They already told us. I knew that. At that time, I gave them maybe, when I started a company already, you know, I was age 41. The age might play a role. I was too conservative. I want to build a step-by-step. Looking back, it's absolutely wrong. The reason why when customers say, I bet they need a phone service, we do not have that. It took us another one, almost two years.

59:29Three years ago, we launched a contact center. That should have been launched maybe five years ago, right? Meaning, if you understand the customers' requirements, why not build it now? Why you take a step-by-step approach? That's the reason why today we look at a lot of new services are working so hard in the pipeline. We should have started a few years ago. We have capital, but I just made a mistake. You just made a wrong decision. Are there things that you spend more time on now as a founder CEO that you wished you had focused in on earlier in the journey? I often find sometimes people don't lean into enterprise sales or they, you know, maybe delegate in some ways and end up stepping into other functional areas.

1:00:22Are there things in your day-to-day that you spend more time on now that you wish you had done a few months or years earlier? Yeah, I think one thing is really about thinking about it used to be, we only look at it like, you know, we only build like a one-year plan and the most one and a half years. We do not think of what, what does Zoom look like in five years, 10 years? Prior to becoming a public company, if we have that, more like a long-term planning or five years planning, today is a much better company. That's the reason why I learned hard of it. That's why I always think about, hey, in three years, five years, what do we want to achieve?

1:01:00And then, based on what we have today, we've got to just start working on those kind of stuff. More like a long-term planning is becoming more important, more and more important, you know, given the size, given a public company. And we did not do well before. So always, you know, short of my focus. And that's something, you know, I think I learned. You've been fortunate enough to pick investors in the private markets as well as the public markets. Anything that you've learned about picking who to work with that you would impart upon a CEO or someone that's thinking about how to pick who are going to be the partners on the cap table?

1:01:42Yeah. So, yeah, early on, I had a philosophy. Today is still very, very, you know, I think valid, you know, to me is two things. First of all, I want to pick someone I can work together with some, you know, forever. I know more like, you know, startups, you know, is the long journey. It could be 10 years or maybe 20 years. You pick up a partner. You know you can become your great friend. You can work together, you know, even not for a business, but must have something else forever. It's kind of a lifetime friend. That's really important. That's the number one thing. Number two thing I really like is, in particular for investors, they not only bet on our business, they also want to bet on me, you know, trust me.

1:02:23Because, you know, as a founder, sometimes you have to pivot quickly. If you really invest in your business, what if your business don't do well? You want to pivot. They may not want to support you anymore. But this is why I like those investors or partners who truly trust me and bet on me in addition to bet on our business. That's the second thing. I think as long as I find anyone, I can be a lifetime friend and it's better on me. I think, yeah, why not to become a partner? As we wrap here, are there any things that you think about in our industry that you project forward in the coming decade or just a belief that you have in a unique way about anything in the industry that you think is going to radically change over the course of the next decade, particularly as people think about how AI is going to permeate our day-to-days?

1:03:26In my view, AI is already as important as we all know, right? And nobody knows what the future looks like in 10 years. I think this is the AI. It's this crazy innovation piece on AI front. Today, there's so many engineers working on the product. I guess for sure we all know that. You know, so many AI engineers, you know, will deliver much more than human engineers delivered over the past, you know, 200 years. So I do not know which industry and will be extremely different, right? And truly stand out compared to other peer industries. But I would say healthcare could be something extremely interesting, right?

1:04:08The new drug discovery process, the way to take care of our body, right? And the way to level the AI, make their lives better. And I think it is could be revolutionary. And that's kind of, you know, my two cents. So, well, Eric, thanks for, thanks for doing this. It was fun to, it was fun to have you, have you on and talking through all this stuff and look forward to hopefully doing it again at some point in the future.

1:04:47Thank you.