Drew Houston, Founder & CEO, Dropbox

27:43But anyway, so he was one of the venture investors, the partners, was actually really kind. And I got to know him because I was an engineer and I knew the founders of that company who ended up, founders ended up investing and doing well. But I talked to him about Dropbox from the napkin stage through Y Combinator. And I guess he came to demo day, but didn't actually engage. Then we go out to California. We get a term sheet from Sequoia. And he comes back. He's like, I will give you a totally uncapped note. And I'm like, it's a little late, dude. Didn't he fax you a term sheet with empty numbers?

28:25Maybe it was. Yeah, it was crazy. Is this really sad that I remember this story better than you do? Because I just felt like this was the most insane story. I believe he faxed you a term sheet with blank spaces for the valuation and stuff. And said, fill it out. Yep. Yep. That's desperation time right there. Totally. It's crazy, but he could have invested before anyone else. It just goes to show. Yeah. What a crazy. I don't blame some of the early investors too much or prospective investors. I feel bad for something like that because he saw the awkward adolescence. Most of the Demo Day investors saw a very airtight product.

29:12He should have still invested in a lot of things.

29:17A lot of the things that people pointed out is competitive problems. I'm like, yeah, I agree with you. You're like, yeah, we probably will get killed by Microsoft or Google or Yahoo, these companies back then. Like, yeah, we're probably going to die. Like, and then we'll do something else. Like, so I don't really blame people for having that kind of perspective because it was like so early and so like raw back then. That's a generous perspective. good work pageman for seeing what a great company it was and what great founders you were and really helping you guys with the introduction i mean that is just that's also such an amazing fabulous side of the story yeah um okay so you're now out in california you've moved into the y scraper you are like in the zone there so it was the justin tv guys zobney um read it Cribbed, Weebly, Reddit.

30:14Yep, all those guys. What was it like? Did you get a lot of work done there? Or was that your social scene or what? All of the above. It was, what was great, the reason that became such a popular landing site for these founders was because it was month to month, had like corporate housing, fully furnished. So you had like basic, like, um, uh, so you were kind of like kitted out enough and it was very compatible lifestyle wise with people who are just like graduated from college. And then it was sort of like going from, you know, a college dorm to like a startup dorm. So like the lifestyle is very similar.

30:55Um, and the first thing we would do after landing was, uh, rent a car, go to Ikea, get like cheap furniture set up our computers um and that was like that was like the pilgrimage we made with every new employee it's like all right welcome to dropbox like aston our first employees like go have this ritual around like order all your computer parts and yeah moats oh yeah okay so you took them to to ikea yeah we're like first like ship all your computer parts to Dropbox HQ or our little apartment. And then pick them up from the airport, go to Ikea, get the same table and cheap chair and everything.

31:36And first task is like build your computer. And that was like the onboarding. That was the extent of onboarding at Dropbox. I'm just going to ask what you had. You had$1.2 million in the bank. Did you hire right away with that money? Like what were your plans? So how many people did you hire? we probably got up to around 10 people um eight or nine people on that first but you couldn't you couldn't keep them all in the Y scraper did you have to go get a new office we did have to get a new office and we certainly tried to we put we put like six people in a two bedroom apartment um you know like and like flipping up a sofa I mean I was going through some of those pictures there's like we've we've put one of the sofas up vertically so we can make room for another desk.

32:23Um, and it was squalor. Uh, so yes, like for many, many reasons we had to get, get a new office. So we, we got some random office space above the Walgreens on Kearney street, uh, and eventually moved in there. Um, and that took us from kind of September, 2007 when Sequoia first did the seed round through our public launch and our series a a year later. Nice. Okay. It was a crowded space. Everyone was complaining. Oh, we don't want to fund you too crowded or you're going to get squashed by Google. Why did Dropbox work? Because that was the beauty of Dropbox. It actually worked. It was this elegant, wonderful, simple solution that worked.

33:05Was it because you and Arash were great programmers or was there something that you guys did that other people didn't see? I think it was a little of both. And I think you You also need, like every startup needs some measure of luck. So I think there's luck in that none of the bigger companies built like good versions of this earlier. But there were a lot of things that were sort of the timing was right. And then the engineering execution and some other things ended up being really critical. So I think what made it hard was you had to get some things right across some pretty different disciplines.

33:41So one problem is that it's correctness, right? So most people's experience with sync is that it like doesn't work and it breaks all your things, you know, and that's, that's like, forget files, but like you're even like your Palm pilot back in the day or like you'd always have problems with sync. And the reason you have problems with sync is because it's like a, actually like a mathematically pretty tricky problem. And there's like a whole correctness and algorithmic piece of it, which you just can't get wrong. And like, I love that stuff. So those are my favorite classes at MIT, like algorithms, distribute systems.

34:16And that's more of a mathy, abstract thing. Then there's a whole grungy, different systems engineering, which is more like getting into the guts of an operating system and basically cloud enabling Windows and Mac without the source code. And one of the problems with the other apps is you had no visual feedback when you changed something. and so you didn't know if it was working and we're like well you should put little green checkboxes if it's like up to date and a little blue syncing icon if it's like being updated or not saved yet so just that visual feedback seemed like a really important piece of the UI but there was no mechanism to do that on Mac for example so we ended up having to basically use all these malware techniques to like hack up the finder and draw icons whenever the windows refreshed.

35:07And I learned that kind of thing from the security company I worked at. Yeah. And then, so there's sort of like the science and the engineering, and then there's design. Like you have to build, you have to like have some restraint in what the UI of this thing should be. And so for example, actually a lot of the early customers who wanted like Windows file synchronization software were pretty bad because they actually wanted like all the knobs and dials and like oh it should do backups at 5 a.m and it should cover these nine folders but you look at the the interfaces for these the uis of these things were just like a car crash with like all these complicated settings and so we had to like really have restraints be like no it's gonna be one folder um and we're gonna really get the design and ease of use right um and the part of where that came from was like in addition to being the you know six-year-old who was playing games and trying to write games.

35:59You know, I was also the kid that was called in by neighbors to like fix a computer. So, and I'm still like the IT guy at Dropbox often. Oh my God, I love this. So you get kind of an appreciation or like a much more visceral sense of like what is easy and what is hard on a computer. And so I think that empathy was really important. And then, I mean, random stuff. I made T-shirts and Photoshop for my fraternity when I was in college. I made fake IDs. No way. You made fake IDs? Didn't make any money. A lucrative business. I'm like, statute of limitation is up. Didn't make any money. I didn't sell them.

36:41Wait, why not? You didn't sell them? You gave them to people? I sold them at cost of materials. Do you want to know what they go for these days, Drew? I happen to know this. I don't know. No, I know. They're from China and they're about$200. That's cheap. I thought you were going to say cheap. We're talking about teenagers here. You can't charge too much. Someone figured out that's the sweet spot. Teenagers can scrape together$200. Wow, true. There's a thread here. It's like reverse engineering. I would borrow literally my mom's driver's license and photograph it. And then they would have, they had like some templates online, like in shady corners of the internet.

37:31But like the templates weren't good enough. And I'm like, no, the blue is off here. And like, no, you need to have. So like, yeah, I had like holograms. If you want to be an organ donor, no problem. That's hilarious. Jeez, Drew, I'm dying. So like reverse engineering is definitely a thread. Were they Massachusetts IDs? Massachusetts, yeah. Also dumber is like way would have been good to do like Hawaii or New Jersey or something. where it was less stringent. Wow, I'm learning a lot about you. This is so interesting. So there was a design, all that is to say there was a design element here, sweating the details on the visual design that ended up being really important.

38:06But it's sort of these very different strands of my previous experience all coming together. All coming together magically. Ending up being important. Well, I'm just thinking that Drew lived next door to me so he could come troubleshoot my obvious Wi-Fi problem. But also I wanted to say, you know, Drew, Your YC application actually does, in the competitor section, you point out some of the difficulties that your competitors or potential competitors were going to have. And they seem pretty spot on. Like back in 2007, you were kind of like, oh, this is too heavyweight. This is, you know, they're not good at the web integration.

38:41Like you kind of knew. In other words, I'm not surprised people were like, oh, yeah, this guy's got it right. Because you figured out what the other people were doing wrong. So pretty impressive. Yeah. I've been one of your earliest users and it's fabulous. Oh, it's the best. It's the best. It's growing. You guys are doing well. I want to ask you about, I think it was 2010 when Steve Jobs was up on stage and he called it, quote, a feature, not a product. Yep. Was that crushing? How did you feel? So there are a couple of different things. So one is we got sort of summoned to meet Steve in 2009, and then they launched iCloud in 2011, where they called Dropbox out as sort of this archaic thing in the launch of iCloud.

39:28So both of those were stressful. the first the meeting with Steve happened because well Apple people on the MobileMe team which was sort of the precursor to iCloud they were like confused as to how we had this UI of like these checkboxes on these files and we were sort of kicked around between sort of an engineering team and their M &A, like their corp dev team and after a couple rounds of that we ended up I ended up getting invited to meet Steve. Oh. And was he a childhood hero of yours? Yes and no. So I had grown up kind of on the PC and Windows side of the tracks, and I thought Mac people were kind of annoying at the time.

40:18But then the iPhone had launched and the MacBook Air, and I'm like, okay, I see what people are excited about. So yes, I had a ton of, I mean, I think he's like the best to ever play the game. But so it was intimidating for sure. I had a bunch of other friends who had had different Steve experiences and they were like very into one of two buckets. Like either it was like totally charming or like totally an asshole. And, you know, you didn't know what you're going to get. And fortunately in our, and we, we roll up to one infinite loop. I'm like, Oh, the address is already in my iPhone. That's convenient.

40:52Okay. You know, just little things. You go in the main entryway and you're like, the reception is there. You're like, I'm here to see Steve Jobs. She's like, have a seat. And then Arash and I are like, oh shit, I don't know if our demo is like, we had this whole demo ritual where you have to have the fake account and all this. So we're setting all that up. But anyway, so we go meet Steve in the boardroom.

41:19And initially he was very charming. He was like, oh, you guys have built a great, I'm like, do you want to see a demo? He's like, no, I've seen it. you guys have built a great he started by saying you've built a great product and so actually you know under the table on my bucket list i'm like steve jobs said we built a product check okay good i'm good i'm out i'm done our work here is done um and yeah actually the formal part of the meeting was pretty short like he was like you should join you should throw in with apple we're like a startup with a lot of resources and um you know sort of going through his pitch and um Um, and I was like, you know, I was thinking we're not looking to sell.

41:57Um, and so this is a tricky needle to thread was how to approach a meeting like this. Cause we mainly just didn't want to piss him off. And we also didn't want to get him super excited. Um, we basically wanted to do nothing, have like no followup, uh, like leave a good impression, but not too good. Um, and don't like antagonize him. Um, so he's like, you should throw in with us. You should join Apple. and I'm like, I would love to work with you guys. I'm a huge admirer of everything you've built. I'd love to work with Apple in any capacity. There's a lot of ways we could do that, but Arash and I feel like we're really having a great time building this Dropbox as an independent company.

42:38I'm sure you understand. And then he started getting more prickly. He's like, all right, you guys are a feature, you're not a product, you don't own distribution, you have to partner, you don't control the operating systems. And I was like, yeah, but then every, you know, Android doesn't control the Mac, Mac OS or Google, you know, every pair of companies has like an incompatibility. So like that, that's actually why you need this like common layer of something like Dropbox in the first place. And he was right, like getting distribution ended up being very important. And we had an unorthodox way of doing that too.

43:11But there was an open question for me, like, what should Dropbox just be like pre-installed on every computer, like antivirus? or we have to figure something else out. And so he was right in that if we had to go through partners, it would be pretty difficult to get distribution because we didn't have any leverage. And so anyway, we were sort of haggling over these points, but eventually I'm just like, agree to disagree, like don't piss them off, okay? And then so the formal meeting, part of the meeting was over in like 10, 15 minutes, but then he hung around for another, for like the rest of the hour, just being like, oh, where are you guys from?

43:41And I asked him about coming back to Apple and like why he did that. and he was like, yeah, I couldn't understand. This is the 97. They were like, you know, six. These were days where they were like six weeks from winning out of cash or whatever. He's like, yeah, I couldn't figure out how this company could be making, you know, could have its customers paying at like$7 billion a year in revenue and still manages to lose a billion dollars a year. And then a lot of the other stuff that he said about that time that he's, that's been reported on pretty broadly. But it was a very cool experience except for the part where he's like, yeah, we're going to have to like build our own thing and kill you.

44:14And so there are a few things like that. Is there a dollar amount he could have mentioned where you would have second guessed your decision to do this by yourself? Not really. Not because I didn't care about financial pieces, but more like my view is that, well, one, I didn't even think about that question. I didn't even like try to, I didn't want to get tempted by it. So I'm just like, we're going to, I'm just going to not go there. And then secondly, it's, you know, when your company is kind of up into the right, the way we were in like 10 X-ing every year, I'm like, Apple's not going anywhere.

44:56Like if whatever, whatever that X dollars is today, it'll probably go up tomorrow unless we like something completely unforeseen happens. And, you know, maybe that's wrong, but like, we're willing to take that risk. I bet that was a weird experience for Steve Jobs having somebody just be like, eh, no thanks. Like he must've been pretty frustrated. Yeah. He, it's hard to know exactly what, that was the only time I met him. So I didn't really get a debrief afterwards. This is jogging my memory. Didn't he throw a pen at you? He did not. No. Fortunately he was, there was no violence. Oh, but yeah, I'm trying to, I think, but I'd heard stories like that from other people, not, not with us.

45:43He was like very respectful. I mean, other than sort of saying like we're strategically effed, like, yeah. Yeah. Okay. Like he was, he was fine. I'm going to have to figure out who I know that he threw a pen at in frustration in a, to me, it was very funny. Yeah. Like that he got agitated. I mean, he would have withering criticisms of other, like I had other heard stories of like, another friend of mine spent some time working at Microsoft and was pitching his thing to Steve. And Steve's like, yeah, this looks like something a product a Microsoft guy would design. And he just crushed his experience.

46:20He wasn't always on his best behavior with his meetings. So I don't know if he just got him on a good day or what. So that's good then. When he said that Dropbox was a feature, not a product, up on stage at this launch, you weren't crushed because he had already told you that in private a year earlier. Yeah. Okay, that answers my question then. But it was a much bigger peanut gallery of people, of him saying this idea of storing your files on your hard drive or in Dropbox is an anachronism. Everything's just going to be in the cloud. It's going to be in iCloud. So he was pretty explicit that we were going to be obsolete.

47:00And then you can imagine the impact that had on the company. But, you know, we're all watching that keynote and everybody's looking at me being like, all right, Drew, now what? And so it definitely was that was one of, you know, several of these competitive moments where like, OK, eventually Google Drive did come out and iCloud came out and OneDrive came out. And that demarcated a new period for the company. So this new period had some real struggles in it. Can you tell us about some of them? Yeah. Yeah. So, you know, the first several years of Dropbox were kind of that hyper growth, fever dream dot com thing.

47:38Every founder, that experience every founder hopes to have, it was still stressful, you know, sort of like you're an amateur surfer. And then suddenly you're on a hundred foot tall wave and you're like, there's no style points. You're just like trying to hold on. But at some point like that smooths out and then or that big wave. and then you got to start battling. And competition was what kicked off that second period of the company, which was a lot more challenging, but not in the way that I was expecting. So iCloud launches, Google Drive launches, Microsoft launches their thing, lots of others.

48:15But you would look at our analytics and not be able to tell when that happened. And the press usually writes about competition like it's a shotgun blast. Like, oh, okay, Google Drive launches, Dropbox is dead. Um, and that wasn't our experience per se. It was more like, it creates a lot of noise, but like looking at past examples of startups competing with incumbents, you know, looking at something like Netscape, um, and Netscape didn't really get killed by internet explorer 1.0, but internet explorer 3.0, 4.0, 5.0, they just keep coming at you. So like competition is more like a boa constrictor than a, than a shotgun blast.

48:54Meaning they just keep coming. And our version of that, like, even though we couldn't see in the numbers, we could sort of start seeing science. So ranging from, for most of our history, the fact that Dropbox is so general was a feature, not a bug because, you know, it had this universal appeal. And this actually created some problems because we're like, well, what's Dropbox for? It's like, well, what's a phone for? or what's a computer for? And so it created some issues with how do we describe what it does? And I would often go to do you carry a thumb drive as the question that actually made sense to people.

49:27You don't have to do that anymore. But what it also meant was people are using Dropbox for a lot of different use cases that were each their own in a different market. So what that meant was we were increasingly fighting this many front war against much better funding competitors and kind of fighting with everyone. So on the sort of basic cloud storage side, we were competing with the phone to back up your phone. We were competing with the operating system. We were competing with the device in ways where we were never going to have a home field advantage. So it's like there's no world where Apple's going to be like, hey, install Dropbox with your new iPhone.

50:03They're going to promote iCloud. And so, you know, and that was Internet Explorer. It was bundled with Windows. It made the default. So I was very familiar with that kind of dynamic. And I'm like, that's not a good fault line to be building our house on. Um, then a lot of people are using Dropbox for photo sharing. These were like photos and effectively photo albums, um, that were in the form of like files and folders. Um, that had a couple issues first, like that was a whole different set of competitors. I was like Facebook, Snap, Google, Apple. Um, and then by the way, our UI of like files and folders was like not the right metaphor for photo sharing and especially on mobile.

50:42and then people were doing a lot of productivity in Dropbox and for them it was more like Dropbox was like this virtual workspace or office where like you could actually work from anywhere and be like this digital nomad and Dropbox for a lot of people was like facilitated that because you could use any device, any platform, anywhere, anytime and so that was a whole other set of engagement and usage but it was like pretty clear that all of them were going to be under siege And then there are other examples of companies that kind of got picked apart despite getting an early lead, which I thought were cautionary tales.

51:14So let's take something like Craigslist, right? Craigslist used to be very horizontal. You could rent an apartment, you could get a job, you could do all kinds of ungodly things on Craigslist. But the most valuable parts of that got picked off by more... Airbnb took a lot of the short-term rental piece away. And then Upwork took a lot of other things. Craigslist still exists. It's actually like a surprisingly profitable company, but that was not our aspiration. So we're both trying to spread our wings as a company and do more stuff while also dealing with some of these strategic issues. So we built a new photo sharing app called Carousel.

51:48We bought a mobile email app called Mailbox to kind of diversify. And that was great until about a year after that, Google Photos launches and gives everybody like free unlimited video storage for life. And that was like my rude personal introduction to like the incumbent playbook, which is where they'll copy your product to clone it. They'll bundle it with our platforms and they'll give it away for free, either like for free with their bundles or just give it for free, period. And Google just gave away this for free, period. And they're just like torching billions of like we, you know, Google can buy hard drives cheaply.

52:26So can we that maybe a little bit cheaper than us, but not much. and i'm like these guys are just like torching billions of dollars um without even a theory of how this will like come back around and then it was also more personal for me because i'm like this was like easy to foresee like this would have been like the obvious next move for them like how did it get us into this like really precarious situation so you know with the photo sharing or you know similar things for the storage or a lot of these different fronts i'm like we're just like not going to win the wars on most of these fronts.

52:58Um, and the, there's already some skepticism starting to build in the industry about, ah, it's Dropbox. Like at some point people write enough nice things about the company where they get tired of that and they want to write how like, actually this thing is a house of cards. I'm familiar with that. Yeah. Y Combinator. And then internally there was a lot of angst about this. And so Google photos launches, I'm like, this is bad. I kind of go off and I need to think and I reread Only the Paranoid Survive by Andy Grove. And it turns out Intel went through something like this, too. And this is what his book is about.

53:33It's about the strategic inflection points and how to deal with them. So in their case, we know Intel as like the microprocessor Intel inside company. But they actually started as a memory company. Like they would make the RAM that goes in your computer. but over time they found that they're competing with Japanese companies that were over time just like better faster cheaper just like outgunning them on every dimension and so the book goes through like you know they're Andy who's the one of the founders and became CEO and then Gordon Moore one of the other founders they're like discussing this and they're like all right if we were consultants to ourselves what would we do with the situation and they're like obviously we'd get out of the memory business and we'd go all in on microprocessors.

54:19And that sounds like very tidy and sensible, but in practice it's like Google saying, Hey, we're going to get out of search and like go on on Gmail or something. It's like ridiculous. So easier said than done. And the book talks about how CEOs usually want to keep all their options open and hedge, but what you really want to do is just go all in on one thing. And so I took that pretty seriously and literally and came back from 4th of July and just like, like we're killing Carol, we're killing carousel. We're going to kill mailbox. are going to kill anything, like everything that isn't productivity, which in one sense was like not that difficult of a decision because like most of our subscribers at the time were using Dropbox for work, like 80 % were using Dropbox for work, you know, use case.

55:00But then, you know, I wish I could say that, oh, then we lived happily ever after. But that actually like completely sent the company into a terror, like a tailspin from a narrative standpoint. People like, you know, Dropbox is going to get roadkill from being the next Google to roadkill by Google, Amazon, Microsoft, Apple, everybody. First dead DecaCore and lots of these kinds of articles started cropping up. Which then, the main effect of that was kind of through the talent flywheel, which was flying in our direction, throwing it into reverse. It became extremely hard to recruit the the next levels of like execs and especially like product execs that we needed and set off a super difficult period.

55:48So that was sort of the beginning, the opening salvo of that Google thing was like, all right, well, we're going to shut down a lot of stuff, but then people are like, all right, well, what are we going to do? And I was like, if I had like a great answer to that, we'd be doing it. It was pretty awkward. Yeah. So it was, that began like the second chapter of the company, which is a lot more difficult. So here's a question and you can tell me if this relates to the second chapter. So I was listening to you talk about the Enneagram test. You will not believe this. But after I listened, I took the test, Drew.

56:23Nice. What are you? I'm a seven. Oh, nice. Isn't that what you are? Tell someone about the test. What's the test? Yeah. Yeah. Okay. I just did it yesterday. I haven't read the whole report. Tell Carolyn what it was. I couldn't read the report because I'm so conflict avoidant that I couldn't even bear to be told that I'm conflict avoidant. Tell Carolyn what this is. Yeah. Okay. So the Enneagram is a personality typing system, kind of like Myers-Briggs, but I think a lot more useful and sort of easier to understand. One of the challenging things about scaling a company is as CEO, your company's personality or quirks are going to be inherited from the founder's quirks and blind spots.

57:11And so your company will inherit whatever kind of dysfunction you have as a person, and most of the time you won't even know about it. Uh, and so you have one, every founder's job is to figure out like what personality quirk or defect, um, is like in a torpedo your company and like do something about it. There's a lot of ways you should do that. But, uh, one of the ways is just to like better self-awareness and, and through tools like personality typing. And our favorite, um, is the Enneagram. And basically it's similar in that you get a number one through nine. Um, so, you know, Jessica and I are sevens.

57:46We're like, there's nine of them. So, you know, there's a peacemaker as a nine and a reformer as a one and a helper as a two and achievers of three. And so it doesn't mean that there's like only nine dots of people, but there's sort of like nine area codes of personalities where you're sort of all in the same zone. And that ends up being really helpful because one of the things that's great about the Enneagram versus Myers-Briggs is the theory is more around like what fundamentally motivates you. Like what are you running towards and what are you running away from? Um, whereas I find that Myers-Briggs is more descriptive.

58:20It's like, okay, you're an introvert, you're an extrovert. Great. Like, what does that actually mean? Whereas, um, with the Enneagram, the theory of sevens is like, all right, well, these, these types originate from a mix of like your genetics and your, um, early childhood. And they're about of like your strategy to cope with the world. The seven personality type, the strengths are like very creative, like lots, like synthesizing across lots of different things. um they really like they're they tend to be like inspirational and really like building good relationships with people um and um but then you know the development areas are often the other side of the same coins which are like all right you're really creative and like new ideas but then you're really bored by routine um and scattered uh or you really like building good relationships with people then you're very like conflict avoid when you don't like telling people of things they don't want to hear.

59:14Um, and, uh, you know, you're really resilient and comfortable in chaos. Okay. But then you create a very chaotic environment for your team and you don't really recognize that like not everybody likes that. Um, so, um, it gives you a bit of a, it gives you like a good default map of like, here are the natural strengths that follow from this and here are the weaknesses. And so you want to like double down on the things that are strengths and then offset the things that are weaknesses. So in my case, it would have been things like, all right, I need to figure out a minimum system of organization.

59:46I need to recognize that I probably shouldn't be asking the company to do 10 different photo sharing app, an email app, all this stuff. I'm like, okay, these things have some roots in my personal psychology. And you just have to figure out how to deal with that. It really tugged at my heartstring. You said, I needed to make sure that my company is not so exposed to my personal dysfunction. Did you have to do a lot of work on yourself? I did do a ton of that. Yeah, a lot of personal development. Yeah, there were a couple of things that were difficult about that period. one is just like strategic so we talked about like alright the calculus of what are all these competitors going to do how do we survive I read this like great book called Playing to Win by Roger Martin and A.G.

1:00:36Lafley so A.G. Lafley was CEO of Procter & Gamble and actually the impetus for this was like I kept hearing people saying like storage is a commodity, storage is a commodity and yet like our business just kept growing and like our prices would go up over time not down I'm like, this doesn't really seem like a commodity in that sense. But I'm like, all right, well, try selling paper towels, which is what Procter & Gamble does. And how do they deal with that? And they have this very lucid framework for like, yeah, you have to choose your market and your customer, where you play, and then how you win with your differentiation and stuff.

1:01:08So there's a lot of kind of academic stuff that helps to learn in these frameworks. But I think the hard part of running a company for a long time, especially when it's difficult, is also dealing with your blind spots. It's like, yeah, what is, how are you sort of inadvertently torpedoing the company? And it's not, it's not personal. It's like, everybody has these kinds of like some level of issue that they need to work through. So it's not the presence of that isn't necessarily bad, but it's like, you do have to deal with it. Yeah. And then the other is just like, how do you metabolize a lot of the stress?

1:01:41Like, and just like the challenge of this over a long period of time. And then also even something more basic, which is like, you know, what does Dropbox need to be in the world? Like maybe we did it because like people don't really need to carry around a thumb drive. We have a bajillion users. Like I, you know, I'm sort of picking my teeth up off the ground in Hawaii. Like after the Google photo stuff, I'm like, well, at least I'm in Hawaii. My 18 year old self would be like, why are you so pissed off? Like you did it, dude. You're good. But I had to kind of reconnect to a sense of purpose and motivation, which is kind of pre-wired for you in the, you know, at the YC stage.

1:02:17It's sort of like school. You like go to middle school, then high school, then get into a good college. Then for me, it was like literally after that, all right, then get into Y Combinator, get Sequoia funding, then do your series ABC. And it's like this very linear prescribed path. But at some point, you know, one of the hard things for me to deal with was like, okay, actually the competition is getting a lot harder. It's quite embarrassing. Like I ran like kind of an irrelevant company in obscurity that struggled, which was difficult enough, but it's, it's, it's a lot worse to run, to run a company that like was succeeding and then you screwed it up.

1:02:47It was like a thousand people, employees that are depending on you and like millions of customers like that. And a lot of press that's like tearing you down. It's like, OK, how do you deal with that? So I think things like the Enneagram help give you a bit of a map to figure out like where what motivates me? What am I running away from? You know, what do I do about it? I mean, you went public in 2018. So what what was the most important thing that you did to write the ship, if you will? Yeah. So, I mean, I think it's sort of one of these where it's like, if, you know, I think it's a Churchill quote or something, if going through hell, keep going.

1:03:26So it was a number of things. I mean, first was just like cleaning up the strategic story. So like getting out of these unprofitable businesses or stop fighting these wars, which we can never win. There's a very obvious financial piece of this where we had to kind of gear shift from land grab modes, growth at all costs, spending at all costs, to a more reasonable financial picture. So we were hemorrhaging hundreds of millions of dollars a year on all this free storage or just on these unprofitable segments. So fortunately for us, most of it was pretty tactical. Like, all right, just turn off the dumb faucets and just stop blowing money on that stuff.

1:04:02And some change management, but it was okay. But a lot of the harder part was more like, hey like your company needs to grow up and like as you know if you're playing it in a sport like as you go from like t-ball to high school basically to college to the pros like to the playoffs each at each phase like you have to like keep leveling up um and your reward is like just a harder and harder opponent um and i mean there's a lot you need to do to deal with so first you have to like as i was saying before like i think you have to like train yourself or educate yourself on how to play the game better and like understand what new game you're playing and so as we're like fighting with Google and Microsoft and Apple.

1:04:38I'm like, on the one hand, this is really rough. Like it's like playing chess with opponents that have like eight Queens and back. Um, so it's not that fun of a game, but then I think there's a lot of mindset stuff that comes in here where you can either feel victimized by that, um, and burdened by it. Or you can be like, well, yeah, I, instead of I'm getting screwed, I think a much healthier, um, approach is be like, I get to do this. I get to get screwed. This is what I dreamed of. And I think Ben Horowitz says the hardest thing about being CEO is managing your own psychology. And I think there's a lot to that.

1:05:15So just like, all right, well, this is... I wanted, even from when I was young, I wanted something like a career that have a high learning curve. I wanted to be building things that have a big impact. I wanted to be playing at the highest level. Um, but I had to kind of like reconnect and I did feel like pissed off and resentful and like, Oh, this sucks. And this is rigged and whatever. But I had to kind of get out of that. Um, in a couple of ways, like first to sort of like, I would want to do with like my life and career. And then equally importantly, what should Dropbox do with its life? Um, and hopefully these things intersect, but like maybe not.

1:05:51Um, so as part of like getting my head right and things like that a lot of it is sort of learning from other from history and other stories to feel like okay it's not that personal like this kind of stuff happens in tech and in business all the time so a sense of equanimity about that yeah it's just like in the game um second like i wanted like i decided that i really do want to become like a great ceo and it's like a much harder game than i thought yeah um all right but like good news is um you know that's something you can that takes a lifetime and beyond to master so i was like okay this will keep me busy and occupied.

1:06:26And I'm going to do this more for the love of the game than for money or for, you know, other motivations that were very salient for most of the time. But and then what should Dropbox be? It might be OK if it's just like, yeah, we did it. We synced the files like you're good. No thumb drives. Now I should go and move on. You know, there's a lot of stuff I could be doing. And there's sort of this like tech bro ascendancy that you go through like, oh, I'm going to go to space. I'm going to do flying cars. I'm going to do climate i'm gonna do cancer so i was like should i just do that um but that reconnecting to purpose and that like hard hard at the beginning of that hard time was like really important for me personally because i'm like all right or like i'm choosing this life like i'm so like i can't complain about it i get to do this this is you know some level of gratitude and there's a lot of mindfulness stuff that helps sort of frame these kinds of things for you um so like a meditation practice some coaching was helpful to me in getting kind of you know untwisted around the axle of, um, frustration.

1:07:27Um, and then I was like, all right, well, what problems really need solving in the world? Like I, you know, it's hard to argue that no one would have figured out that you're like, iPhone should be backed up to the cloud or that you should have like a photo gallery that has like your whole life. Like maybe we're the first to commercialize some of these things, but we could probably do something better than just like invent an obvious thing 10 minutes before Google does. Um, and the, and I'm like, where are the problems really not solving themselves. And I felt like in productivity, that was actually, there's like this whole other set of issues.

1:07:58So specifically, you know, during this period, it wasn't just like the external competitive difficulties. It was also just like internal experience running the company. It was really rough. I'm like, God, I went from like coding for the rush in, you know, a little apartment to now have this like a thousand person team. And And I'm like, this subjectively is like not that fun. Like I'm just in like meetings all day, email all night, sleep, repeat. Manager mode. Yeah. And I'm like, and I'm like, not doing anything creative. But I'm just like busy and overwhelmed all the time. And I'm like, what's going on?

1:08:41I'm like, work had just become this treadmill. And, you know, I felt a little sorry for myself about that for a while. but I'm like, all right, but wait a minute. Like everybody else is on this same treadmill too. And like, it's really weird that, um, I'm like, why is my like brain like stuck in first gear? Um, and I interviewed a guy who worked at SpaceX. He was a director of engineering at SpaceX. And I was like, Oh, that's so cool. Like you guys are actually going to Mars. Like, how does that work? How's the company work? How do you guys work together? And he's like, what do you mean? I'm like, I don't know.

1:09:15Like how do you collaborate? What tools do you use? What's it like at SpaceX? You know, what's it going to take to put someone on Mars? And his answer was basically like a lot of emails and a lot of files. And like a switch flip for me, I'm like, oh, wait, yeah, usually we think about technology as this like amplifier. But it's also like the limiting factor from another perspective. Like we can only go as fast as like our tools will let us. And there was like this new round of productivity tools, things like Slack and others where the tools could kind of flip from like helping us do the work to like becoming the work.

1:09:48Yeah. Like when I visited my dad at, at his job, when I was a kid, you know, a lot of things were the same. Like you'd go into his office, he had a PC, he had a phone. But a lot of things were different. Like he could close a door, you know, he got five emails a day, not 500. He could turn off his phone. And when he would come home from work, like he would like literally put a briefcase down and like not think about work till the next day. And I'm like, wow, that's just like not our setup here. And you can see like for him, each new tool, like, oh, a Google search saved like, I don't know, like making a phone call or going to a library or something.

1:10:24But at some point as you go from like 10 tools to 100 tools, 1 ,000 tools, things break. Much as they did for TV, like as we went from like 10 channels to 100 channels to 1 ,000 channels, Comcast was just like, what? Like we're just giving people what they want. But as you're like trying to sift through all that, and like, I just want to watch the Super Bowl. You're like, wait, this is, this broke somewhere. And what we needed was not like another thousand channels. What we needed like was a rethink of the system. And we actually needed like Netflix, which was rethought from a design perspective, but then also use like machine learning and other things to kind of curate that experience for you.

1:10:59And I felt like we were sort of in like the Comcast era of productivity tools, where we're just like throwing more logs on the fire, more stuff, more messages. And then wondering why like, yeah, as these tools are like pinging us 24 seven, interrupting us, overwhelming us, distracting us. Is it really that much of a coincidence that we have this like new epidemic of like knowledge worker burnout in a world where, you know, modern work has like 50 % of the, of the time is just spent on like bullshit tasks that don't matter. And the other 50 % is like totally distracted and overwhelmed. I'm like, that seems like a problem.

1:11:34And like, why is, why is no one fixing it? Just for context, this sort of period of self-reflection when you're thinking about all this and sort of thinking about purpose and was this before or after your company went public before okay so this is all happening like pre-2018 okay okay this is all that swirl in the you know competitive yeah 16 15 16 okay so you focused on this i guess morale must have gone up and profitability like everything seemed to be working yeah we said then we we were like able to grind forward and be like all right well let's stop doing the things that are just never going to work let's stop spending money dumb ways okay so that that at least got our like head above water a little bit um and then and then fortunately we had you know we talked earlier about all this work we had done to design dropbox the product but um what ended up being equally pivotal pivotal and probably more important for this period was the stuff we did around like distribution and growth um so back in 2007 when we started dropbox um that was the period where like social media and like gaming were all taking off and there was this whole playbook for consumer internet and how you scale um that funny enough was actually transplanted from epidemiology it turns out the way that disease you have covid spreads and are not and things like that actually transplanted perfectly to how viral apps spread.

1:13:00Like, all right, how many people do you reach? What's the conversion rate of other people? That's interesting. So draw your own terrifying conclusions. Yikes. But so people had done this in a consumer context, but we actually took a lot of this playbook and ended up applying it to business software, which is a pretty big inversion from how most other companies had done this. So Dropbox was like this self-serve viral product. I mean, we tried a bunch of other distribution mechanisms. We tried partnering. We tried conventional marketing. We tried buying AdWords. none of that stuff worked what really worked were these viral mechanisms of like if i share a folder with you you become a dropbox user you go on and share and it sort of spreads that way um we had this referral program where we kind of gamified giving people extra space where if i get if i told you about dropbox you would get extra space i would get extra space of this two-sided incentive ended up like those two things accounted for the majority of our signups and they're zero cost and they're infinitely scalable so um therefore like you know especially as we're wrapping my our heads around the financials like oh yeah this is how we can be like you know spend half as much on sales and marketing as a traditional enterprise software company we can totally invert this model that starts out like top-down sale via sales people you like make a purchase then you deploy the product like that's sort of the conventional thing we turned all those things upside down so like actually people adopt dropbox in the company before they even pay for it it's a bottoms-up adoption you know the top-down piece only comes later um and like the product's already working before you even there's not like an rfp or something like dropbox is already like the way the company's um collaborating so um that ended up being really pivotal um the the distribution and the monetization piece because then it meant we just kept scaling and so we were able to hit a billion in revenue in 2017 and that t to say and then like a lot of sufficiency work and fiscal discipline and operational excellence.

1:14:51There had to be kind of this cultural shift around professionalizing the company that then teed us up to go public in 2018. Did you have trepidation about being a public company CEO? So trepidation, yes, absolutely. And, you know, you hear horror stories about how you just can't focus on anything but the next quarter and it's screwing things up. And it's also sort of a threshold where, like, you know, generally people join companies. The startup stories don't usually talk about life after IPO. It's like all the stuff that happens up to that. And I heard those things pretty consistently. I think there were a couple of things that were also informative.

1:15:33So most of the value appreciation happens when these companies are public, after they're public, not before. So if you think about it, Netflix is many hundreds or thousands of times more valuable today than when it was pre-IPO. Microsoft went public at a couple hundred million dollar valuation. And actually, some of the best inventions happened well after the IPO, not before. So things like Windows and the iPhone all happened when these companies were public. So I think the narrative of like, oh, you're sort of, you know, you're just destined for irrelevance or stagnation certainly doesn't have to be true.

1:16:10Another piece that is really important is control. So we had put in dual class shares for a bunch of reasons. Like Arash and I wanted to be the long-term stewards of the company, certainly while we were involved. So what you do is you basically take your existing capital structure, shareholder base. You give everybody 10-vote stock. You give new people, new employees, new investors, one-vote stock after that. So you do this kind of flip. But then any time the stock changes hands, it down converts. So you basically have this concentration of voting power with the founders if everybody else sells and you don't.

1:16:44And so the reason that matters is because it's not just for like control for control's sake. It's actually with public companies, a lot of the things that are really difficult is like dealing with, you know, bad actors who are sort of using your company as like a tutel for other ends or like rating it or, you know. That was what I really wanted to avoid. but then also just like to be able to maintain it's like your company is going to have a lot of volatility whether you want it to or not there's not really like an up and to the right but it doesn't mean like all founders should always have control all the time i think most of the founder-led value creation happens when you sort of power through those curves and there's usually points in the company where the founder and like everyone around them like disagrees Has that happened to you?

1:17:28Oh, yeah. With your board? Yeah. I mean, as a private company and public company. Not often, but it does happen. And any kind of hyperscaling company is going to have those moments where you have that kind of volatility. And this is sort of a religious argument. Should it be one share of one vote? Should it be dual class? So not really, you know, sort of like pick your church. Don't try to get in a religious war for like whatever, but, you know, decide on the church. And then for I do recommend for founders that you like put into a class if you want to go to distance and run the company indefinitely.

1:18:08Don't get removed against your will is certainly one big piece of your startup journey as a founder will end in probably like one of three ways. Like you'll get fired, you'll burn out, which we started talking about. or you like have some like happy, you know, voluntary transition. Like either you sell the company or you, you know, you're, you're, or you just retire or how, or it's your life's work. True. Yeah. Right. Yeah. Right. So I'm saying that, that would be in the happy zone. Like you just, you just go on as long as you want and then you sort of step off in a graceful way. But right now you're feeling good.

1:18:42You're energetic and can handle the chaos that we sevens can operate in, but it might not be best for the company. but you're doing well yeah yeah i'm so it's funny i'm you know it's been 18 years since that first line of code on that bus um i never set out to be like a long-term founder um i just was in fact when i initially started dropbox and things started taking off where we took sequoia's money i'm like this is really cool this is really stressful you know maybe i'll just like take this to i don't know 100 million valuation sell and then just sort of i don't know if this treadmill is just going to keep going faster and faster and faster and so suddenly like i'm violently not on it um that was what i thought might happen but then over time like the learning curve does flatten out to some extent and um and so it becomes you know the company's not scaling so much faster than your ability to like keep up with it um and um and then fortunately like as founder and CEO, you can sort of make the, unless it's like a completely different market, like the company has a funny way of being interested in what you're interested in.

1:19:53And so, you know, the first version of that, um, what helped, you know, in addition to like going public and focusing on productivity and stuff, but I'm like the, the bigger picture thing I want to accomplish is like, you know, helping people get back to being able to use their brains at work again. Um, and like, I think civilizationally, you know, hopefully, uh, five years from now, we'll look back at this period and be like, yeah, this was nuts. Like the whole knowledge work thing was predicated on like hiring someone for their brain and sitting them down at a screen and like letting that do its thing.

1:20:25And then we know from like brain science that, um, people do their best work when they're like in a flow states or can focus and they're not being distracted and they're like well-rested and all these things. And we're like, yeah, yeah, yeah, yeah, yeah. And so you jump over the fence to like what we actually do at work. It's like, if you wanted to design an environment that made it impossible to ever focus ever get into a flow state like what is going on under this window you know all these tabs all this shit like yes it's insane that is so out of sync and i'm like i want to solve that problem because that's sort of the moonshot that all these other moonshots depend on is like being able to get more return on our like brain power as a as individuals as companies as a you know knowledge economy um that's a big problem like we're not going to like solve that but i'm like that will keep me busy and you know everything that's happened with covid everything that's happened with generative ai like all these things are new colors to paint with it's super important to like ground yourself um in addition to like fixing your flaws or whatever like doing the enneagram and being getting coaching i think you also want something that's pulling you like okay there's a new um uh new mountain to climb and that you can also get everybody else excited about there's a lot continuity of what we're doing.

1:21:36I think in a lot of ways what Dropbox is doing today is solving the 2025 version of some pretty similar problems. And I've started by forgetting a thumb drive, but the real problem wasn't so much that. It was really just like, I can't find my stuff. I can't organize my stuff. I can't share my stuff. I can't keep myself safe. Back in the beginning, my stuff was my files and they were scattered across these different devices. um now fast forward that's shifted a lot and we still have files but mostly we're in our browser and we we've traded what used to be 100 files on our desktops now 100 tabs in our browser um but still a lot of the basic issues like i can't find stuff can't organize it share it um and you know search is a great example and it's an example of something we're working on with a new product it's insane that you know at home i have one search box i can just google something but then I go to work and I've got 10 search boxes, right?

1:22:28I've got one for each app. I get another one every year, but like no one thought this is a good idea. It's just something that sort of happened. It's like one of these problems hidden in plain sight. And I'm like, this is nuts. And it's especially important if you're like in a distributed or remote world, like one of the first things you lose is context and like just getting people the most basic information they need to do their jobs is actually really important in any context. And so like, why is search broken at work? So we built a new product called Dropbox Dash. that is designed to go after this.

1:22:58So it gives you one search box for everything. So you connect all your apps to it. And it's great. You can both do conventional search. So it'll search across your Google Docs and your Slack and your Dropbox. I didn't know about this. When did Dropbox Dash launch? So we launched it, the business version in October. So about two months ago. And we're just starting to scale it up. So this is gonna be the year of scaling Dash. You can also use, as you'd expect, like natural language. So for all the questions that chat GP, in addition to like conventional search, like find me this Google doc or find me this, you know, notion thing or whatever.

1:23:30You can also ask like, when does my lease expire or where's that product deck from last year? About this. I need this in my life. It's basically as if like, you know, the Silicon brain read all your stuff ever written in your company and was able to just give you the answer in natural language. Carolyn, let's get Y Combinator to get. But actually, we should get you guys on this. Totally. Let's do this. We will do this. Even organized people. I don't know what number I am because I haven't taken this test, although I really want to. But I'm really organized. But then I forget my own organizational structure.

1:24:07Yeah. So it's not about not being good at organizing. It's just really about like trying to remember, especially across, if you have a long career at a place, like you really, really need these kinds of tools. So that does sound really like a great, like a great thing to have built. Yeah, totally. And we're, and we're trying to tackle the whole, yeah, the whole problem. Because to your point, like some people like organizing, some people don't, but like at the end of the day, what you really want is to be organized. Yeah. And like, wouldn't it be great if that were sort of, you know, maybe it's not completely autonomously done for you, but if like most of the heavy lifting, if, you know, if all my papers on my virtual desk could sort of Mary Poppins themselves in the files.

1:24:48Why doesn't that work that way? You know, and again, it's sort of one of these, you know, we're the frogs in the boiling water where this just sort of happened over 20 years, like where we've had all this technological progress, but we have these missing these regressions and these missing obvious things. So, for example, and we talk about search being broken, but also just the idea of like having your stuff where you left it. You know, when you reboot your computer, your files are still there. When you wake up tomorrow, your physical papers are still on your desk. But in like browser land, your workspace just like resets itself every few days, either because you declare like tab bankruptcy and just nuke everything or like or your operating system updates in a weird way and it gets closed.

1:25:28But like, you know, it's kind of insane that this idea of like picking up where you left off is just like not a thing in the modern world. And even just organizing things in any form, like files have folders, songs have playlists for good reason. You're like, OK, links have. Right. There's just no like collection concept. So, you know, what do you do if you want to put a Google Doc and a 10 gig 4K video and an air table on one container? There's no like mixed format container that handles that. What if you want to share these things? No way to do that. So, again, problems hidden in plain sight.

1:26:02A lot of the same genre of thing that we have a lot of experience with in Dropbox. And, you know, in many cases, same customer, same job to be done. But yeah, like, yeah, why is it, you know, I didn't like emailing myself files. I also, there's all these other paper cuts we're talking about. I still do that. I do too. So it's called Drop Dash? Dropbox Dash. Dropbox Dash. Dropbox Dash. Carolyn, we're getting on this. Okay. Y Combinator. Or Dropbox.com slash dash. Okay. Awesome. And so yeah, we have this like smart, and then we also make sharing really smart. So it's sort of inspired by like Spotify playlists.

1:26:33Like when you add a couple songs, you don't have to like search for every song one at a time. It sort of starts making smart recommendations. And that's how the whole consumer internet world works. When you log into Netflix, it's not like, here's all the movies starting with A. It's like, no, here's based on what the world is watching and what you're watching. It's like a learning system that gets smarter. And then, yeah, Netflix works that way. Spotify works that way. YouTube works that way. Everything works that way. Then why do we go to work and nothing works that way? So fortunately, what makes technology a good business is for every problem it solves, it creates one or two new ones.

1:27:06So it keeps us in business. That's the truth. It keeps us in business. Well, this has been so much fun. Like, not only did we get to walk down memory lane, but I've also learned a bunch of new things. And I think our listeners are going to be fascinated. And your story, even outside of just its longevity, is inspiring at every step of the way, at every chapter of Dropbox. I can't wait to talk to you in another 18 years. 18 years. And see. I'm still coding like an 18-year-old. I'm still like, you know, again, like finding the things that give you like joy, like that's still a big part of my equation for how to.

1:27:44Your son will be coding. Prototype things myself. He sure will. Halfway. How old is he now? He's 15 months. He's got it. He's got it. Charlie, my little guy. Three and a half years before you're going to be like, all right. Yeah. The clock is running. He loves buttons. He loves and he will mash any keyboard or mouse. Oh boy. This is, I think this is a sign. Yeah. Thank you for all your time. I had so much fun catching up. It's going to be a great episode. And I can't wait to see you in person. Likewise. Well, thank you, Jessica. Thanks, Carolyn. All right. We'll see you soon. Yeah, my pleasure.

1:28:24Okay. Bye, Drew. Bye. Oh, that was so much fun catching up with Drew. It was a good long conversation. He had a ton of good stuff in there. I love when there's time to really dig into stuff. I learned so much about him that I didn't know. Yeah. You know, the thing that really stuck out to me is how, um, like serendipitous that meeting with the SpaceX guy was. And that's why I was trying to get context from him on like, when did that happen? And it sounds like almost that was so rejuvenating for him. And so inspiring that like he then carried him into, you know, actually taking the company public.

1:29:00Like that was part of that trajectory. So like, what a serendipitous moment, you know? Well, yeah. And here's what I wanted to know about. I mean, he even said he had been doing really well and then he was failing publicly. He had been a high flyer. And how do you dig yourself out of that hole? You know, most companies just die or become super irrelevant. It just seems so rare to have all these struggles that are really big and pick yourself up and still be able to go public and flourish. I'm so impressed with him. Yeah. Also kind of important is that it's been 18 years. This has been an 18 year journey for him.

1:29:42Yeah. That's a long time. He's stuck at it. He's been successful. He's obviously experienced, you know, pitfalls and figured it out. And he's kind of low-key about it all and that's really impressive he perseveres clearly yeah and just finally i'm so impressed with all the stuff drew did to make himself a better leader and ceo it's a ton of work but it makes such a difference when you're playing at at his level oh i was just gonna say like that's a you know in your free time you could just watch television or get on twitter and instead like he did his full-time job and then went to work on himself and like that is impressive really impressive he's so impressive oh yeah i loved catching up with him i think it's going to be a really interesting episode yeah i'm glad we got him for such a good amount of time too yeah all right see levy i'll see you soon okay see you soon bye bye