Blitzscaling 18: Brian Chesky on Launching Airbnb and the Challenges of Scale

- It's a great honor for us to have Brian Chesky here. Brian's obviously CEO and co-founder of what I think is actually the most interesting of the up-and-coming unicorns on all kinds of levels. Not just the way the world should be, but also various things that I learn from Brian. I learn about design, I learn about, kind of, what are the right ways to be an entrepreneur in this set. And so, it's a great honor for us to have him here. Thank you for coming-- - Thank you, thank you. - Let's start with, it may be known, but it's worth starting with the story of Airbnb. - Yeah. - How did you get the idea? What were the early days like? - Right, right. Well, thanks, thanks everyone for listening. Sorry, my thing's coming out. So Airbnb, many people would say that, or a number of people said, "It's the worst idea that ever worked." Or, at least I can say everyone at the time seemed to say it was the worst idea ever, and it worked, so maybe that's the nice connection, it's the worst idea that ever worked. Airbnb, I'll just do a really quick, kind of, background before Airbnb. I'm different than most technology founders in so far as I actually went to art school. So I was an artist by training. I went to the Rhode Island School of Design. I don't know if you guys know that school. And I studied industrial design, and industrial design, I know they teach that here in Stanford. It's kind of like product design, everything from a toothbrush to a spaceship, they used to say, and everything in between. Bless you. And I, growing up, I never really thought about being an entrepreneur. I didn't even know that existed. I don't even know if I ever even heard the word entrepreneur. That would've been an almost absurd thing to say in upstate New York, where I grew up, to use that word. In fact, in hindsight the only entrepreneur I knew was Bob from Bob's Pizza. And I didn't really wanna have a pizza shop, so I don't think it would have occurred to me to start a company. My parents are both social workers. My mom used to have a joke. She said that I chose a job for the love and I made no money, so you should choose a job for the money. And I said, "Well I'm going to art school." And she said, "Oh my God. "You chose the only path in life "that's gonna pay less than a social worker "cause you're gonna be an artist and get paid nothing." And so she said, "If you do that, "make sure you don't move back home, "live in my basement. "Make sure that you get a job one day "and that if you get that job, "make sure that job has health insurance." And this was like a grand ambition for my parents. So it wasn't about starting any kind of big company, or scaling up a company. And so I wasn't going to be able to call my parents, "Oh my God, what do I do? "I have 100 employees, how do I scale?" That wasn't going to happen in my family. I ended up going to RISD, and the school had a profound impact on me, probably much like here in Stanford, because growing up you're taught to look straight ahead. Growing up, you don't get rewarded for being disruptive, you just go to the Principal's office. And I was there, quite often. And so, got to RISD and teachers were like, "You're a designer, you can redesign everything around you." Basically, they're saying is you can change the world. That's not something that most parents tell their kids. "You can change the world." They tell you to behave. And so I ended up, one other thing happened at RISD, I met my co-founder, one of my co-founders at RISD, named Joe Gebbia. One day, Joe says, "Brian, I think my neighbor and I "are gonna start a company together." Well, I'm living in L.A. working as an industrial designer, and I remember my life, and you, maybe, confront these decisions, where everything in front of me in my life looks like everything behind me. In other words, the road is like a disappearing road into horizon, and it kinda terrified me, because it was that job with health insurance. And at RISD, I was told, no I can do anything. I can change the world, and you're not doing that. And so, I had this impulsive moment, where I go into work and my roommate, or my friend, Joe at RISD, was tryin' to like convince me to leave my company and go to San Francisco, and we were gonna start a company. We had no idea what this company was gonna be. We just thought, we'll think of the big idea. And so, one day I go to work, I quit my job, and I'm living in a house with a bunch of friends that moved across the country with me, and I say, "OK guys, I'm gonna leave." And they thought I had, like, an early life crisis. They thought they need to have an intervention, but no, no, I'm fine. And I took some old foam mattress, I rolled it up in the back seat of an old Honda Civic. With a thousand dollars in the bank, I drive up to San Francisco. This is October 2007. I get to San Francisco and Joe tells me the rent is $1,150. I didn't have enough money for rent. That weekend, this international design conference was coming to San Francisco. We went to this conference website, and we notice in the conference website, they had like a hotels tab and we clicked on the hotels tab. And in the hotels tab, there are always hotels and next to every hotel, it said, "sold out", "sold out", "sold out." And at that point, we just had this idea. We said, "Well, designers need a place to stay, "we literally have no money, "in fact I don't know how I'm gonna make rent." So we thought, what if we just created a bed and breakfast for the design conference? Naturally, that's maybe not what most of you would think to do, but that's what we thought to do. You know, go to RISD, you're like, "Oh, I've got a creative solution." So we thought, "Let's create a designer bed and breakfast "for the conference." Unfortunately, I didn't have any beds. Joe had, he just moved up there. It would be like a floor and breakfast. That's like not the best thing. And so, Joe had three air beds. He had gone camping, and he had kept some air beds. And we pulled the air beds out of the closet, we inflated the air beds, and we called it The Air Bed and Breakfast. And that's where the name comes from. Airbedandbreakfast.com So a lot of people hear the name, they think it's like, air is like the platform and bnb is the house. No, it's just air beds. That's all this was. (laughter) This was just air beds. And so, we end up hosting three people from around the world. A 35 year-old woman from Boston, a 45 year-old father of five from Utah, and a 30 year-old from India. And, now, I gotta tell you, the reason we started doing this is 'cause we thought it was funny, cool and we'd make money. 'Cause we had to make rent. There's something that happens, though. When somebody lives with you, it's kind of like the arc of a friendship gets contracted from a year to a day. In other words, if you were to meet somebody, maybe here at Stanford, or in the real world, and you get to know them, how much time does it take to like invite them over to your house and have dinner with them? It might take months, even a year. You don't just get to know people. And it, what it did we realized, is it contracted this year long friendship into a couple days. And so these people came as strangers, they literally left as friends. We ended up keeping in touch with them. In fact, one of the guests ended up inviting me to his wedding. The other guest, this woman, moves from Boston to San Francisco. And I think we're realizing there's a bigger idea here. I asked Joe, I said, "Who's the best engineer you know?" 'Cause Joe and I were designers. Joe could do front-end engineering, but we were both designers and product people. And Joe said, "Well, my old roommate, Nate is." Nate, Joe met on Craig's List. He went to Harvard, he was a computer scientist. And so the three of us got together and we said, we basically had this core idea. We said, what if you could book someone's home the way you could book a hotel, anywhere in the world? And that's basically how it started. The one caveat I'll make to the story is, after that very first weekend, there wasn't this flash that, "Oh my God, "this is gonna be huge!" We actually didn't do anything for four months. In fact, the thing we don't usually talk about, is after that, we started exploring creating a roommate matching website. 'Cause we thought no one would ever do this Air Bed and Breakfast thing, but people need roommates. And we thought roommates meets Craig's List meets FaceBook. Roommates with profiles. Until one day we typed roommates.com in and realized somebody had built that site. (laughter) And this was like three weeks or four weeks later and I said, "Why the hell didn't anyone "type that site in the first day?" 'Cause I just wasted four weeks. (laughter) So, we didn't know what to do. We went home for Christmas, and people are like, "What are you workin' on?" And I'm like, I didn't want to tell everyone in my family I was unemployed. So I said, "I'm an entrepreneur." Of course, my mom said, "You're actually unemployed." I said, "No, I'm actually an entrepreneur." And that's also when I learned, when you're starting out, the difference between unemployed and being an entrepreneur is in your head, It's usually a mind set. And I was, in my head, an entrepreneur. And they said, "Well, what are you entrepreneuring?" And I'm like, 'cause it wasn't really a common word there, and I said, "Well I got this thing, Air Bed and Breakfast." They're like, "Air Bed and what?" And we just started to get used to pitching it. We're like, "Maybe we should actually do this." And, it was still not obvious. The original idea was airbeds for conferences. So we ended up launching at South by Southwest in 2008. And we just, that whole idea was, if you're going to a conference and you don't have a lot of money, you could sleep in someone's home on their air bed. And we ended up, the second version of the website we built, and we had two customers, and I was one of 'em. So that's kind of how it started. It was frankly, it wasn't the FaceBook story, two weeks. It was a longer road. - By the way, I hadn't known the roommates thing until just now. - Yeah. We don't usually talk about that. - My first start-up, myself, was called Socialnet. And it was a social platform for a variety of matching services, it included a roommate service. - Nice! - And that was in '97. - We both, we're kind of circling similar ideas. - I didn't actually realize I was, we had dating, professional networking, activities and roommates. Those were the four things. - That's amazing. - That's hilarious, I had no idea. - Yeah, the idea was that like Air Bed and Breakfast was not the big idea. We thought there was a big idea and we didn't think it was that. We thought it would pay the rent so we had enough time to think of the big idea. And we thought the big idea was some social networking something. And, of course it turned out that the crazy little idea that we thought no one else would do, became the big idea. And I think there were a couple lessons there. Number one, all these really good ideas or big ideas often sound like stupid ideas. Somebody once told me in the early days, don't worry about anyone stealing your idea. If it's any good, everyone will dismiss it. And that was exactly the truth. And the second thing was that a lot of these ideas are you solving your own problem. And they're not some life changing problem, it's in a nuisance. And that was clearly the case for us. - So tell us a little bit about the early days. You really had to hustle to keep it going. - Oh man, so we're one of the companies that launched a bunch of times. I actually learned something, 'Cause, we kept doing launches to get a lot of press. If you launch and no one notices, you can actually just keep launching. (laughter) And so, we just kept launching. Like, "We've launched!" And people would keep writing about it, as if we launched. We're like, we'll just keep launching until we get customers. And we would change things and change the name, and we'd launch again. And so the first so-called launch was that first weekend, but that was just three people. The second launch was Air Beds and Conference United States. And we had two customers, I was one of them. And so we decided, we'll launch at least one more time. When I, I used it in South by Southwest. At the time, there was no payments and you had to stay in an airbed. And a bunch of people was telling me a bunch of things. They said, "Why do I have to... "like, I want to go to London, but there's no conference." And we're like, "Why does this "have to be for conferences?" At the time, that wasn't even obvious. Why would anyone stay in anyone's home if there wasn't a conference? It would be too weird. And then we thought, "Wait, why does it have to be on air beds?" At the time actually, we had a rule. You had to have an air bed, so you had to inflate an air bed and put it on your mattress. (laughter) And everybody was like, "Why am I putting air beds on my mattress? "It's so uncomfortable. "And I wake up on one side of the bed "and I wake up and the other "it's like rolled around me, it's hot." We're like, "OK, fine. "You don't need to have an air mattress. "You may have a real bed." And the final thing was payments. We may very well be the first website on the internet where you could actually book with somebody else and pay them directly. In other words, there was Ebay. And Ebay used PayPal, but you didn't feel -- - Before PayPal, there was checks. - There was, yeah, yeah, checks. Exactly. And we had, there wasn't a lot of legacy there. 'Cause we looked at, there was Ebay and Etsy. And they were both before us. And Etsy used PayPal and both of them you would book, and it would send you on a PayPal gateway. And we want it to feel like booking a hotel. You never leave Airbnb. We would hold, collect and remit the money. And so, where as they were paying direct and they would take a cut and there was two different payments, so... And that was kind of a crazy idea. It almost scared us. It seemed insane that you would actually be able to pay somebody else and be able to book something with them, and you would get a reputation system. We decided, let's just do it. And at the time we're like, "This is a little too crazy. "It's a little too scary. "I don't know if we're allowed to do this. "I'm not sure if it will work." We decided to do it anyway. So then, in the summer of 2008, we ended up basically designing the final version of the product. So, we designed this product where you could book someone's home anywhere in the world. We had a rule, three-clicks-to-book-it button. Because there were so many clicks and so many different ways to get a home that it was just too hard. And I remember hearing the story of when Steve Jobs developing the iPod, no matter where he was in his iPod, he wanted to make sure he was always three clicks from a song. And we said, you should always be three clicks from being able to have a paid booking. And so we created this, basically a home page with a search bar, listings, the home and that's exactly the product as you see it today, with reviews, payment system and customer service. And we basically ended up landing on that. But that was the third version of the product. We kept basically redoing the product. At this point, I get introduced to a whole bunch of investors. Probably 15 angel investors. We were raising $100 to $150 thousand dollars at a $1.5 million valuation. We were at $1 million and eventually someone convinced us we'd get $1.5 million valuation. An extra $50,000. So we were trying to sell 10% of the company for about $150,000 and of the 15 people we got introduced to, I think about, you know, we got introduced over email. I think about six, seven or eight of 'em didn't even reply to the email so we never heard from 'em again. About seven or eight replied, of those, half of them said, "This doesn't fit my investment thesis." Which is weird, 'cause their investment thesis was like consumer internet companies, we were consumer internet. So I assumed that we fit their thesis, but we didn't. Or they said the market wasn't big enough. One person said, "I'm just not excited about travel as a category." So we're like, "Okay." And then we ended up meeting a few more investors and they all passed on us. The low point was, we ended up launching in August 2008, we meet with the angel, Mike Maples. And we decided, I was so cocky I said, "I'm not even bringing a deck. "I'm just gonna show him the live website." We launched that day on TechCrunch. We had 10,000 people visit our website. I go there without a deck. I have a website, I type in the website, it doesn't work. So I basically sat in front of him for like an hour, and I didn't know what to say. I'm trying to explain to him this concept, and he's like, "I have no idea what you're talking about." So, needless to say -- - Mike's never told me that story. - Yeah, yeah, yeah it was pretty embarrassing. And, always have a deck. As a backup if your website goes down, or a least just don't let your website go down if you're meeting an investor and it's the last money you have. So, you know those binders that kids used to put baseball cards in the sleeves? We put credit cards in them. We probably, I probably went $30,000 in credit card debt. I would get credit cards, like a typical $5,000 max and I would just keep getting credit cards till the companies stopped giving me credit cards. And Joe did the same thing. And you know, we went tens of thousands of dollars in credit card debt. We ended up launching for the Democratic National Convention, though. And we were able to -- So 2008, what was like, the number -- We had this basic idea, we need to get people to talk about us and we had this thing called the chicken and egg problem. How do you get guests come without homes? Well, you can't get homes if there's no guests. Now, how do you get them at the same time? And how do you do that on a travel website where you can't just focus on one city, 'cause people go to other cities. So you have to focus on cities all over the world at the same time. And basically, the thing we thought is we need to just get a ton of press. So it's like this spontaneous combustion at the same time. And so we thought, maybe events, higher profile versions of the founding event. And just thought, what's a high profile event? And we thought, the Democratic National Convention. Barack Obama was coming to Denver. There were 80,000 people coming or there was an 80,000 seat football stadium and they had 27,000 hotel rooms. We thought, "Wow! There's an opportunity here." Plus, it's very grass roots. And we contacted New York Times, CNN and they thought, "What are you talking about? This is crazy. "No one's ever gonna stay with other people." So we ended up just reaching out to the local newspapers. They ignored us, and we had this idea, why don't we just start by getting anyone to write about us? We felt like if some people write about us, other people would refer to them. So we literally started with bloggers. I wouldn't be surprised if some middle-school student wrote about us for the school paper. But, if we literally got bloggers to write about us, then people would Google "DNC," they would see us come up, 'cause all these bloggers wrote about us. Then the local newspapers would write about us and eventually we worked our way up until CNN, New York Times got it. It started getting traction, but we were still in debt. We got 80 bookings, or maybe less, for the Democratic National Convention. We got one or two bookings for the Republican National Convention. That did not work out too well. And then, the following weekend, we got no bookings. We realized, if only there were political conventions every week, we'd have a business. But we have nothing. So, this is now almost a year into the business. We're tens of thousands of dollars in credit card debt, every investors said no to us, we've launched three times, we've got national press, and we have almost no customers every single day. And now my, one of my co-founders decides he's moving to Boston, he's getting engaged, and his fiance's maybe not interested in living in the west coast and it was unclear if we were gonna stay together as a founding team. Everyone hits rock bottom, for me this was rock bottom. We're totally in debt, we don't know what to do, we're desperate, late at night, it's midnight, maybe one in the morning, and Joe and I think, maybe, we're Air Bed and Breakfast, the air beds aren't working out, maybe we could sell breakfast. (laughter) I mean everyone needs to eat! So we thought, "Let's just get in the breakfast business." So, we ended up making, we weren't gonna make eggs so we decided, "Let's make cereal." So we started making breakfast cereal. And we made presidential-themed breakfast cereal. We made a Barack Obama themed cereal. We called it Obama Oh's, The Breakfast of Change. And we created John McCain themed cereal. We called it Capt'n McCain's, A Maverick in Every Bite. And we literally hand crafted our own cereal boxes. And we basically used a gin up press and also, frankly desperation. And I hadn't been eating at this point, so I was probably also starting to get slightly delirious. But, we called General Mills, they were like, "What are you talking about? "You seriously think we're gonna make unlicensed presidential-themed cereal?" We're like, "Okay, I guess you won't." And so then, we called these medium-sized cereal companies. They're like, "Great, just send us a non-refundable check for $200,000." I'm like, "OK, that's not gonna work." So we found this guy in Berkley. He was an alumni of RISD. He says, "I can't print you 100,000 boxes of cereal, "but here's what I'll do. "I'll print you 1,000 boxes of cereal for free, "just give me a royalty." We're like, "Thank you!" One day, Joe comes back with 1,000 pieces of giant cardboard. I'm like, "What the hell is that?" He's like, "These are the cereal boxes." They were just pieces of cardboard we had to fold and glue into boxes. No one told me that. So, to fund the company we basically folded, like giant origami, 1,0000 boxes of collectible breakfast cereal, had to pack cereal in them, and we sold them for $40 a box. We thought who was going to pay $40 a box, but they were limited edition, so we hand numbered every one. We called it limited edition. And we ended up selling $30,000 of cereal. And that's actually how we funded the company. And now we have a core value. It's called, "Be a Cereal Entrepreneur" with cereal with a C. I know it's a bad joke, but... And that's basically how we started. And, this is the last part of the story. The last part of the story is, it was November 2008, (laughs) we got back to almost broke, it's more than a year in, we've launched three times, we've been on the national press, we have only a couple customers a day, everyone says this is crazy. I told one mentor of mine about this business. He said, "Brian, I hope that's not the only idea you're working on." My mom said, "If you need money, "you don't need to have strangers stay in your home. "Let me send you money." So people were very worried. And you start wondering about the decisions you've made in life to get here. So I could tell you, I didn't feel successful or smart, or talented at this moment. I felt like the world was against me. I'd go to sleep, my heard pounding every night. I'd wake up like wide awake, like what am I gonna do, how am I gonna get through the day? We have no money. And a bunch of people recommended we go into Y Combinator. And we were kind of like, "Well, we've already launched, "we're way beyond that." They're like, "you're dying." And we're like, "Okay, I guess we're not beyond anything "if we're dying." And so we meet with Paul Graham at Y Combinator. And he thought the idea was absolutely terrible. In fact he said, "People are actually doing this?" And I said, "Yeah." And the second question was, "What's wrong with them?" And I said, "Oh shit!" So I thought this was a really bad interview, but by the end of the interview, Joe hands him a box of Obama Oh's. And Paul Graham thought that we just bought this stupid box of cereal. And he's like, "No, this is how we funded the company." And Paul Graham said, "If you can convince people to pay $40 "for a $4 box of cereal, "maybe you can get strangers "to stay in other strangers homes." And he also liked us 'cause he said we were cockroaches. And he said, "It's an investment nuclear winter "and the only people that will survive are cockroaches "and you're a cockroach." (laughter) And so I'm like, "Thank you!" It was actually the nicest thing. For six months, that was the only compliment I got, was I was a cockroach. And I remember calling my mom like, "Mom! I'm a cockroach. "I got in!" So that's how we got into Y Combinator and that kinda was a turning point for us. - And so, but Y Combinator itself didn't make the numbers change. What was the thing that you did, or the couple of things that you did to change the inflection? - There were two -- is this still on? - Yeah. - There were two things. The first thing was Y Combinator did was, it basically created a structure for us to work on it full time, and live together. So in other words, we were all kind of working on it, but it was like everyone had other things going on in their life. And I think the enemy of a start-up is everyone else's life. It's true. You have a life and you have vacations and you have conferences and you go away and you do other stuff and it's like, that's the enemy of start-up. You know, Paul Graham used to say, "Start-ups don't die, they just fade away." And so, you know, we basically decided, for three months, Nate would move from Boston to San Francisco and we'd wake up at 8:00. We'd go to bed at midnight, seven days a week, and we'd work from eight to midnight, every single day. And seven days a week, we'd get a full night's sleep, but that was it. And we would, in that dedication for three to four months, created this real serious rhythm where we weren't doing other things. We were totally focused. That was the first thing. The second thing was, Paul Graham. I think the second thing was Paul Graham gave us a series of advice that probably changed our business forever. Probably the most important single piece of advice I got, which is probably advice that is probably the most important advice I can give you, or one of the most important advice, is he basically drew out this chart and he basically said, it's better to have 100 people that love you, 100 customers that love you, than a million customers that just sort of like you. In other words, if you have 100 people that absolutely love your product, they'll tell 100 people, and then they'll tell 100 people, or even 10 people, and this thing will grow. We call it growing virally. In fact, almost all movements in history have grown this way as well. There's like deeply passionate followers and they grow it. And they're customer advocates. And the problem is, in Silicon Valley, the general wisdom is, I need to build some app, this thing it needs to have this viral coefficient. I need to get millions of people to use it. And they gotta like it enough to share it. That's totally the wrong way to think about it, especially if you're in a service business like ours. So Paul Graham said, "All you have to do is get 100 people to like you. "Don't worry about millions of people." That was totally freeing. 'Cause until then I was like, "How the hell am I "gonna get a million people to do this "if I can't even get my mom or my sister to do it?" But I can find 100 people. And so we literally decided, do things that don't scale. If all you need to do is get 100 people to love you, do things that don't scale. It turns out, 100 people that love you is really hard, 'cause it's easy, 100 people to like you, 100 people to love you means you need to meet them. You need to understand their problem. And so we literally would fly, during Y Combinator, from Mountain View, we commuted from Mountain View to New York. We would go, Joe and I would go to New York, and we'd go door to door, 'cause New York was where most of our community was. And we would meet with every one of our hosts. And we'd live with them. We literally would live with them, we'd write their first reviews for the places. And in fact, I would go there and I would be like, "Wow, the photos are terrible! "This is actually a really nice house." And the host was like, "Well, I can't figure out "how to get photos onto my computer." This is before really the iPhone and high quality camera. This was like people had to plug a camera into their laptop. So we thought, "What if you just clicked a button "and a photographer next day would magically show up "and photograph your home?" And we thought that would be amazing. And so I went home with Joe and we borrowed a camera from one of our friends in Brooklyn who was a photographer, and we knocked on the door (knocking sound). And they're like, "Hello?" Yes, I'm here, the photographer. And they're like, "Wow, this is a small company. "The founders also photographing my home." (laughter) I used to also carry a bank ledger in my backpack. And if you need to get paid, I'd just write you out the check and knock on your door hand you a check. So, that was also a reminder of how small we were. But the point was that doing things that don't scale. If you just think about building something that even that just one person loves, it's super easy to create something a single person loves. Especially if it's a service. And then you go person by person. Once you have 100 people, then you just focus on figuring out how to scale that. And it's a totally different intellectual problem to scale something that 100 people love than figure out what that is. And that was a turning point for us. And so by April 2009, we had hundreds of people that loved us. People started booking. And it became clear there was a real business here. And we, Paul Graham said, "You have to be Ramen profitable by demo day." Demo day is the end of Y Combinator when everyone presents to investors. Well, he said, beginning of 2009, it wasn't clear there'd be any investors. Sequoia Capital had put out this slide deck, RIP good times. That was the worst possible thing for me to see at the time. I'm like, what do you mean good times? This last year has been the worst year of my life. What do you mean the good times are over? What's the next year gonna be like? (laughter) 'Cause it wasn't good the year before. I'm like, "Oh my God. I don't know what this means." And what it meant was, Paul Graham said there may be no, he actually told us this. He said there may be no investors at demo day. Can you imagine that? At Y Combinator, there may be zero investors at demo day. And so if you want to defer a batch because there may be no investors, you can. And we decided, well we can't defer, we're gonna die. So Paul Graham said, "Well there might not be investors "so if you're profitable you never need to get funding." And so we decided, let's be Ramen profitable. Ramen profitable means you're profitable if you just live on Ramen. And I'm like, "Well, that's more than I'm living on now. "So that's totally fine." And so by April, we were Ramen profitable. And Sequoia Capital invested $600,000. And at the time, that was a pretty big deal to get Sequoia Capital to invest. They hadn't invested in many, they invested in LinkedIn, they invested in Google, PayPal sort of like, oh my God. It was a huge legitimization event for us. I think at the point, the rest was kind of, I don't wanna say history 'cause we're gonna talk about what happened next, but that was the moment, at least, the product market fit happened. And then it went from building a product to kind of building a company. - And how did you start getting to, like, you had this initial community in New York. You actually got to know your customers very well, so you understood photography was key for unlocking the marketplace. You understood getting the host connected in really well was unlock the marketplace. How did you start then moving to many cities? - So the really unexpectedly great thing about our business was, it was, this word network effect gets kind of bastardized and it's unclear if it means anything any more 'cause everyone says they're in network effect, but we truly were a network. And I'll tell you how it happened. So we launched in New York. Or, we didn't even launch. I mean we launched anywhere that you could access the internet basically and there was Google Maps. But, New York was the big city we launched in. The thing is that we were a travel product in New York, which meant unlike other companies where the supply and demand, like Uber, the drivers and riders were in New York. On Airbnb, the hosts were in New York but the travelers came from all over the world. So people from all over the world would hear about and discover homes in New York. They would travel to New York, and they'd also travel to San Francisco, and then they'd go back to their city and they'd spread the idea. The other thing is they would go from a guest to a host. And so the network naturally grew. But we also targeted events, so... We targeted the Democratic National Convention. We built D.C. through the inauguration 2009. We focused on music festivals and concerts. The World Cup, the Olympics, these are early, not the most recent one, but the one before. So events and PR were probably the main ways that we bootstrapped. And then we built this one-click post-to-Craig's-List tool, that Craig's List allowed us to do until they shut it off a couple years into it. But, we allowed hosts to basically, we built a tool where they could, with the single click of a button, click and distribute their post to Craig's List to get more distribution. And so the listings would get re-listed onto Craig's List and they would feed back. We started a little bit of Google advertising. But the main way it grew was through word of mouth and PR. And PR, we used to promote the events. We didn't have any partnerships. We tried to partner with event companies. We tried to partner with, partnerships in your early stage company I found never work, 'cause there's so much red tape and paper that by the time you ever get done, you're dead. And so, but PR is super. If you've got an idea that's noteworthy, people will talk about it. And almost the more absurd the idea, in some ways, the better, because it's worth writing about. Like, it was absurd people were doing this so they couldn't stop writing about it. And so that was actually a good thing. Being kind of a provocative idea was good to get the word out. And then we thought, "if we just get enough people to use it, "they'll tell everyone else about it." And so this idea primarily grew through word of mouth. And then we would go to cities and then we would educate the host. We would do these meet-ups. So we'd go to a city, and we called it turning on a market. We would do a meet-up. We would meet the 10 or 20 hosts, we'd educate them. But the other thing is that, in San Francisco or here at Stanford, it's not novel for you to meet somebody who's started a website. That's like not a big deal and you just had 15 people come talk to you. You go to Boston, you go to Austin, Texas, you go to San Diego, most people don't go through their day-to-day meeting a person who built a product they've used. It's very novel. And if they liked the product, they wanna go meet that person. And so you're in town, so we literally went city by city. We went to Paris, we went to London. We'd meet the host, we'd educate them, and then one thing we'd didn't realize is, they would get so excited they met us and they thought we were reasonably nice people, that they would tell their friends about it. And their friends would start doing it. And they'd get more engaged. We noticed, after you meet us. you would get more engaged. And then we'd also photograph your home, give you tips, and so these markets started turning on. And we kept getting press. We kept having some funny Obama Oh's type stunt to get people to keep talking about us, and we just religiously focused on making sure customers really loved us. And we felt like if you loved us, you would tell more of your friends and eventually it would grow. - I think that's a great warm-up story. - Yeah. - And I'll get into scaling. Oh my god, I'm just warming up. Holy shit! - Yeah, exactly. (laughter) - What's next? - It's the canonical ideal one. So let's first start with a couple of things that you guys do very uniquely from all the other consumer internet. For example, because you and Joe are designers, you have an attention to design that's much more intense. - Even my socks, if you notice. - Yes, yes exactly. But you have this concept of seven-star design. - Yep, yep. So the concept goes as follows. On the internet, especially most marketplace businesses, the paradigm is five stars, right? So a YouTube video, Airbnb or Uber or whatever, it's five stars. And the problem with five stars is, five stars -- the only reason you would leave less than five stars is because it was horrible. If you rate an Uber ride four stars, your life might have been in danger. In other words, the bar to do five stars is really low. On Airbnb, the bar is, people actually do leave four and three star reviews. But our goal wasn't to get to a five star. 'Cause a five star might have been nice enough for other people to book it, but we wanted to build a product where you loved it so much you would tell everyone about it. And it would have a meaningful impact on your life. And we believe that travel has the impact to transform your life. I've taken trips and I've met people where it has an impact on your life. And we wanted to have that. And so we thought, what if you booked an Airbnb and we sold you a product and you didn't leave five stars, but you emailed the company asking for a sixth star. 'Cause the product was so good, you had to almost go above and beyond. And so we imagined, when we design products, we imagine this is what customers expect. They expect to have a five-star experience. And then we basically ask the intellectual question. Let's take airport pick up, for example. What's a five star-check-in experience on Airbnb? The five-star check-in experience is, they give you the address, you get to the house, you knock on the door and they're there. And they open the door and they let you in the house. And that's five-star. And anything worse than that, you start to leave -- Four stars is you call them, they're five minutes away, and you'll probably leave a four-star. One star is obviously they never showed up. So the bar's kind of low. You knock on the door and they open the door. That's a really low bar. So we asked, "Well, what's a six-star?" Well, a six-star is, they probably pick you up at the airport. So you don't knock on their door, they actually pick you up at the airport. So what's a seven-star review? You can actually play, this is kind of fun. Well, seven stars is, they don't pick you up at the airport, they send a limousine. And you open the limousine door, and they know that you like Pringles. Sorry, that was a weird example, but this is like improv so we're rolling with it. So there's Pringles there and there's coconut water and they know you are into surfing and there's some surfing magazine, even though you're in San Francisco, you're not going to surf, that's fine. So that's a seven-star. So what's an eight-star pickup? Well, an eight-star check-in is, you get to the airport and they're like, "We're coming." And you're like, "Where are you?" And all of a sudden, you see a giant elephant. An elephant is walking by the gate, the terminal. And there's a parade in your honor. You get on top of the elephant and you are paraded away. (laughter) And you said, "What's a nine-star check-in?" If that's an eight-star check-in, how do we get to nine stars? A nine-star check-in is, you get off the plane and you don't even -- the moment you step off the plane, there are 5,000 screaming 13 year old women and boys. And they're holding signs. I call it the Beatles check-in. It's the Beatles in 1964 coming to America. And they're just cheering for you, screaming for you. And you basically they follow you and they do a press conference in the front yard of your Airbnb. And so then, what's a 10-star check-in? (laughter) Well, I can go to 30 but I won't. 'Cause it'd be a long day. The 10-star is, you get to the airport, and there's a little card and it's got your name on it, and you're like, "Great! There's my ride." But you realize the person dressed in the limo suit is Elon Musk and he just takes you to space. (laughter) I've exaggerated to make a point. Usually we don't go all the way to 10. The whole point is that if you, if what you need to do is just find 100 people to love you, then it's very easy to take for granted that the five-star is what people expect, but to build something that people love, you almost need to do something more than they expect. And so, every moment is an opportunity to do something slightly more than people expect. And we play this out, you go all the way to 10. Now, we're not gonna do all that, but maybe, suddenly six stars doesn't seem so bad. Now we should have a service, airport pickup or something like that. So we do this almost every frame of the experience. And this also can apply to almost anything. Office assign or how you hire people. You know, we storyboard, end-to-end, the interviewing experience. - I think one other thing in your seven-star design principle that you haven't yet captured, which is really important, is, it's not just the web page. It's not the mobile app. - Yes. Yeah, I think... One time I told somebody about our product. In fact, there's this person who works for the executive at Disney... I'm like, "Yeah, we have a product team." And he thought, "A product..." He said, "Product, do you mean, like, the house?" And at Airbnb, we've historically called the product the website and the applications, the technology. And I'm like, "Oh, that's kind of weird." See at FaceBook, Mark Zuckerberg calls the product the website or the app. But technically speaking, the product is whatever the customer's buying. The customers are not buying our website, and they're not buying our application. That's just a storefront of communication. What they're buying is a house. And frankly, what they're buying more than a house is the host. Experience of hospitality. This idea of belonging. And so, we realized very early on that we are an online-to-offline business. In fact, in China they're called O to O, online-to-offline. But we kind of started, I think the sharing economy... We're kind of like a next wave of the internet. So there was a wave of the internet, things online. Amazon, books online. There was another wave of the internet, connecting together. LinkedIn, FaceBook. But then there's another wave of the internet, the internet going back into the real world. And Airbnb was one of those examples. And so, we started storyboarding the experience and realizing it's really about every moment of the experience. And we have to be responsible, not just for the online part of the product, but the offline part of the product. And so that's what we did. - So, as a bridge to getting to how you also design culture, I think it's worth sharing with people how you also apply design to the office. - Yes. - As part of embodying culture. - Yeah. I feel like there's all these things... lemme back up and say, before I say that, let me say this, I consider myself a designer by trade but I think a designer... You know, Steve Jobs used to say, "Design isn't how something looks, "it's how something works." And I think when you realize design's how something works, you imagine almost everything needs thought and design. That you don't just design a website or an application, you design everything, you design a company. And you design your organization, you design your buildings, everything. And so, we started thinking, once you realize everything can be designed, then you don't have to pull everything out of a box and plug it in. In other words, your company doesn't need to look like every other company. Everything can be reinvented. Now, not everything should be reinvented. You shouldn't reinvent management, and HR systems, but there are some basic things that might be core that you should reinvent. And for us, we decided the space we work in should be reinvented. First of all, our core competency was showing cool space around the world. We better have a cool space. And I also realized early on that a really cool, interesting space would be a huge differentiator to hire people and that you would spend more time in your office than you will in your home. And so it was deeply important that people were comfortable and happy. And so that was the kind of hypothesis and I think it's pretty much a no-brainer, but I think that it's a moment that people completely take for granted. It's totally a afterthought. And, I said that's great that it's an afterthought for everyone else. It's going to be a competetive advantage for us. And one of the things we decided was, how can we reinvent the office? There were like 100 ideas, but I'll just give you one of 'em. One of our offices that we had, you walk in the lobby and there were photos of our homes around the world. And so you go to this lobby, and I remember people were just walking in our lobby and lookin' at all of these homes, like, "Oh, these are awesome." And I thought, I couldn't figure it out, but I thought there's gotta be a better way than just showing photos of our homes. And I couldn't figure it out. One day, I'm walking home, I'm walking from my house to -- I'm walking down the street. And I pass a furniture store and it's late at night and the furniture store was lit up. They light it up at night and it's like, there's a floor to ceiling window. And I just look in and it's a showroom. They've basically recreated these rooms. And it was hilarious. I thought it'd be really funny just to have a meeting in the showroom. And in fact, the next day I took somebody to a meeting in the showroom and we were hanging out in the dining room of a furniture store, but you feel like you're in a living room. It was actually kind of fun. It was kind of absurd. You're like having a meeting in Ikea, but it was actually kind of fun. And suddenly we realize, what if all of our meeting rooms were actually modeled piece by piece after apartments on our website. And we ended up doing that. And so, I remember one time we emailed somebody. We said, "Hey, do you mind if we recreate your home "in our office?" And they were like, "What?" And I'm like, "Yeah, all I need is an inventory "of everything in your home." And so some people did it, and we literally recreated the rooms. So you go there and our meeting rooms are literally homes you walk into. Like showrooms of our homes. It's a subtle little reinvention. It doesn't cost a lot of money 'cause people's homes, the furniture they put in is actually cheaper than most office furniture. It's really creative and we have tens of thousands of people a year who fly or come to our office to tour our office now. And our office has become a huge competitive advantage in hiring. And people like to stay over. But that's just a tiny example where almost everything is a creative opportunity. - And that was actually one of the ones that I was like, "Oh my God, this is a great idea!" Because part of what you're tryin' to do, and when you create a culture is you're tryin' to create a norm of what are we all focused on, what are we doing. - Yes. - And tactile visual-- - Yes. - Here it is, is awesome. - It's so critical that there's no dissonance between what's inside the building and what's outside the building. And I remember, I'd been to some companies before. Like one time I went to this travel company, this travel magazine. And I imagined their office being this awesome place and I don't know what I imagined, but I got there, it was gray, it was drop ceilings, cubicles and you could have put any logo on the front and it could have been literally any company. And I thought, people need to be in the mindset of your product. And so you have to put your product in the building. People need to be immersed in the world 'cause they're working in that world. And so when they work for you, that's kind of like they're working in the center of the universe. The center of the universe of your business needs to be the most potent. And the problem is, with most companies, it's the least potent. It's like just gray with drop ceilings and cubicles. And so I thought that was a huge opportunity to reinvent. And we've now had a lot of CEO's and other people come to our office to get inspiration, even as of last night I was showing somebody around. - Well, it certainly had that effect for me too. Actually before we get to design and culture, that actually brings up one other point that I think is useful. You spent, I think it was nearly a year. - Yes. - Living in Airbnb's. - Yes. - Why don't you say a little bit about why you did that and what you learned from it. - I did it out of kind of necessity. So here's the thing. When we started Airbnb, we started in our three bedroom apartment. And we started working on the apartment. And unlike most companies, most companies when they start hiring, they find an office space. And we decided we were gonna work out of our apartment indefinitely. In fact, originally we were inspired by Craig's List who works in a house. We thought, maybe we could put 100 people in a house. We didn't do that, thankfully. But we started working and we hired people so quickly, we couldn't find a office in time. At one point, we had I think 15 or 17 people working out of a three bedroom apartment. We literally had meetings in the bathroom and in the stairwell. It was kind of odd. By the way, never interview someone in the bathroom. It's apparently a huge violation. (laughter) But at some point, we had no space so we turned our bedrooms into meeting rooms. And I decided I'm just going to give my bedroom over to the company. You guys can turn it into a meeting room and I'll find a place to stay. And my first instinct was, well where do I go? I've never lived without roommates. So I'll go to roomates.com, I'll go to Craig's List. And then, I don't know, for some reason I thought, "Wait a second. "Why the hell will I go on Craig's List? "We have thousands of homes here in San Francisco. "Maybe I can rent one for the month. "Or a couple months." And then I thought, "Wait a second. "Why don't I just -- "Actually it'd be kind of fun if I stayed in them "for a few nights each and actually could test 'em. "And I could travel without leaving my city." And so I ended up doing this. I thought for a few weeks, turned into a few months, turned into almost a year, I think it was 10 or 11 months where I would stay in a different home every three to five nights. People were like, "Where are you from?" I'm like, "Three blocks away." And they're like wait a second, what's going on right now? But it was this huge message of the company and the message of the company was, this is not a job, this is not even a career, this is a calling, this is a passion. And I think a strong culture is when people believe and feel in what you're doing. And they're not, there's this old parable about two men. They're laying bricks, a guy comes up to one man he goes, "What are you building?" He goes, "I'm building a wall." He asks the other person, "What are you building?" He goes, "I'm building a cathedral." I think Simon Sinek wrote about it. But it's the idea that you're not... You're not building financial systems, you're not building a website, you're not designing different screens and mock ups. You're building this mission. You're creating this kind of world. And that's only possible if you're constantly using the product. And even if you're a travel company, you can be living and breathing the product. And I always felt like every one of us has to be a product person. You can't be a business person, you're a product person first and foremost. And product needs to rule, and product is the thing you're selling. So we need to be deeply passionate, all of us, about everything that we're doing with the product. And it really told people in the company, you should use the product when you travel. You should use the product when you're home. You should be hosting, and you should become an expert in every part of your product. And the number of people I see that work at some big companies where they are so disconnected from the end customer, those are the companies that get disrupted. - Yep. So the last piece on the, kinda, well, there's a lot of things that are unique about Airbnb, but the last thing from the point of view of the class before we get to the scaling part of it, designing culture. - Yep. - So part of the reason why we started with the role modeling with you as CEO, what you did to the office, those are two of the elements, but what are the other things? 'Cause the design of the culture was one of the things that I see you put more energy into than any other young entrepreneur. - Yeah, I... Culture, first of all, culture I define as a shared way of doing things. And so that's it. And I don't think there's necessarily good and bad cultures. You could argue there are cultures that are bad. That's usually subjective. I think there's weak cultures and strong cultures. And what I consider a bad cultures, others might consider good cultures. Just, that's the way they do things. And I wanted to have a strong culture. A culture where everyone was on a mission. It was shared and people were deeply passionate and there was a set way that certain things were done. And there were like a series of beliefs that we all had, and there were a few governing ideas. And so I decided we wanted to have a strong culture. We ended up touring Zappos. Alfred Lin's on our board. He ran Zappos with Tony Hsieh. And we did a lot of research. And one thing I learned is, a strong culture is a place where the founders, it's a founder-like culture and it's where the founders really impose this kind of strong kind of way of doing things that people buy into and they're deeply passionate about being there. And again it's not a job. Weak cultures, it's lame to hang out with your co-workers. Strong cultures, it's totally natural. And so the first thing I realized that the most important cultural event is every time you hire somebody. When you're starting a company, the most important cultural decisions you make are the people you surround yourself with. The second most important is deciding when people aren't fits, removing them. There's a hundred other cultures, but I think hiring's the most important thing to culture 'cause you're bringing people in and so the culture becomes the people around you. And so the main thing is the hiring. I decided to interview every single person which is not crazy when you're five employees, but I think I interviewed the first few hundred employees. I don't know what the number, but I remember people were begging me to stop interviewing employees. And about a year after that point they started begging, I actually did stop interviewing every employee. But I literally would interview every employee. And today, when you interview at Airbnb, you have to go through functional or technical interviews. So if you're an engineer, you go through engineering interviews or functional interviews, but you also have to go through culture interviews. And everyone goes through two. We have two people, 'cause sometimes, you know, you make the wrong decision. So we have two people. And the people are basically testing for six core values. I'll give you one example. One of our core values is to be a host. So are they passionate about the notion of giving and hospitality. And you can kind of tell by their life and their background if they are or not passionate about it. It's deeply hard to not be a host in your DNA and wanna work at Airbnb and be successful. It kind of is a weird thing. So you get to learn these things. So these are just some of the things. We created a core values council. It almost sounds like an absurd thing to say. At most companies, I don't know any one that really does that kind of stuff. Core values council, it's about 12 people that are experts in the values and the culture. And they're kind of this adviser group to everyone in the company. So people aren't sure if this is the way to do something or not. I don't know if this is something that feels on brand or not, you can kind of book office hours with these people and they can give you some feedback. So this is kind of some of the stuff we do. We try not to be overly dogmatic about culture. I think it can go too far where there's a set way of doing things you can never reinvent. So the things have to be timeless and more fundamental. Not like, this is how we make presentations. That's not culture. Culture, like, beliefs that should never change, under any technological conditions. - And how do you, I mean, obviously you've got a huge drive to that by personally getting it, and then evolving that into a practice that includes a cultural interview. What are the kinds of things that as you begin to hit the scale, 'cause that's the precise thing that one of the things-- - Yeah, you can no longer do it. So you have to basically be relentlessly doing cultural things every week. And so, I do as many cultural things as I used to do, but now they're no longer person-to-person. The main leverage points I have now with culture is having people do things on my behalf. You woulld call it leverage. They're doing it for you. So in the early days, I did all the interviews. Then I trained people, I hand picked people and I said you should do the interviews and here's what you interview for. So I spent days with them showing them how to interview. So then they started interviewing. Then we had all these people, so I had to create an inner circle that trained those people. I used to meet every single employee and give them a personal orientation. Then I started doing weekly orientations to groups of people. And now we've recorded it all 'cause we hire people all over the world and so we've institutionalized this whole on-boarding week and we carry all the videos and stories, I do the Sunday night email series, I think you've seen some of the emails. Every Sunday night, I write an email to the company that's not really a tactical email, but a more, kind of, above the trees, kind of, fairly thought provoking, kind of cultural email. Because I find that, if, on your first day, you say something to somebody, they kind of remember, but then a hundred people said a hundred things after that. So you have to continue to repeat things. So I think culture is about repetition. It's about repeating over and over and over again the things that really matter at a company. And then, it's about trying to design as many things, like the space, when you check in, there's a key card, and when you check your key card, above it says, "Champion the Mission" It's one of the values which is like, and it reminds you every day to do that. So there's a lot of subtle things that we do. And I think it's like that touch point. What is every moment that can be designed to reinforce how you want people to value things. And it all can be designed. I think culture, some people I've heard, when I wrote this blog post, it was based on what Peter Thiel said, called, "Don't Fuck Up the Culture". 'Cause I asked PeterThiel's advice, and he said, "Don't fuck up the culture." And I'm like, "Oh shit. How's that happen?" But he way you don't fuck up a culture is by focusing on it and designing it. I've heard people giving it counterpoint. There's devils advocate which is to say, cultures are organic. They shouldn't be designed, and when they're designed, they're fake and sloppy. I actually don't believe that, because most people who've created cultures organically wake up with a culture they don't usually love. Now that doesn't mean you control everything they do. The whole point of culture is you only control a few things. Like, everyone here's a host. And I'm not gonna tell you how to act, but I am gonna tell you, everyone here has to be hospitable. And that I'm gonna impose on everyone. If you don't like it, go somewhere else. So you pick just a few things. You can't pick everything 'cause then you're like Big Brother. - Yep. Culture is the norms that define what is the team that we're playing on and what is the winning condition. - Yes. - And how do we hold each other accountable, not through a hierarchy, but through a community. - Yes, that's right. - Each other. - And they work really well through peer accountability. - Yeah. That's why it's key. And as I was mentioning before the class, Reed Hastings also went into this. - Yeah. - A couple weeks ago. So let's go to the challenges of scale. So now... A substantial time in the wilderness. - Yes. - You know, vetting Obama Oh's - Yes. - And cereal and moving on to the breakfast part of it. And then financing, beginning to get customers to love you, beginning to get a network effect by which guests would come and then go be hosts and then be spreading the world. And so now you've begun to hit your product market fit and you've begun to scale it. What were the things that started changing for you that you had to now learn, now that you were scaling? - First one was-- - That's a long list. - Yeah. First one was hiring. I think hiring and then management of the people that you hired, that's still -- Starting in mid 2008 until today, that probably became and it sustained to be the most important thing. And when you're just starting, other than picking the right co-founders, which is also kind of like the most important thing, it ceases to be important. So, before product market fit other than your co-founders, to find people around you weren't the most important because you and your co-founders presumably could do most of the work. And it's just really on you to figure out almost everything. And so I found, before product market fit, I did everything. And I literally did everything but code. I did everything. And then post-product market fit, you do very little except manage, create a vision and hire people. And so suddenly you shift and you go from building a product to building a company that builds a product. Well, the company's mostly the people. And so I had to figure out how to find great people, attract them, recruit them, and then, craziest thing is once you hire these people, it's like what do I do now? I gotta manage them. How do you manage somebody? What does that even mean? I had never been managed or managed somebody in my life. I mean, I worked at a company before, but in hindsight, I don't think I was managed very closely. It was a small firm and I kinda did my thing. And I managed, I was like a camp counselor like at a hockey camp. That wasn't really management. They were like 12 year olds and I'd tell them how to skate, but that wasn't really management. So I'm like, "Oh God. "I don't really know what management is." And you're managing people older than you and that's also kind of weird. Like, "Oh my God." And so at first it's a really odd experience. So you kinda learn, partially through trial and error, by making tons of mistakes. Like, a classic management mistake, people complain, so you immediately appease them, so you basically reward people that complain. And the people who don't complain get disenfranchised, but they're not extroverted so they just leave the company. There's just these little things that are kind of, in hindsight, intuitive, but they seem counter-intuitive. And so I had to learn, I think learning to hire and manage was one really big thing. I think learning how to move towards, from an intuition to data informed. 'Cause I think when you're starting and building a product, I think data is not the most important thing. I know people do a lot of A/B tests to try to figure out a product. I really feel like pre-product market fit data is not the most important thing. It wasn't for us. We were really going off of person-to-person interactions. And then you have to work on moving towards data information. So, obviously A/B testing and cohorting and all these things that were completely foreign to me. Saving data, kind of building people, thinking more long term. When you're a start-up before product market fit, thinking long term seems preposterous, 'cause there may not be a long term. It's kind of like, if you're dying, you're not thinking about what you wanna do when you grow up. You're gonna think about how do I not die. And how do I plug this wound. So you kinda move out of this terminal -- you start thinking more terminal. I think those are probably some of the big things, but there were other things. Like actually having a plan, a road map, a strategy. You don't have plans in a start-up. You don't have strategies, you don't have road maps. Road map's the next two weeks, and suddenly, I got three engineers, they gotta know what to do for the next three months. And so you start creating road maps. You start having wish list. How am I gonna get the word out? How am I gonna span, so things like that. - Well the overall thesis on blitzscaling, as you know 'cause you're one of the people living it and doing it, is... what got you here is not what will get you there. And you're changing, like, you used to be entirely very short term focused where the results this week, today, this month matter, versus, what's my year plan? What am I actually, in fact, trying to make happen one, two years from today, which changes. The question of, "Am I doing it myself "or am I essentially first hiring people, "then hiring managers, then hiring executives, "and keeping a culture in that." The game changes as you're going. And so what got you here does not get you there. - That's one of the weird things. It's kind of like there's this perception that when you start a company, you grow a company. See, everyone when they ask me about Airbnb, they always ask me about the founding days. It's as if you have this idea, it takes off, and you just gotta find a way to manage it. And the truth is that so glosses over all the other stages. You have five stages. Stages two, three, four and five are as complicated or more complicated as stage one. I mean, I think stage one is actually fairly straight forward. Solve your own problem, do something you don't scale, find 100 people that love it, and have some really great co-founders that you trust, make sure you are full stack, designers and engineers in your founding team, ideally. They're just basic principles. I don't think it's that complicated and even if it is, it's well written about. But the thing after that, there's not a lot of books about and everyone gives you the wrong advice. You gotta figure it out and you're kinda on your own. And the risk is, if I ask a CEO how to manage and they work at a huge company, they're gonna tell me the wrong thing. It's like you talk about you're skating, but it's not ice it's water. The ice skates don't work yet. We invited a former CEO over, and he gave me this piece of advice I'll never forget. He said, "Every six months you keep your job "it's a promotion." I almost think, in hindsight, it's better to say every six months is a totally different job. So it's not like this metaphor of you're an athlete and you're a tennis player and you play small tournaments and you work your way up. You start playing tennis, then you're like a bowler, then you're like a football player and then you're playing hockey. The job changes so much, you're almost playing a different sport every job. And this is why it's fairly, I don't know if it's rare, but it's hard to start a company, to be the right person to start a company and be the right person to manage it when it's a thousand people. Because it means you have to be different types of people. And it's totally different. At a large company, you have to be extremely strong at public -- usually you have to be fairly strong at public speaking or writing 'cause that becomes your primary management tool. How do I speak to the company? I either write 'em an email, or I say something in a video or in front of a bunch of people. In the early stage, you're around a kitchen table and it's four people. So your interactions are different. There's just all these subtle things that like, the skill sets start changing. The most important thing, I think, is being adaptable. 'Cause no one's an expert at everything. But you gotta be very adaptable. And I've seen people who've been able to scale and people who haven't been able to scale. And I think there's two things that I've identified at being able to scale. One is just general intelligence and talent. If you were over your head when you start, it's hard to ever not be over your head. But the other thing is people who are kind of curious and adaptable. I've found that, like, Pablo Picasso had a saying, he said, "It took me four years "to learn to paint like Raphael, "but it took me a lifetime to learn to paint like a child." We have to kind of be kids at heart in startups, I find. In the sense that you're curious, you're open minded, you're welcoming, you're adventurous and you're not a know-it-all. Know-it-all's will never scale in start-ups. So if somebody's a know it all, they know everything so they'll never know more. So you're not going to scale. That's kind of the way I think about it. So, these are the things and I've had to be that. And I've sought out your advice, and if you're not a know-it-all, you are shameless about getting feedback. And so I've had to surround myself with people much smarter than me and much more experience than me, including Reed and many other people who have gone through what I haven't gone through yet. But you're right, it's not even like you're slaying a different dragon, it's a different sport. - The term that i use for it is infinite learners, and you're actually one of the people I use as an example. 'Cause literally the very first time you and I did a press event, it was the first time that I had done a press event with an entrepreneur in my portfolio where the very first question you asked me when we got off the stage was "What should I have done better?' - Yeah. - It was literally, we walked out and it was like, "What should I have done better?" I'm like, you're the first time I've done this with somebody and it's the first time that's been the very first question. - Yeah. - Anyway, infinite learner I think is actually, is key for managing the scale and the blitzscale. International. One of the things as you begin to scale, it changes competition. - Oh yeah. - Right, so you got Wimdu in the early days. How did that kind of change your notion of how you were playing when you'd begun to see people being able to go from, "Oh, that's crazy" to "Oh, that's essential "and we're all now trying to compete." - Yeah, there's like bunch of stages of start up. The first stage is, I think survival. Meaning, you're not meant to survive so you start this company, you have this idea, and everyone's telling you you're crazy. You can't get any money, you can't raise any money, you're co-founders, you don't even know if everyone's going to keep working on it. And so I call that survival. And not dying is working on it the next day. No one actually kills you, you just fade away, you stop working on it. The second stage is probably like firefighting. And so then you are firefighting, "Oh my God, we're growing. "I need to hire these people, I don't know what to do." And then, once you get through the survival and some of the initial firefighting, you've gained the luxury of having all these other people now decide to copy you and try to destroy you. So now it's existential threats. True existential threats. And we had two. One was government relations and the other was competitors. And I'll talk about competitors. So we got the point where we started getting successful only to have all these people basically copy us. One day, it was early 2011, so about two years in from 2009 of it working. So 2009, 2010, it kinda was working. 2011, so we had two year kinda honeymoon. I don't know if you wanna call it honeymoon, and then suddenly, by the way, in 2010 somebody, this guy Howard Hartenbaum, he's an investor at August Capital. He told me, he says, "Whatever you do, "all you gotta make sure is these two brothers "don't copy your website." (laughter) And I said, "What two brothers?" And he goes, "They're called the Samwer brothers "and they're notorious "and usually when they copy your website, "they scale it and they kill you." And he's like, but he's like, "Don't worry though, "'cause you're fine.' 'Cause they haven't copied your website "and if they haven't by now, they won't." I'm like, "Thank God, we're free." All of a sudden, we notice people, we noticed a lot off suspicious activity and people spamming our users and we're like, "Something's up." We didn't know what was up. Turns out, we find out the Samwer Brothers have their eye on Airbnb. Now, I'll tell you how scary this was. In 2011, the hottest start up in the world was Groupon. They went from zero dollars to, I think, a billion dollars in revenue in like a year, or two. At the time, that was completely unheard of. Actually, it's still kind of unheard of. And Groupon grew that fast, not because of US business, but because the European business, which was called CityDeal. That was actually the Oliver Samwer clone that Groupon had to buy. So basically, these two brothers, not only, I was told, would kill anyone that they cloned, they're like the attack of the clones, but they also had built what was, at least being positioned at the time, the fastest growing, most successful start up of all time. That was how Groupon was positioned. That was not somebody that we were interested in fighting, right. Suddenly this giant dragon appears and you're like this is not possible to beat him. And now at this point, we had raised 7 million dollars, in fact, from you. (laughter) - Yep. This is where I enter in the picture. - Yeah, so, Reed had given us 7 million dollars and then suddenly, in 2010 I think, in April 2010. By January or February or March, some point 2011, they raised 90 million dollars. And we had 40 employees, and it took us two and a half years to find these 40 people. And in 30 days, they hired 400 people. And they opened 20 offices and I had no idea how you even opened a second office. We have one office, how do I get a second office? Do I fly there? Do I get an apartment? And they had 90 million dollars and I was like this is horrible. And they basically said, "We're gonna do in Europe "what you did in the United States." Now the problem with that is, most companies, if they lose Europe, they're just a smaller company. In Airbnb, if you lose Europe, there is no Airbnb. A travel website where you can't travel to Europe is like a phone without email or a phone without signal. There's no reason for it to exist. So this became a bet-the-company fight. And we didn't know what to do. We had a proposition to buy the company. It would have been very expensive, but more importantly, it would have been a huge cost, culturally. And I didn't know what to do. I remember, I called up Mark Zuckerberg because they cloned FaceBook, this (speaking French) So I called up Andrew Mason. Andrew Mason told me, "Yeah, they're probably gonna kill you." (laughter) He had told me a story that Oliver Samwer was so good at copying companies that it was too easy for him. He needed to turn it into a challenge. So he decided to hire developers from North Korea. (laughter) Just 'cause, I don't know, and Andrew described it as, 'cause he just wanted to make it more challenging, the copy companies, 'cause it was too easy. I don't really believe that story, but... And there was this whole mythology. Mark Zuckerberg told me, "Don't let them sell, "whoever has the best product wins." And he ended up being right. Paul Graham gave me even better advice though. He said, "You're missionaries, they're mercenaries "and often times, missionaries often win." So he said, "You should basically just pretend "like they had this baby, "but they don't wanna raise the baby." And so I thought, well we're founders. We wanna grow this company. So I'm like a parent and I want this child to grow into this wonderful company. And so I said... Well, I didn't say this to Oliver Samwer, but my view was, my biggest punishment, my biggest revenge on you is, I'm gonna make you run this company long term. So you had the baby, now you gotta raise the child. And you're stuck with it for 18 years. 'Cause I knew he wanted to sell the company, I'm like, "No, no. You're running this company." And I knew he maybe could move faster than me for a year, but he wasn't gonna keep doing it. And so that was our strategy. And we built company long term. And the ultimate way we won is, we had a better community. He couldn't understand community. And I think we had a better product. And it was a do-or-die time. And we ended up flying to Europe, we hired bunch of country managers, we flew them all to San Francisco and we basically trained them for a month or two. We said now go to your countries, hire your team, here's how you open a market, here's how you open cities and we opened, I think like eight or 10 offices in like three months. It was actually totally insane. We hired hundreds of people and the whole speed of the company picked up at that point. And a couple years later, obviously, it was game over. - Yeah, it was one of the principal triggers for Airbnb going the blitz scale in the organization. - Yeah, 'cause we were not -- I think the first moment was Y Combinator where we had to hustle up. If we weren't successful by the end of Y Combinator, we were probably gonna stop, so we hustled. And then we started moving, but we aren't moving as fast. Then 2011 and boom! Samwer, I mean the gift he gave us was a scale fast. And he, he took a company that was kind of successful and he kind of compressed our time to becoming an international network effect within a year. And by the end of 2011, it was clear it was gonna grow really fast. - So two last questions before we go to a few questions from the audience. The first one is, the other one that triggered, obviously, was government regulatory. And you and I both speak of this a lot. So you can find it in detail on YouTube and Google and news things. 'Cause roughly speaking, this is the way the world should be. People should have this kind of social belonging. People should be able to, you know, they can already rent the room as students, they should be able to rent a bed. People should be able to connect with them. And obviously, we should make sure that this social space, the neighborhood, that's all done the right way. But give a little bit of character, as we win to scale, here's how a unique challenge hits us. - Yeah, so the problem with all these challenges is they always hit you, and it's like, you're walking down the street and someone just punches you in the side of your face, and you never saw 'em coming. And that's kind of what it felt like with everyone of these challenges. So Samwer like hit us in the side of the face and the same thing happened with government relations. We had a number of big problems. The first problem I remember having was was June 2010, when we got word that New York City was gonna pass a law. They hadn't heard about Airbnb, but they were tryin' to go after this landlord that wasn't even on Airbnb that was converting apartments into hotels without getting licenses. And we thought, "Uh oh, this is a problem "cause this might affect our users." Of course it did. They said, "Oh, the city won't enforce against you. "It's just an enforcement based policy, "don't worry about it." And we're like, "OK, we won't worry about it." So then, a couple years later, we get an email or a call, actually a physical letter from New York State Attorney General saying, well actually there is this law and you are violating it. Or your users are violating it. And so we want the data of your users to enforce against thousands of people 'cause we don't know if they're paying taxes and more importantly, we think they're breaking short term rental laws. And so suddenly we're confronted with these huge, potentially omnious challenges. And Attorney Generals are very scary people. They actually have quite a jurisdiction and they have reputations for putting people in jail, especially New York State Attorney Generals. His predecessor was Elliott Spitzer. And he was quite scary as Attorney General. So, you're just kinda, and suddenly, I remember us having conversations like how do you know, do you fight an attorney general or not? And how do you do that? And I could tell you the details of how that fight happened, but I think it's more the principles of the matter. I mean the details were, he wanted specific personal information on tens of thousands of users, many of whom weren't violating any rules. We thought, not on my state is one thing, but we're not just handing over so you can just discover rules people might be breaking. That's a fishing expedition. And we viewed that if we challenged them in court, we'd win. We challenged them in court, we did win. We eventually compromised on a narrow set of user data, which is not any different than a subpoena, which all companies basically comply with, but that was overly broad. It was like a fishing expedition and so we didn't want to do that. But the bigger thing is, how do you learn how to deal with government relations. It was a huge challenge. We had a lot of trial and error. My first instinct was to fight. Was to be like this fight for the people, mobilize people. In 2010 we wanted to do that. We staged a rally, a political rally. After I learned how to build a website, I had to learn how to stage a political rally. So we go to New York City, go to City Hall, and we'd give people signs and they'd help. And then we realized, that's not really the right approach for us. We're a company where people are living together. And we're trying to teach people that people are fundamentally good and they're living together. A company where people live together is not a good company that has a brand of fighting. 'Cause the big fear is, people are gonna fight in their homes, this and that, we need to be partners with cities. And we want cities to know they love us. And so we decided, you know, we're gonna kill 'em with kindness. In other words, we're gonna show them that we wanna be partners. And I also learned another lesson from government relations, which is, I always had this instinct that, if people don't like you, you should never talk to them. And somebody told me this saying. They said, "It's hard to hate somebody close." And so I kind of created this counter-intuitive thing which is that I will meet everyone that hates me and the goal isn't to make them not hate me at the end, you'll hate me less after you get to know me, and I think you'll understand me. And that was totally counter-intuitive, 'cause I used to have this fear, that if I didn't think I could convince them, I thought it'd be a bad meeting and I didn't want to have bad meetings. I wanted to avoid conflict. And so we basically had this view that we're gonna meet everyone. And the more you hate us, the more we might be even inclined to talk to you because we think there's misunderstanding. And it's not to get you to like us, but so that you will understand us and at least you will be informed. And so we decided to go on a listening tour. At one point in New York City, I am deciding I'll meet everyone that hates me or a lot of them. And I'm meeting like 40 different people, tons of horrible meetings, but months later, there was a lot less, kind of, vitriol against Airbnb. I mean people suddenly had an understanding. And so that really helped a lot. Now we have to meet with senators, all sorts of politicians, we were on the ballot in San Francisco. How do you fight a ballot initiative. There's like, it's just so crazy, because this... Because we're a business in the real world, the scope of things I've had to learn how to do are astounding. We've had, over the summer, almost a million people living in a home every night. How do you keep a million people safe every night? That are staying in strangers homes, often from different countries. Where sometimes the countries never even live together, like, these different cultures. So the bigger lesson is, you know, you had a saying, "Starting a company's like jumping off a cliff "and slamming into an airplane on the way down." And I guess my point is, that never stops. That, it certainly happened for me, starting the company, but then it was always the next thing. And now I have new things. And so it never stops. And so I think the biggest thing I've had to learn how to do is learn. And learning means going to the source and I don't know. - So, last question on the kind of things that surprise you as you grow these globally relevant companies, 'cause you just came back from it. Paris. - Yeah, oh God. So, everyone's obviously quite aware of the horrible things that happened in Paris last week. Terrorists killed, I think 129 people. ISIS. Well, what you may or may not know is that I was in Paris with a huge part of the company while the attacks were happening. So, last week we had our annual convention or conference. We have this thing called the Airbnb Open. And it's an annual, it's the third year in a row we've done it. And hosts from around the world fly in. Last year it was up in San Francisco, this year we had it in Paris. And it's like our version of what SalesForce might call DreamForce or whatever. And hosts come together and we really kind of update them on the new products, the new values, everything. And we had 645 employees fly to Paris to be a part of this, and about 5,000 hosts. And I was there in Paris with all of them. And by the way, my parents were there, my sister, my girlfriend came with me, so kind of like everyone in my life was there. And I'm in Paris, it's two days into the conference, I did two keynotes, first day and second day, so I take a deep breath and I'm like, "I'm done. "Thank God. I'm gonna relax." I had this dinner. A celebratory dinner. We called it the 10th Street Dinner. Basically we had an office on this 10th Street. It was basically everyone, it was the first 40 employees of the company. They're still there. So we called it the early employee dinner. And we brought them together to celebrate and recognize them for being at the company for almost five years. And we're having this wonderful dinner, Joe gives a toast, "Thank you all," da da da da. It's amazing dinner. All of a sudden our phone starts buzzing and I see Twitter and I'm like, "Attack in Paris." And it was at a restaurant and there was a shooting. We're like, "Oh that's really horrible, that's terrible." But, not unlike you'd read something horrible happened in your city, and you're like "Okay, that's really sad." And so then we put our phone away. About 30 minutes later, my phone starts buzzing again. There is a massacre in a theater. And 80, 100 people, well, actually, we didn't know it was a massacre at the time. 100 people taken hostage in a theater, another location. And my phone buzzes again. There's a suicide bombing outside of a stadium. Oh my God. Suddenly my phone buzzes again. At this point, what had happened was, we had 645 employees that were going to dinners and events throughout the city of Paris, and 5,000 hosts from 110 countries that were throughout the city. And at this moment, there were seven coordinated attacks happening within a one hour period, in random places all over the city, particularly in the areas that all of our employees were at. and all of our hosts were at. And the thing that was so scary was, the places they picked were gatherings of many people and many countries where all of our -- that's who our people were. And they also picked random places to create the psychology that these attacks could happen anywhere. So at this point, fear struck over the dinner. We realized we're under attack. There could be another five or 10 attacks, and it could be anywhere. I got, I started finding out there were employees that were, some of our employees were at a restaurant that were next to the Bataclan Theater where the massacre was where 89 people died. And one of my employees, someone I'm very close to, was sitting in a restaurant, looking out the window, when he saw all these people running by them for their life. And they're screaming. The look of when somebody's running for their life and they just witnessed a series of murders, I can only imagine what that feels like. And so, people -- And then, and suddenly people were, in restaurants, they shut the lights, they closed the metal gates, they're hiding under tables. We had a whole team at the stadium. And the stadium, they had a stampede. And people were running out of stands at the stadium. So this was not something I've ever had to deal with. So what do you do? So I'm at this party, we have a head of security who was in a different building. He creates a remote command center. I literally create a command center in a walk in shower, because we're in a two bedroom apartment with 50 people, I had nowhere else to go. I mean there was a giant shower and it was actually, frankly good acoustics, 'cause it was just stone, so if you were just sitting there -- and I couldn't hear anywhere else, so I close the door, we create this command center with our phones and we pull up our laptops, we still have signal, We're told we might lose internet at any moment. And we're basically going through the first step is account for everybody. So we create a list of all the 645 employees and we start calling and emailing. We go down the list and we have this remote command center accounting for everyone. Then we gotta figure out what's the next thing we do. We gotta work with the local government, 'cause some people are gonna be sleeping outside and we can provide housing. So we worked with the local city and the federal government of France and try to provide housing. And we get our hosts, 300 of them, to open their homes, very spontaneous, for anyone that needs housing. And then we gotta figure out, well what are we gonna do about this conference? 'Cause we had to cancel the next morning and account for people and deal with their families and everyone's reaching out, so it was something that, it was one of most insane ordeals. We had to fly all the people back. Make sure, that, you know, we provide the employees support for them. And I've never had, in my life, to deal with anything quite like this. We were in the center of this huge crisis, and as remarkable as it was for that time, it's not remarkable in the arc of a start up. In other words, that was very specific, but that physical event is kind of a metaphor of so many things you do. And this was just physical safety. I've never had to deal with something quite life and death like this before, but so much of that remind -- When I was going through that last week, I'm like, "Oh my God, this reminds me "of the first four years of Airbnb." And I don't mean, I just mean the way my body felt. Heart constantly pounding, not knowing how we'd get through the day, constantly firefighting, I hope I'm selling you on starting a company, by the way. (laughter) For the right people, it's a rush, but it is this constant thing. And the other thing that that, the last thing I'll say is, it was at that moment that I, reminded me of the responsibility I have. 'Cause you know, I'm conscious of the responsibility I have. We have a couple thousand employees, we have tens of millions of community members, but at that moment, you are so much more conscious. Your responsibility is truly real. And people's lives, I mean, in some cases, they, maybe, do depend on you or at least their livelyhood depends on you. And that was a huge and humbling realization that I had. - So, can we go a little long? - Yeah. - 'Cause I know we're at time, - Sorry that was actually a long story. - No, I wanna make sure, that was a really important story to get to, for all kinds of obvious reasons, but I wanna get through a few questions as well. Start here. - [Audience member] Could you talk more about learning how to learn? Like was it reading books, was it self-reflection? - Yeah, so... - [Audience Member] Can you repeat the question? - It's, talk more about learning how to learn. - Yeah. I'm certainly not an expert on how to learn. I think people here at Stanford are going to teach you a lot more about how to learn. But I'll give you just one tip. I think there's a lot of tips, I'll give you maybe one. If I told you I want you to learn about a topic and you got a week to do it. So, let's say I want you to learn about the basics of UI design and you got a week, what would you do? You would -- and I want you to really learn it. I want you to learn everything that's important. I want you to become like an expert or at least a temporary expert such that you could know the basics, and know the most important things. You would probably read like a ton of books, talk to a ton of people and interview people, and go through this fairly exhaustive process just to learn about UI design. And so what if I told you that in that week, I also actually want you to learn about the basics of front end development, I want you to learn about the basics of accounting so you can have balanced books and I want you to also understand how to incorporate a company. Now how do you do that? 'Cause you start adding the hours, you don't have hours. So what you learn is, you can't learn everything about a topic so you have to be very good at short circuiting to learn from the definitive source about the topic. The skill becomes, you hope that you go the right source. 'Cause if you go to the wrong source, you learn the wrong things, but you also find that if you read the right source, you don't have to read any other sources. And, about management, somebody gave me the book, "High Output Management" and it turns out I never had to read 10 management books, I just had to read that one book. - That was Keith. - That was Keith Rabois, that's right. And it's about Andy Grove, founder of Intel and if you read that book on management, you kind of know about management. And, you know, Paul Graham probably was a version of that for Y Combinator. And so, what I've had to learn how to do is seek out the experts. And, it's kind of the equivalent of like, reading and writings of intelligent people rather-- if you want to learn about the news, read about somebody who's deeply informed than watching a political talk show for four hours. 'Cause you're gonna leave kind of confused, and you won't have any deeper context. So, I've found that going to the source, and Reed was a source for me. I wanted to learn about trust and safety, I went to George Tenet, The Director of CIA, and that was fairly like - Former Director. - Former Director, sorry. And that was kind of over the top, but it was helpful. And the cool thing is, the more successful you get, the more you have access to them. But even before you get really successful, you can certainly read about the best. And I also learned from biographies, but I think going to the source. There's a lot of other tips, but that's just one tip I would give. And then you gotta be shameless. Because I've found that most people will help you if you ask a question. And the biggest reason people don't help is because people don't get asked. And, we're here to share information and knowledge. You gotta be willing to have the courage to ask people and seek out knowledge. And I was shameless at asking questions, like, over and over again, to the point where it was probably annoying, but I didn't care. I was so shameless, (laughter) I didn't care if I annoyed you. 'Cause, I'm like, "I need to learn this." - Yeah, exactly. - [Audience Member] Could you talk about the pre-history you had with your founders, and how you sort of selected them and knew that they were the right fit for you? - Yeah, I kinda got really lucky. If I wrote a book about how to start a company, I think the one part I wouldn't be helpful with is how to pick co-founders, 'cause I got really lucky, that part kinda fell in my lap. I went to RISD with Joe and I was friends with him for seven years. It's now 15. But I was friends with him for seven years before I started the company with him and he was kind of like a best friend of mine or one of my best friends. And then my other co-founder, Nate. He kind of, I didn't know him, and so, that was a little more of a happenstance. So, it was kind of luck, and I had an intuition he was a great engineer, and I could tell by the things he built he was pretty extraordinary, but there was a element of luck involved with Nate. So, I'm not the best, I did not go through the struggle of havin' to find co-founders, so I can't tell you a long journey about how you do it. I can say a few things though. The first thing I would say is, you should -- a few thing about co-founders. Number one, I think the mentality should be, your co-founders should be better than you. If they're not better than you, you should at least feel like they're equal. And I see a lot of people who find co-founders who they kinda consciously know aren't their equals, and they're not really co-founders, they become proxy early employees that can't scale. And when they can't scale, they get super disenfranchised and they're not useful and they're not able to contribute. And I think sometimes people do it 'cause they're lazy or out of insecurity, they don't want an equal in the company 'cause it might be a power struggle. I think you should try to find people you admire that are better than you, that challenge you. The mentality is, if they're better than you, then you will rise to the occasion and become better 'cause you're around them. And the other thing is, you have to have people that you deeply trust and like. You're gonna be around these people for 12 hours a day, 14 hours a day, 16 hours a day. If you're kind of annoyed by them after 4 hours, you're gonna be annoyed by them after month seven, 24/7. You're gonna really not be able to stand them. So you need people that you like, that you trust, and that you admire. And ideally you have a long history with them. I had a long history with one of the two, but I think Nate, who I didn't have a long history with, proves you don't have to have been friends with them for seven years for it to work. And I generally find complimentary skills rather than overlapping skills works. Now, Joe and I appear to be the same people on paper, at least our origins, but we ended up having, frankly, very different personalities and skills, as it turned out. And, Nate is totally our opposite in many ways. - The woman. - So I was wondering, at the beginning, you were a designer. How did you make the switch to go to entrepreneurial? Just like, what's the mentality change? Also, like, you mentioned on the tough times, how do you convince yourself, this is a good idea to be working on it. When do you keep going? When do you stop? - Should you repeat the-- - Yeah, always summarize it and then. - So, how did I switch from becoming a designer to entrepreneur and then during tough times, why'd I keep going, right? Switching from designer to entrepreneur. It's really like how do you switch from anything to becoming an entrepreneur. I was always kind of, in hindsight, it turns out, I always was an entrepreneur, I just never knew it existed. Meaning I was always creating things and starting things although they weren't always businesses, they were usually projects or films with my friends or things growing up, I created clubs. And so, I think the best way to become an entrepreneur is just to become an entrepreneur. Like I don't know how else to say it. In other words, just start. And just creating things. Create things for people. The best preperation for creating a company is to create a company. If you can't create a company, create a club. Or create a product, or create something. And I found that throughout my history, all the things I created, whether it was my club hockey team at college or this thing I designed or a project with my friends for fun. and usually it was outside of school and it was always slightly mischievous, like, you know, like just slightly. Kind of fun or a prank or something. I think that's the best thing. So I think that other than the fact that it is good to learn in these classes, the thing that's even more useful than being here right now is to leave this thing and to start something immediately. And not learn how to start it, just start it. 'Cause you will trust yourself and you'll learn. So that was what I did. At RISD though, the school teaches you to start things, 'cause you constantly have -- They give you some impossible challenge. Like, okay go, figure it out, go. And I think just having that, it's almost like becoming impulsive. You have to kind of learn to be impulsive in some ways, 'cause just to start and plunge in is kind of an impulsive thing. I think the second question is, why do we keep going during the tough times. Which is another way of saying, why did you have conviction and resilience, right? 'Cause you need to have resilience and conviction to keep going. The thing about start-ups, of course, I keep quoting things that Steve Jobs said, 'cause he's one of the people I've learned a lot from, from afar, of course. So there's a lesson, study people you admire. But he said, "You have to be passionate "about things you do "because there are gonna be days where it's so hard, "it's easy to stop believing in it." So if you don't have this reservoir of deep passion for what you're doing, you'll kind of lose faith and stop believing in it, when it gets really hard. And I had this deep conviction it would work. And many people say, "Well why'd you have this conviction. "Why'd you believe Air Bed and Breakfast would work?" And it was that very first weekend we hosted three people and I saw how my life changed. And I saw how other people's lives changed. They literally changed. One person moved. The other person decied to go on a different path 'cause of the designers he met. And I thought, with Joe, if people could experience what I'd experienced that first weekend, this would be an idea that spread around the world. And I really believed that. Now I couldn't get people to actually give it a shot, but I believed that was a marketing challenge and that we would get them to try it. Because we discovered something. And one of the things Paul Graham says is, "What insight do you have that no one else has?" In other words, what is something that you've discovered? Often, a discovery doesn't happen in a laboratory. A discovery is something that you hacked to solve a problem for yourself, and you accidentally discovered it's really cool, and if only other people knew about it. And my unique insight or discovery was staying with other people in their homes was deeply rewarding and saved money. It would be awesome and other people would want to do it. And it was clearly non-intuitive, not obvious. Which is a good thing. 'Cause when you tell people, they're like, "That will never work." That means people won't copy you for a couple years. (laughter) - Ah, here. - [Audience Member] Yeah, just to follow up on that, you talked about the deep conviction. How do you, you said that you were distracted by the roommate thing you were working on after you started. So how did you get back to the Air-- - Really good question, really good question! - And repeat the question. - Oh, sorry. So you say conviction's important, but you started Air Bed and Breakfast, then you did a roommate thing and then you went back. What was that journey like? You know, it's kind of funny. I think conviction happens over time. It happens through repetition of talking about it and thinking about it and working it out with people. So kinda here's how it happened. We started this website and I had some conviction that this would work. The weekend we started it, I had conviction it would work around the country. Air Beds for Conferences. I was always a generation ahead. I was never three generations ahead. I didn't think years out, but I always thought the next year out. And I could always see the next step. I couldn't see three steps forward. And so, I believed in the next step. So that first weekend, I believed this would work around the country. But, Joe and I convinced ourselves out of the idea because we were so enamored by the story of FaceBook and all these other companies, we thought, they're huge. I can see the next step, but I can't see people all over the world doing this. And I can't see becoming a company where millions of people would use, and I wanna have a company millions of people use. And millions of people need roommates, but millions of people, when they travel, don't stay in homes. And so that was kind of where I went to. So, it wasn't as much I lost conviction as much as, I had the wrong mental model to decide what to persue. But I deeply believed in this idea. We did the roommate site and it was like, okay, someone's done it and I don't know if I'm passionate about it. And I went home for Christmas and I found myself talking about it, and the funny thing is, the more I talked about it, the more excited I got. And the more I talked about it, I'm a fairly extroverted person, so extroverted people they kind of figure things out by talking it out. And I'd talk about it and as I'd talk the idea out, I'd keep adding things, even though I hadn't built it yet. As if I had. And then we could do this and that and you'd brainstorm. And the conviction happens through repetition, and investigating and going deeper and exploring and thinking about it. And it just kinda built from there. And then it came through more and more physical experiences of doing it, staying, and the more you have real experiences, the more you build that reservoir of conviction. And the one thing people don't talk about leadership is, leaders are people other people follow. They're not necessarily people that are bosses. A leader is somebody other people follow. And a key core reason why somebody follows you is conviction. In other words, a leader has to have conviction. And if I'm like, "I think the way you go home is that way," like, like, maybe. If I say, "The way we go home is that way. "I know it's that way." People will probably go that way, 'cause you are so certain. Now, you gotta try not to be wrong, but conviction is incredibly important for leadership. And for me, building the reservoir of conviction was through real life experiences and talking it through and getting to know the problem. - The other nuance, by the way, on a lot of these companies is, they make markets. So it wasn't like, "Well, how many people were staying in homes before?" Far fewer. How many people were picking black care services before? Far fewer. How many people, just, other things -- And part of that making of markets is part of what you have to have the conviction for. - Yeah, just one nuance of that which was, that was what happened. We fell into the venture capital trap, or the like so called trap of, well is it-- - That's the dumb venture capital trap. - The dumb, sorry. (laughter) He's a venture capitalist. (laughter) Sorry. The dumb VC trap. They call it the idiot VC, which is, there's no market for this, and you're right, as Reed says, almost all great companies created the market. And so, a lot of people say they invest in markets. And I think you should invest first and foremost, in product and founders. You can invest in markets if you think, "as long as our market's travel or accommodations," But our market was not, in fact, Sequoia who is notorious for invest-- or not notorious, but famous for investing in markets. They really struggled sizing our market, but they actually, to their credit, discovered this was a big market. And, as long as they looked at the right things and they thought, "Well, there's 1/2 a trillion dollars a year "spent on accommodations every year, short term. "Two trillion dollars a year spent on travel "and 40 billion spent on vacation rentals. "So we do think, based on, we like these founders, "and we like the product. "We think there will be a market." And so, you have to be able to foreshadow emerging markets rather than existing markets. - Last question in the back. - [Audience Member] What's difficult for you right now? - Oh, - What's difficult for you, - Jesus Christ. right now? - The problem is that's a very long answer. - Um... (laughter) Answering that question, that would be the-- - Yeah, yeah answering that question is extremely difficult right now. You may have stumped me on the last question. Let's see. Okay, I'll tell you one thing. So this is, I think this is in your book, you talk about it as transitioning from city to nation or village to city. - Yep. - Which is one of the things you have to do. So, I've gone through all different phases. We're at the phase now where the company is working, The core business is working well. The product we had, the idea we had, is now scaling, it's working well, we've hired an executive team, I have a full executive team. They're managing it. I could presumably go away for a month or two months, and the company would basically run fine. Basically, right? I mean there's things that would start to degrade, but the core product will be fine. The company, more so than the product needs day to day management, but the company, the product's fine. So, there's a couple things. The first, probably the two biggest things I'm focusing on, the first one is scaling the culture for the new size. A lot of the cultural norms and kind of things we institutionalize was for a company that was 500 people. We're now over 2,000 people and I wanna make sure that this still feels like a fast growing start up. It's still product oriented. It's still everyone is mission driven. So that means a lot of the methods and behaviors in the day to day has to change. The other thing though, probably even bigger, is, most companies that are really, really big have more than one product. Apple has the Mac, but they have the iPhone, the iPod, the iPad, the Watch and very few companies have a single product. I mean you guys have multiple sources of revenue, right? You don't have one source of revenue. Almost no company in the world has a single product. I mean, Google is maybe a notable exception as having many products, but kind of one product that generates most of the revenue. And so, that's the challenge for me now. The core products can continue to grow, but there's opportunities to start other products. And part of me is like, 'Well, I know how to start a product." I started one. But how do you start a product or a new business inside off an existing business that's successful? It's, I thought it was just like the first time. It turns out, starting a new business inside of an existing, successful business is so different than starting a business, because you have all these things that are helpful. Like, you can pull people internally, you have unlimited funding, but you have all these things that you never thought. Like, sometimes people inside the company inadvertently try to stop it. And they don't do it on purpose, but you try to pull the best people on the team, they're like, "No, we can't have it." Or why are we focusing here, we need to fix this. So that's a huge thing that I'm focusing on right now, is trying to create a new business inside of the company and you're basically, you're shifting from a single product company to a dual product company. That's a pretty big shift. And so that's something that I'm thinking a lot about now. And I think all enduring companies have to do that. Because if you're a technology company, you can't presume your original invention, your original product, is the thing that you're selling many many years from now. - So let's thank Brian for joining. (applause) - Thank you guys.

Channel: Greylock

Views: 642,656

Rating: 4.9346881 out of 5

Keywords: Reid Hoffman, Brian Chesky, Allen Blue, Chris Yeh, John Lilly

Id: W608u6sBFpo

Length: 98min 29sec (5909 seconds)

Published: Mon Nov 30 2015