[MUSIC] Well, Brian, it is a great pleasure and even greater honour to have you with us at Stanford GSB. >> Well, thank you for having me. Wow, it's big room here. >> I'm pleased to say that you're seated in front of hundreds of globe-trotting MBA students. >> Wow. >> Many if not most of whom are your most loyal customers, that I can assure you. >> [LAUGH] So thank you. Well, thank you. I gotta I hope to do well. >> As I was gathering materials for this interview, Brian, I found myself transfixed by a certain photo in your high school yearbook. >> What captivated [LAUGH] what captivated my attention was not the photo itself which was perfectly fine, but rather the caption underneath the photo. >> Yes. >> Why don't we take a look on the big screen? >> [LAUGH] >> I didn't know there be visuals today this is going to be. >> God. >> [LAUGH] [APPLAUSE] >> But the good news is. >> [LAUGH] >> As of the close of yesterday's trading session, your prediction turned out to be slightly off the mark. >> Yes. [LAUGH] >> By $8.4 billion to be precise. >> Yes. [LAUGH] My dad was not very happy about that. >> [LAUGH] >> I remember I got home one day and he's sitting in the dining with that opened. And if you had told me when I was in high school that I would be here talking to all of you, I just thought it was, it kind of boggles my mind to be here right now so. >> The founding story of your company, Brian, will be familiar to many in the audience. But as a quick refresher, could you walk us through the origin of Airbnb? >> Yeah, I'll do the quick version. So I'm from upstate New York. My parents are both social workers. And I remember my mom telling me one day, I think I was in high school, and she said, I chose a job for the love, and I didn't really get paid any money. So you should make sure that you get a job that pays you a lot of money. >> [LAUGH] >> And so then one day, I was really interested in art and design. And then I asked Santa for poorly designed toys so I can redesign them, really peculiar things like that. And then one day I tell my mom, I said, I'm going to be an artist and she said, my God, you chose the only job in America they'll pay less than a social worker >> [LAUGH] >> You're going to get paid nothing. And that was probably the pretext to that yearbook quote, and I said, no mom, I promise I'm going to get a job and she said, a real job? I said, what's your real job? She said, a real job, that job that gives you health insurance, so you don't have to live in my basement. So that was the context. And I said, all right, I'll promise you I'll get a real job with health insurance. I get to RISD thinking I want to be an artist. And then I felt like the moment I got on campus I was born like 100 years too late for what I wanted to do. Because I was an artist, I was a painter or a drawer and photography had replaced a lot of the need in society to do a lot of things I wanted to do. And I didn't know what to do at RISD and all of a sudden you have to pick a major. And I was a freshman and there was a department head and he said, there's this field called industrial design. It's a design of everything from a spaceship to a toothbrush and everything in between. And I thought to myself, okay, that's what I'm going to do. So I got into industrial design. I graduate RISD, I moved to California. I wanted to come to California. I was like, I didn't really know the difference in LA and SF very much. I'd never been to California, so my friend was willing to come to LA, so I got my friend to come to LA with me. I get a job as an industrial designer at a design firm. I'm designing products for entrepreneurs. The firm I was at had really small budgets, so I would do products all the different times. And so people bring me ideas, and we think about what's the market strategy. How are we in design this product? How do we manufacture it? Where do we distribute it? And because we were so small budget, I got to actually do the entire thing. Now it's 2006, one day, my boss comes to me and he says you're going to be on a reality TV show. And I said what? And there was a precursor to Shark Tank, this show called American Inventor. And it was like a spinoff of American Idol and there were these contestants and they would get $50,000 and they have to hire a design firm. And I was the firm that one of them hired and so all of a sudden before I knew it I was designing a toilet seat for a magician. And that's kind of in that moment, it was a cool project. But I realized that myself, what's the difference between me and this magician? And I thought to myself that the difference is they made the chance to be an entrepreneur I didn't and I was designing other people's products. So my life is like I'm in a car and the road in front of me looks exactly like the road behind me. And all of a sudden I get a package in the mail, it's a package and it's a seat cushion but it looks in the shape of a human buttocks with a handle. And it's a product called Crip Buns and it's from my friend from RISD. And he says I started this company, we're manufacturing this product. Now by the way, the products beautiful ended up being sold and the Museum of Modern Art gift shop so it's really nice product. And he said come to San Francisco. And this was like my call to adventure. And there's might be a few times in your life where you make a decision and everything about your life changes after that decision, and that's what happened. I packed everything in the backseat of a Honda Civic. I have 1000 hours bank, I get to San Francisco. And then Joe tells me the rent is $1,150. And I thought, well, I should have asked that before I came up to San Francisco. >> [LAUGH] >> But it turns out that weekend International Science conference was coming to San Francisco. All the hotels are sold out and we had this idea. We said, well what if we just turned our house into a bed and breakfast for design conference? Unfortunately, I didn't have any beds but Joe had three air beds, we pull them out of the closet, and we call the air bed and breakfast.com. And at that point, my mom said, so I guess you don't have that job but health insurance anymore. And I said no mom I'm an entrepreneur and she said no, you're unemployed and that's when I realized when you're starting it's mostly in your head. >> Wonderful. >> [APPLAUSE] >> Back then the idea of renting out your bedroom to strangers sounded completely foreign- >> Yeah. >> And even visible to Silicon Valley investors. In 2008, you sought to raise $150,000 for your budding enterprise. >> Yeah. >> You approached more than a dozen investors- >> Yeah. >> All of whom sadly turned you down. >> Yeah. In fact, I have here a couple of those of rejection. >> [LAUGH] >> That those investors sent to you >> These exhibits are great. >> [LAUGH] >> And it's slightly embarrassing, but we'll see. >> Would you be so kind as to read one of them- >> Yes. >> Out loud for our edification. >> Yes. >> [LAUGH] >> Thank you. >> You want me to read them? >> Yes. >> Okay, so we'll read this on, I know this person. Okay, >> [LAUGH] >> Hi, Brian, I apologize for the delayed response. We've had a chance to discuss internally and unfortunately don't think this is the right opportunity for blank from an investment perspective. This is my favorite part. The potential market opportunity did not seem large enough for our required model. Now it's travel about the same size as oil but it wasn't large enough >> [LAUGH] >> But you can imagine they didn't see travel they saw strangers sleeping in other people's homes. I'll give you example, the first investor Joe and I ever met was in university cafe, this cafe. >> Mm-hm. >> An investor walks in, he goes to the get a smoothie, he sits down, he never picks his head off, he's drinking a smoothie, he's on a straw sipping smoothie. We're pitching him, halfway through the presentation he gets up because he has to move his car. We still haven't seen him since, so- >> [LAUGH] >> That was our first pitch, we pitched Paul Graham at Y Combinator, we end up getting a Y Combinator. The first question Paul Graham asked me is, people are actually doing this? Staying each other's homes? And I said, yes, so the second question was, well, what's wrong with them? >> [LAUGH] >> The interview kind of went downhill from there but over the course of this journey, we were about to leave our interviews, and Joe takes out a box of cereal, and a box of cereal we designed. So we'll take a quick detour, we provided housing in 2008 for the Republican and Democratic national And you remember that was when Barack Obama was running for president. It was like a huge movement. And that weekend, we launched and we got like 80 bookings. And I thought at this point, we've made it we're huge, like a bunch of blogs covered us. I'm like, we're like the Beatles of tech right now. And then all of a sudden the next weekend for for Senator McCain. We got two bookings. >> then the week after, we got no bookings. And I realized if only there were political conventions every week, we'd have a business. So we were called air bed and breakfast, the earbuds weren't selling. So we said, I know what you're thinking, why not breakfast? >> Mm-hm. >> And so we created this Barack Obama and John McCain themes, breakfast cereal. We call the breakfast Obama O cereal, Obama Os, little Cheerios the breakfast did change. >> [LAUGH] >> And we learned about John McCain and he was a captain in the Navy, and I thought my God, Captain, Captain McCain's, a Maverick and every bite. So we made these boxes, and at this point my mom's, yeah, you're definitely unemployed. >> [LAUGH] >> Like this is just not a good sign, and so we ended up designing these boxes. We called General Mills, hey, can you make a hundred thousand of these? They're, please don't ever call us again. >> [LAUGH] >> If you do, we'll call security. >> [LAUGH] >> So we ended up, I'm making that up, I can't remember who it was, but some big cereal company. So we end up getting a thousand box cereal, we hand-glued them ourselves. I remember hand-gluing cereal boxes, these collectible breakfast cereal, thinking, I wonder if Mark Zuckerberg ever glued cereal boxes. And the answer was no, he didn't, this is not a good sign. But we ended up making like $30,000 of collectible breakfast cereal. So we basically said at that point we're serial entrepreneurs and- >> [LAUGH] >> That was how we funded the company, so, we are in this interview, Paul Graham, he's what's wrong with you like these people? Why are strangers staying together? But when we leave the interview, we gave them these boxes of cereal, and he said what are these? And we said we made these, he goes, why did you make these? He said, actually this is how we funded the company because no other investors gave us money. And he said, well, if you can figure out how to get people to pay $40 for a $4 box of cereal, maybe, just maybe, you can figure out how to get strangers to live with each other. So that's when we entered Y Combinator in 2009 after couple dozen investors just thought this was not for them. >> So now that you get your cash infusion from selling breakfast cereal, you pivoted back from breakfast to beds. >> Yeah, we realized the market size for housing was probably better than breakfast. >> And one of the keys to Airbnb's initial success was its emphasis on accuracy over speed to market. >> Yes. >> Instead of targeting millions of potential customers at once, you focused on converting 100 people at a time. >> Yeah. >> What gave you that discipline? >> Okay, so, it's the first day of Y Combinator, it's January 2009. By the way, I want to set the stage for you, you remember what was going on in January 2009, the economic crisis, the great recession? The economy was so bad, and Y Combinator has a thing called Demo Day. So the end of three months, all these investors come. Paul Graham sends us an email before Y Combinator starts. He says, the economy's so bad, we don't know if any investors will show up for demo day. So if you want to defer, you can defer, that's how bad it was. And so we said, no, we're going to do this. So we get to Y Combinator, it's the first day. And I get the worst piece of advice I've ever gotten and the best piece of advice I ever gotten. The worst piece of I ever got was Paul Graham, you have to move to Mountain View, we never did. You don't need to move to Mountain View, you can be anywhere, although it's cool, Mountain View. >> [LAUGH] >> But then I got the best piece of advice I ever got. He goes to the whiteboard and he draws, it's all hard to visualize, but he draws, imagine if you were to take a section plan of the Washington Mall, that long, it's just like a little stream of water. And then he does another section of what would look like a well, and he said, these are the same volumes. But he said it's better to have 100 people that deeply love you. If this axis is number of people and this axis is love, focus on 100 people that love you, rather than getting a million people that kind of like you. And I think that was a profound piece of advice, and may have been the best piece of advice I've ever gotten. And it actually runs counterintuitive to almost everything that everyone says, everyone focuses on scale. But scale requires people to have a deep passion because if you focus on 100 people who love you, there's two things that happen. The first thing is, how do you know how to make something for a million people? I don't know where to start. But if I pick one person in the audience and I study you, and I take you a journey and say, how do we improve this part of the journey? How do we improve that part of the journey? You can actually do something really personal, and if you design something, keep iterating until they love it. And don't stop reframing until that one person loves it, and you're not allowed to get to the second person until the first person loves it. And then you get the second person, and you keep iterating till they love it, and then the third person, and what ends up happening is two things. One, you design this perfect experience which is a different part of your mind, then the industrial part of your mind that has to figure out how to scale this. And the second thing is when people love your service, they become your marketing department, they tell other people. So, the first day why come here, they give you this t shirt, and on the the t shirt it says make something people want. And we thought what if we went even further, make something people love. And so we've now done these exercises, we had this process I named after the movie Snow White. I learned that Walt Disney in 1937 credits Snow White, it was one of the first uses of the storyboard because was this really long feature animated movie. And he storyboarded the experience. >> Mm-hm. >> And I thought to myself, what if we storyboard the perfect experience for the Airbnb? We actually hired Pixar storyboard artist to do this, and then what you like to do is pick one frame of experience. So, the moment of truth in the Airbnb is when you check in, right? You're, is this going to be what I think it is? And there's a really bad version of check in like the host didn't show up. And there's kind of a good version of a check in, they showed up. >> Mm-hm. >> But we want to think to ourself, what would make the experience something people love? And so we created this exercise, we thought, when you go on Airbnb, this is also to Uber, a five star mostly means nothing bad happened. And we thought, well, what if there was a six star? What would that be when you check into your Airbnb? And the six star is you get to your Airbnb, and there's a bottle of wine waiting on a table, and there's some fruit and they have a handwritten note to you. And they're, okay, that's really nice, and then I thought, well, what would a seven star experience be? >> Mm-hm. >> A seven star experience is they get a limo, they pick you up the airport, and there's this whole curated experience, you get to the house And they know you like surfing and there's a surfboard there waiting for you and all that stuff. So then I thought, what would an eight star experience be like? >> [LAUGH] >> An eight star experience, you get to the airport, there's a giant elephant. >> [LAUGH] >> And you get on the elephant and there's a parade in your honor. >> [LAUGH] >> And you go to your Airbnb. So what would a nine star experience be? >> [LAUGH] >> The nine star experience is the Beatles check in. You land and there's 5000 teenagers cheering your name. >> [LAUGH] >> And you get to your Airbnb and do a press conference in the front lawn. So what's a ten star experience? >> [LAUGH] >> We'll keep going. A ten star experience you show up and Elon Musk says, we're going to space. >> [LAUGH] >> And you do get back eventually. And the point of this story is that you maybe can't make an eight, nine, or ten star experience, but most people try to design something that's just good enough. But if you can add that six or seven star, if you can design something really amazing, and you use the part of your brain, the handcrafted part of your brain to create that perfect experience. Then you can reverse engineer how to industrialize this millions of times over. And what happens is people love your product and they tell everyone else about your product. And what ended up happening in our business is Hilton was started in 1919, over 100 years ago. And we were able to have the entire growth of Hilton in ten years. And this is how you do it without, we had some marketing, but not, initially, not a lot. >> As you said, word of mouth marketing really helped Airbnb get off the ground in major cities around the world. Yet one corollary of your new found success is that government regulators and the powerful hotel lobby were now breathing down your neck. How did you deal with those regulators? >> Man. Yeah, there were some things that were initially out of my depth, they did not teach you a risk that you had to work with government regulators. >> [LAUGH] >> So I always grew up thinking if people don't like you, you should avoid them. That seems kind of intuitive, right? Or you should fight them and disagree with them, they're your opponent. And then in 2011, I hired my first executive, her name is Belinda Johnson. She was our Chief Legal Officer, eventually became our COO, and she told me something that was counterintuitive to me. She said, if people don't like you, you should meet with them. And I said, really? Why would I do that? Wouldn't it go horribly wrong? And she said, no, because it's hard for people to hate you up close. And I think that's a really important lesson. So I said, okay, well, who doesn't like me? And it turned out a lot of people. >> [LAUGH] >> And so instead of me having a tour where I went on tour to meet everyone to like me, I told our team, I want to meet everyone who doesn't like me. And it turned out they kept me busy for a long time. But I would meet with these government officials, and sometimes the meetings would start, they were a little hostile at first. But I had a rule that I would always listen first and seek to understand them. And I think my dad used to say 90% of life is just showing up, it's actually not true in tech. But when it comes to showing respect, 90% of life sometimes is showing someone respect and listening to them. And if you just get in the mindset of listening to people, then through creativity, you can realize a win-win. And I realize I would hear from them, we'd tell the story and then through that, I had this image that we create this model city and we roll out the regulation everywhere. And I did it in one city and I get to the next city. And we're like, yeah, but we're different. We're not Portland. We're not San Francisco. We're not Los Angeles. So then I realized we had to treat every city personally. So we actually started meeting with hundreds of cities. We have now 90% of the top 200 markets have a regulation in place. We've collected $6 billion of transit tax since we started. And I think maybe the final lesson I'll just say to this is somebody asked me, what is the biggest thing you've learned or the biggest surprise that you've learned starting Airbnb? And I'll tell you what it is. And this is proven from firsthand experience and from data. Everybody's been used more than a billion half times. It was the worst idea that ever worked. It wasn't supposed to work. In fact, the first time I told him about the idea, he said, Brian, I said, yes. He said, I hope that's not the only idea you're working on. But a billion and a half times later, what I've realized is the thing that surprised me is not how different people are, it's actually how similar people are. And I think we live under this illusion that we're so different than everyone else. And I think we tend to focus on the 1% that makes us all different, and that's really good, there's really positive parts of preserving our culture and understanding our diversity. But when you start to think the other is so other from you, that gets very, very pernicious. And having met with people all over the world, I realized that people with strongest opinions of other people are the ones without passports. And the people that had strongest opinions about business people or government are people have never worked in those businesses. And so if we can build bridges, meet people, bring people together, we will realize the other is not so other, that were 99% the same. And actually through creativity, you can actually find win-wins through everyone. So that's probably what I learned from that lesson. >> At the same time that regulators were encircling you, you had to navigate internal growing pains. In short order, you found yourself at the helm of a multinational company with many hundreds of employees around the world. As you mentioned earlier, you are a designer by trade, not an engineer. How did you leverage your background as a designer to inspire loyalty and followership among your employees? >> Whoa. >> [LAUGH] >> Wow, loyalty and followership, I like that. Well, let's go back to RISD. When I got to RISD, and I'm 41, so I was there in the early 2000s. There was this huge obsession with the idea of design kind of like having a seat at the table. There's this kind of thing that artists and designers are usually not in positions of power. I mean, you take the Fortune 500. How many CEOs of Fortune 500 companies went to design school? I don't know if there are any, very few. So how many board members? There's probably an average of maybe 12 members, or 10 to 12 members per board, so maybe approximately 600 board members in this Fortune 500. How many of them are creative people or designers? Not many. Okay, let's go down the list. How many executive teams do you have designers or creative people on the executive team? And even today, not very many. And so at RISD, there was this whole movement. Well, how can we get design in the boardroom? And Joe and I had this kind of audacious, almost arrogant thought, why would design be in the boardroom? Why wouldn't design run the boardroom? Why don't we start a company? And I think I'll just stop by saying, to me, design, I think a lot of people think of design is how something looks. And to me, design is a much deeper idea, design is how something fundamentally works. I think design makes the complex simple and it focuses on every single detail. Design is really about understand the essence, I think it was Steve Jobs that said design is a fundamental soul of a man-made creation that reveals itself through subsequent layers. And so I think of design as not just how something looks, it's a way to think about the world, and a way to simplify. And engineers, I think, tend to want to narrow in, reduce, like my co-founder, Nate, likes to narrow in and get very focused on a problem you can contain because you gotta build it. And designers, we tend to want to zoom out, to the frustration of the engineers, and be very, very holistic. But I do think that that holistic thinking affected everything. I think it changed how we ran the company. I can talk in a second about how we run the company, it's really different than most other tech companies. At RISD, you'd have to tell a story constantly, so we'd learn how to be really good storytellers. A lot of people build products, they understand stories. It helped understand how we design our products, how we make our products, so it was really kind of everything. And it's weird, it's almost like I'm an anomaly that I'm even here. The fact that I went to a design school and I ran a giant tech company, it is kind of a weird anomaly. And if you imagine a human body, there's the head and the heart. And if you were to cut off the body at the head and take the head, and you cut it off on the left side or whatever, that's kind of the world of business. We don't usually use our full minds to run companies, and I think we tend to get very myopically focused near term on that, which is extremely measurable. Not everything that counts can be counted, not everything that can be counted counts. And so that was a quote by Linus Pauling, a Nobel Prize winning scientist. And so I think that's kind of how I think about design, is just really trying to understand the essence of something and really distill it down. >> Brian, let's fast forward to the pandemic. >> Yeah. >> Airbnb lost 80% of its revenue over eight weeks in March and April of 2020. You had to layoff nearly a quarter of your workforce, that's nearly 2,000 employees. What lessons in crisis management can you impart to us? >> Jeez. Well, let me start by saying this. For many years, I would tell this founding story of Airbnb, I've literally told it now thousands of times. And I remember saying to myself, I'll probably never have a crazier chapter in my life than starting Airbnb. And little did I know about a pandemic that was about to come that would turn our entire world upside down. But let me actually go to a few months before the pandemic. So Airbnb, we started, we go on a rocket ship, it's amazing. And it's late 2019, and we're preparing to go public. And I go on a hike in Bolinas, California, it's a couple hours north of here. And I go on a hike with my co-founders, Joe and Nate, and we're reflecting on this amazing company we built. It was at the time valued at $30 billion, and we're feeling really proud of ourselves, but something is gnawing at us. And the thing gnawing at us is maybe it's like Airbnb was an adolescent, and it was about as awkward as my actual adolescence, you saw that photo. And we kind of looked like an adult, but we had the body of adult, we were kind of still kids. And I realized that the company growth was slowing, costs were rising. We had ten divisions at Airbnb, so a homes division, experiences, we had a transportation, a magazine. And then each division had subdivisions. We had basically ten marketing departments. We were building software the way most tech companies do, which is you try to kind of decentralize as much as possible, allow people to move quickly. Every person is a cell in a body, you have a individual task, we have the information [INAUDIBLE] company, we democratized data. And you do a lot of experimentation and AB tests to figure out what you want to do. We're spending a lot of money on performance marketing. In the aggregate of this, I felt like we had lost that magical ten star experience. It was starting to become like another company, there was a bit of bureaucracy, it was difficult to get work done, and I didn't know what to do. And I remember telling Joe and Nate, I feel like I had a dream that I left the company, I just came back, and they said, what'd you find? I said, I was kind of horrified because this is not quite the company we set out to build. But we had an IPO coming up, and they're like, what do you do? And I said, I don't know, I mean, we have an IPO, we're not going to rebuild the company. So we're going into the new year, and I'm thinking we need to make some changes, but I don't know what we're going to do. And all of a sudden, the pandemic hits, and our business drops by 80% in eight weeks, and we were doing tens of billions of dollars. And when you're our size and the business drops by 80% in eight weeks, that is like being an 18 wheeler going 80 miles an hour, and then you slam on the brakes, nothing good happens. And this was like, Within weeks, journalists were predicting, is this the end of Airbnb? This is weeks after we're preparing for what's supposed to be one of the hottest IPOs in years, and it was completely bewildering. And I'm lucky that I've never had a near-death experience, but what it's been described to me is your life flashes before your eyes. And I think we felt like we had, at least felt at the time, a near-death business experience. And at that moment, we realized not everything mattered. And it was like if you have to go into house, and your house is burning, and you can only take half the things in your house, what would you take? And that was the exercise we had to do. And you can learn a lot about people in a crisis. And the person that I think you sometimes learn the most about in a crisis is yourself. And the hardest thing to do in a crisis, there's a few things to do in a crisis, but the hardest thing to manage the crisis. You know what the hardest thing to manage the crisis is, what I found? The hardest thing to manage in a crisis is your own psychology because people look in your eyes. And if you think you're screwed, they see it in your eyes, and they say, well, you have the most information. And so you need to be optimistic, but it can't be optimism that's delusional. It has to be rooted in some truth, some reality that people still want us to exist, and this is why. And so the optimistic mentality is the mentality you need to be creative. And you need to be creative, because in a crisis, you often have no good solutions. So the first thing is you need to be optimistic. The second thing in a crisis that I found is that you need to be decisive. And I think this is a struggle for a lot of data-driven people, because there's not a lot of data in a crisis, all the data is out the window. And what do you do when there's no data? You have to lean on something, you need to have courage. But what does courage lean on? Courage has to lean on principles. In other words, in a crisis, I don't think you make business decisions as much as you make principle decisions. And a principled decision is if I can't predict the outcome, how do I want to be remembered? And think of yourself as this is our defining moment, how do we want to be remembered? That is the mentality that you need to navigate out of the crisis. And so we use those principles, and we basically, a thousand of us got into a foxhole and rebuilt the company from the ground up. We had to reduce the size of our company and do a layoff. That was the hardest thing probably I ever had to do. We reduced the pay of all the executives. We're spending nearly a billion dollars on marketing, we took it to zero. I became our marketing department, I started just doing press interviews, I did 100 interviews that year. And we just really got focused, and we actually change how we ran the company, and I'll just say for a second now we now run the company. So most large companies are divisional, right? So you have, whatever, if you're a company, you may have a bottle division, and you have a snack division, so you're a divisional structure. We got back to being a functional organization. So we have a design group, a marketing group, a finance group, an operations group. We basically reduced all the things we're working on the company to just a few things. And then I decided that I wanted only leaders that were going to be in the details. I didn't want anyone that was just a manager of people. It's like if you're a general in the cavalry, you have to actually know how to ride a horse. And so you had to actually have your hands dirty. As we had a team of experts and we all huddled together and we basically said, we're not going to do just this agile continuous shipping of features every single hour of every single day. And I'll give you a sense of what I think is wrong with software development Silicon Valley. The general premise of software development Silicon Valley is to democratize data and anyone can ship anything and this Initially is faster. But when you start adding thousands of people, this slows you down and I'll use an analogy. Let's say we're all making a car and one team is designing the tires. And they design this new type of tire. But now that tire has to fit on a wheel. So they have to work on the wheel team, the wheel team's like, wow, we need to actually make the wheels bigger, to work with this tire. But to do that, then that actually changes the shape of the car. So now you need to update the body of the car, but maybe that makes the car heavier and so maybe you need a different battery. And to manufacture from battery, you need to actually capitalize that but the finance team needs to set different expectations and investors and you see how everything starts to tie together. So, we basically had this idea that what if we thought of the entire company as just one continuous, one fluid organization. I don't push decision making down, we pull it in. We try to pull as many decisions into us as possible and be in the flow, almost like an orchestra conductor. Each executive doesn't have their own swim lanes, we all work together on a few discrete things. Every project in the company, every major project, we review either every week, every two weeks, every four weeks. We have these two releases a year. These releases are where all the work together converges to make sure everyone's coordinated. We make sure that product and marketing are in lockstep. At most companies, product people are like chefs and marketing people are like waiters, and if the waiter goes in the kitchen, the chef yells at them and there's just no collaboration. And I thought, well, what if product and marketing were working in tandem with each other? So it was just like really different way of working. And I think the way to summarize it, is we took the best of software and the best of hardware development and we put it into one system. Because the problem with software is there's no constraints sometimes and so things can be a bit of a free for all and the free for alls can slow you down. So, we basically rebuilt the company from the ground up. And to give you the punch line before the pandemic, that year before the pandemic we lost a couple 100 million dollars. There was a question of could we be one day profitable. And fewer than three years later, we have now done $3.4 billion last year in free cash flow. Nearly 40% of our revenue becomes free cash flows for every dollar almost 40 cents becomes free cash flow. And the amazing thing about this whole system is we never even focused, I never focused on trying to make a lot of money. I just focus on being as efficient as possible, obsessing over the experience, focusing on every single detail and getting really, really detailed. And we would immerse for hours on a certain topic. We didn't have strategy sessions. We lived with the strategy. We would have like 20 conversations, not one deep dive. And I think that way of working, which I think came a little bit from my design background really helped us create this huge business turnaround. >> I've got two more questions for you, Brian before we turn it over to the audience, I've got an easy one and a slightly tougher one. >> Okay. >> Why don't I give you the more difficult one for instance? >> Great, let's do it [LAUGH]. >> One longstanding criticism of Airbnb is that it might be exacerbating unaffordability in densely populated cities like San Francisco, by diverting housing stock that otherwise would've been made available to long-term tenants who reside in those cities. Is there any merit to those concerns? >> Yeah, there absolutely is merit to the concerns and let me just zoom out for a second and back up. When we started Airbnb, we started it, the origin story is Joe and I couldn't afford to pay rent. Under words Joe and I couldn't afford to pay for a housing. And in 2008, many people turned to Airbnb and 2008, 2009 during the financial crisis to put their homes in Airbnb. But over the time, I learned a lesson. When I came to Silicon Valley in 2007, the word tech may as well have been a dictionary definition for the word good. And if you were in tech, you were taking a step forward for humanity, and therefore making the world a better place. And so, therefore, if you grow and what you're doing is virtuous, therefore, you're making things better. And I think 15 years later, we've now realized another truth. That if you create something really powerful, a tool or a platform, and you put in the hands of hundreds of millions of people, that they are almost always going to use it. And there are going to be unintended consequences, things that you didn't foresee. And the faster something grows, the more it can hit you very quickly. And I think there is a concern about how fast technological progress is going. And so this was a huge issue. Airbnb wasn't designed for people that remove housing from the market. So this kind of coincided with our working with cities. And we meet with regulators and they said we have these concerns. And we said, well, how can we fix it? A lot of them would say, well, we want to know in our city that people who are renting their homes, this is the home they live in or at least they live there some of the time. So we said, okay, how will we solve that? And we ended up coming up with a registration system where they would register, they may have an available number of nights they can rent a year, maybe have to show proof of residence. We will handle like hotel tax that will go to bettering cities. But I think, again, it's all about working with cities not believing that your product is inherently like virtuous. Maybe your idea is but always knowing there's unintended consequences and that's we tried to do. And I'll just say, again, the heart and soul of Airbnb still lies in the everyday people, 90% are individuals. And that's kind of mainly where most of our activity is. >> For those entrepreneurs and aspiring entrepreneurs in the audience. What are some post Covid trends in travel that have captured your attention? >> Well, can I talk about a travel trend and then I think a driver of the travel trend? I want to talk about like two trends. Okay, so, when the pandemic occurred, people had a shelter in place. And suddenly people were doing their jobs on a laptop. And then many people realized, well, I could take my laptop anywhere. And so suddenly people were untethered from the place they lived. And so we started noticing that Airbnbs were starting to be booked for 30 days or longer. Last quarter, a fifth of our nights booked were for stays of longer than 30 days. Do nearly half our business is now longer than a week and very few people stay in a hotel for a week or longer. And so it's actually become a fundamentally different use case. In other words, people are living on Airbnb, that was a really big trend. The other trend that happened, was because people weren't going to cities, because many things in cities were closed, they couldn't cross borders, there wasn't really urban travel available cross border. People started going to small towns, rural communities, national parks. Another way is they started going from 100 cities to 100,000 places all over the world. So the two pandemic trends were people staying longer and going everywhere. We've now seen a rebound of a lot of people, and now this gets to my other point. So the other trend is that a lot of people have been kind of stuck in a house or landlocked for the last few years, and they want to get out. And the pandemic is ending, who knows when exactly it's over, but the pandemic is ending. And I think there's a lot of people that have pent up demand. But I'll just end with one last trend, a trend I'm actually concerned about I think we can maybe help a little bit. So during the pandemic, we hired the now Surgeon General in United States. He was also Surgeon General for Barack Obama, Dr. Vivek Murthy. And we hired him, by the way, because COVID had occurred and we wanted to keep the home safe. And so we designed this cleaning protocol. And he said something to me I'll never forget. He said, do you know what the number one killer in America is? When I said, I don't know, is it heart disease, is it cancer? And he said, no, in a larger sense, the number one killer in America is loneliness. That there's a lot of studies that show that people that are lonely, the pernicious health effect is equivalent of smoking a pack of cigarettes everyday. And people that are chronically lonely live 15 years shorter than people who aren't. And I always thought, okay, that's really bad. But I had this image on my mind of maybe elderly people being lonely. And so I started looking at the cohorts, and it turns out that the loneliest people in America are not senior citizens, they're teenagers. That depending upon the stats you see, somewhere like two out of three teenagers are chronically lonely. That correlates to feelings of hopelessness and depression. One out of three adults in America is lonely, but two out of three teenagers is lonely. One in five teenagers has made a suicide plan in the last year. And I said, why is this happening? This is so crazy. And I think what's happening is I think modern life is making us lonely. I think what's happening is 10, 15 years ago, we had these amazing magical devices where they brought us to this world, and we could connect with everyone. But social networking, which was two-way friends became social media, which was an audience and followers, and you're performing. And it's not that social media's causing this. I mean, fewer people have families, fewer people will go to a church, or a bowling alley. There's less physical proximity. Now the office is Zoom, the mall is Amazon, the theater is Netflix, the grocery store is Instacart. And all these things are a forward step for humanity, and I think they're all really great inventions, but they're ingredients. You've gotta balance people being online in connecting with people having meaningful physical interaction in the real world. And this is something that I think we're not going to solve. We're not under some delusion that we're going to solve this problem, but I would like for us to be able to focus on helping, because I think travel is a great way for people to connect. And I want to move Airbnb even more towards a platform where it's either a way to do reunion trips to your friends, because a lot of people now, their friends don't live in the same city. When you guys graduate, many of you are going to live in different cities than your friends, and you'll never see your friends again unless some of you travel. And the other thing is, how do people meet each other these days? And so I'm thinking a lot about how can Airbnb's platform be used to bring people together to make the world feel a tiny bit smaller? Because we verify the identity of more than 100 million people on our platform. And if we could bring people together, make things feel a little bit more intimate, that's something that I think I'd be very interested in. So it's if I'm a designer, it's almost like we're designing how people connect together. >> Excellent, well, thank you very much for sharing with us your insights today, Brian. >> Thank you. >> Would you like to take a few questions? >> Yeah. >> From the audience? >> Thank you so much for sharing your stories, Brian. My name is Florian Daniels, and I'm a second year MBA student here. And I would love to understand a bit more about the co-founder dynamics. I find it really interesting that in Silicon Valley, so many co-founder stories end with conflict or lawsuits. But you and Airbnb seem to be one of the companies where co-founders have stuck together through thick and thin. So I would be curious to understand what the secret to the cohesion between you, Joe and Nate was? >> Man, that's a great question. I like to think, why am I on stage right now, and not the person I thought maybe I would be in my high school yearbook? And the answer, in addition to a lot hard work is a lot of luck. But I don't think of my luck as that we came up with this idea at this time. I think the luck I have is having met my co-founders Joe and Nate. That is what makes me so lucky. You're kind of the people you surround yourself with. And I knew Joe from RISD, but Joe and Nate are really special. Each of them had businesses in high school. I think that it's really important that when you pick partners, they're people that you could be friends with. They're people you could imagine spending more time than your spouse, because you're going to probably spend more time with your co-founder than your partner, actually. And they're people that are so good, they almost intimidate you. They challenge you, but they're also complementary. One time, a decade ago, we each did some kind of personality test. It wasn't an Enneagram, but it was one of those kinds of things. And the personality tests are on a wheel, right, and they kind of put you on a wheel. And it turned out that when they plotted our three personalities, they formed a perfect equilateral triangle. >> [LAUGH] >> And it made so much sense, that it's about the sense of mutual respect. People that are so good, they almost intimidate you, but they're so complementary, and there was such a deep respect. And we had a rule. The rule was that winning an argument was never more important than preserving the relationship. And the reason that's important is because if you start a company, you're going to have to debate 100,000 things, at least 10,000, right? You're probably debating three things a day, and so it's a thousand things a year. 10 years, that's 10,000 things. So no one argument can be the thing. There has to be this larger sense that we're a band. And I think you gotta really work hard at the relationship, almost like exercising. If you don't keep exercising, you get out of shape. And so we worked really, really hard. And one of the things we did in 2009, is we said, every single Sunday, we're going to meet, no matter how busy we get. Now it's like sometimes Sunday becomes Thursday, but we basically meet every single week. And to this day, we still do those calls. And I think a lot of human connection requires constant contact, constant connection, a deep sense of respect. A sense that I'm only here because of them, a sense of humility and gratitude, and a sense that I'm never going to try to win, because if I win alone, I'm not going very far. >> Hi, my name is Tomo, MBA 1. I was curious to learn about the principles you mentioned when you're talking about COVID response. What are your current principles? Have they changed a lot? Are there any design process, so to say, or redesign process when you're thinking about principles you operate on? >> So when you say principles, can you elaborate a tiny bit more? >> Yeah, you mentioned in the COVID response section that everything comes to the principles that you rely on. So I was wondering what are those and how it has been formed? >> Yeah, I mean, I think that I'd like to come from a sense of first principles, and I think every different situation, I actually like there are some universal principles for the company, but like, say the crisis, we wrote down a number of principles. The first principle, we said is act fast. And that's why we said we have to be intuitive, we have to be courageous, we have to move very quickly. A lot of people it's like imagine you're in a car chase and you're like pause, what should I turn? You're dead, so we had to act fast. The second thing is we had to preserve cash, cash was like oxygen. The third is we said, let's act with all stakeholders and minds. We didn't want to be villains of the crisis. And the fourth principle I said is we want to play to win the next travel season. So even when everyone's retrenching, we were thinking about like kind of going forward. And I think that principles are really important because they become like your guiding light in the sky. And they also I remember going to the board, we had you know when the crisis was going on we had have Sunday board calls, because it was almost like three months was happening every week. And I told them, I'm going to make like a thousand decisions, I can't run every decision by you, so here are the principles I'm going to use. Let's align on these principles and if I stick to those principles, we can then stick to this. And I generally think that's just one example, but every project I do, I try to identify what are some immutable foundational truths that you couldn't further distill down than those things and make sure that you communicate them to people. >> My name's Roman Scott. I'm a Sophomore studying Political Science, and I just wanted to ask some for somebody who's aspiring to be an entrepreneur, if there was one thing you could tell yourself when you were growing up, or one piece of advice you could give yourself, what would that be? >> One piece of advice. I would say, just start making something. For example, I went to RISD, and I took all these classes. But it's funny enough, one of the things that probably prepared me more for entrepreneurship than RISD is that Joe and I both ran like student organizations. So I ran like a club hockey team, Joe ran a club basketball team, and Joe and I had the hardest marketing challenge in the world. How do you get art students to go to a sports game? And we had like little budgets, but the point is like, I think there's going to be a temptation for you on this audience to seek prestige because you're at a prestigious school. I think the problem with entrepreneurship and it summarized my mom's story is when you're starting out the line between being entrepreneur and being unemployed is kind of in your head. And so you have to be very careful about seeking prestige because seeking prestige sometimes means you won't get your hands dirty. And if you don't get your hands dirty, you don't actually learn the underlying principles. How do you make something? How do you struggle through something? How do you describe the story? How do you convince someone else? And so I think making something it can be like a little toy, I mean, not physically toy but like a like a thing for fun. And I think just the other thing I'd say is somebody asked like how do you start becoming an entrepreneur? So you start, you just start, you start you don't think, you act you start, very few entrepreneurs make plans like the business plans like expire the moment you do the first thing. And so instead of making plans, I would just make something. And make something with the resources you have, with you and your friends, anything. That process of making something is great. And by the way, the other trick I'd say is make something for yourself, solve your own problem. The first weekend, Joe and I were like, wait a second. Let's make a little website so we can rent our apartment and make some extra money. That did not seem like a billion dollar idea, renting three air mattresses in an apartment. And so there's a lot of investors that say we like to invest in big markets. Well, what's the market size for people sleeping on air mattresses? So the problem is that like, I wouldn't focus on markets, I'd focus on solving a problem for yourself or somebody in your life. It doesn't even have to be a big problem, it could be something kind of fun, and just start making, just start doing something. >> Brian before I let you go, it is a view from the top tradition to end each session with a number of rapid fire questions. >> May I invite you to play along? >> Yes, let's do it. >> When was the last time you stayed in a hotel? >> [LAUGH] >> When I had these fake glasses and fake mustache. I think I stayed one, I think it was like last year for like an event. >> And what is the most memorable Airbnb you've stayed in? >> Well, I stayed in a treehouse in Burlingame, California by this couple Doug and Linda, it's very quick story. It's not rapid fire so maybe I should not tell story. Well, I will tell story, >> [LAUGH] >> because now I have half started telling story. So this woman named Mackenzie her mother and father were Doug and Linda. The father built her a treehouse in the backyard, she plays in treehouse growing up then she graduates high school, goes to college and there was this treehouse in the backyard and they're like what do we do with a treehouse? And one day Mackenzie's like, why don't you put on Airbnb? The house ended up paying for the mortgage and it was this amazing experience. >> And finally, I learned that your own apartment in San Francisco is listed on Airbnb. How much do you charge per night? >> [LAUGH] Well, it's free, but boy, do I have some cleaning fees. No, just kidding. It's free and when you stay with me, it's a pretty cool experience because it's me and my co-host, Sophie Supernova, who is my 18-month-old golden retriever and I make what I call Chesky's chips. Chesky's chips are an old family recipe of chocolate chips that I got actually off of Google, but- >> [LAUGH] >> And then we make dinner together and then I take them on a tour the next day to the office where I tell them the story of Airbnb. And, and I think I'll just end by saying this I think on the surface, Airbnb is about space and it's like, stay with me. But I think, below the spaces the thing about Airbnb when it works the best, it's really about people, it's really about connecting to one another. It's the idea that the best way to change someone's mind about someone else is to walk in their shoes. And the best way to walk in the shoes is literally to be in their home and I think that if more people could live together, then I think obviously a lot of minds would be changed and so that's kind of what we're trying to do. >> Perfect, thank you for making the time today. >> Thank you it's been a great pleasure. >> [APPLAUSE] [MUSIC]
