Phil Libin: No Exit Strategy for Your Life's Work [Entire Talk]

Let's welcome phil. Thank you so much. One of the things we made Evernote 4 was as an easy way to capture all of the most memorable moments in your life. So if you guys just hold on one sec. And now I remember this, which is pretty cool. I actually did this little bit with taking a picture of a crowd with a cell phone. It kind of was a gag for the first time. It was my very first press conference. We were in Japan, and we didn't do press conferences before, but I guess in Japan, they still do them. And there were hundreds and hundreds of reporters that showed up. And I got up on stage, and it was literally just a wall of flashes, because I guess, again, that's just what they do in Japan. And I was kind of taken aback, and I just took out my phone and took a picture of the crowd on the way back, and that kind of broke the ice and got everyone laughing. And I just. I happened to do it in Evernote because that's the app that I had on at the time. And so it kind of started as a joke, but then it actually turned out to be something I do all the time now because it's actually really cool for me to have this memory of what you all look like before I board you for the next hour with this talk. So I was asked to come in and talk about being an entrepreneur, and I figured, okay, well, that's Phil Libin, standard talk number 17B. I don't really have to think much about how to do that. And my original plan was to just come in here and basically say the same stuff that I've said to a bunch of audiences interested about entrepreneurship. Stay in school and follow your dream and embrace failure. And now is the best time in the history of the world to start a company and all of that stuff. But somehow I couldn't quite bring myself to do it, because in the past week, I think, like most of you, or like many of you, I've spent a lot of time thinking about Steve Jobs. And all of a sudden, I realized that the general platitude how to be an Entrepreneur speech, it's very hard to add anything to what he's already said. I went back and I watched Steve Jobs Stanford address from 2005, which, again, all of you have probably seen in the past few days. And that is just an extraordinary speech. It is the apple of commencement addresses. Most of the ideas in it actually aren't the first time you've ever heard those. There's a lot of things in that speech that Almost everyone's probably heard before, but the execution is just flawless. It's just perfectly put together, perfectly expressed, flawless. And it just carries so much weight because of it. But it was the follow your dream speech, and I thought, there's no way I can't add to that. I can't do better than that because that's already been done as perfectly as it's ever going to be done. So it made me think that I should throw my standard entrepreneurship talk out the window and try to do something that maybe expands on this topic a little bit more. And the more I started thinking about it, the more I realized that, well, the only thing that I can think of to maybe add to it is this whole follow your dream. That's all well and good, and it's very profound, and it was very well stated, but it really doesn't answer the question of, well, what's the right dream? How do you dream the right thing? Because obviously the world is extremely lucky that Steve Jobs followed his dream and that Martin Luther King followed his dream and that Beethoven followed his dream. But those people also had pretty good dreams. Snooki is probably also following her dream. And so I don't know if that's in itself sufficient. And it's actually something that I realized I've been thinking about for my whole life is what is the goal? What is the meaning of it? What is the dream to have? Once I figure out what's my dream, once I have a suitably epic dream, then I think it's all well and good to say. I'm just going to follow it to its logical conclusion and have a great time and hopefully put a dent in the universe. But I couldn't for a very long time figure out what a suitably epic dream would be. And so I wanted to share, before we get to the standard entrepreneurship stuff, the thought process that led me to this very specific vision of what I wanted to accomplish and why. I think being an entrepreneur is the most direct path to accomplishing it. So I started out. This is kind of a philosophical question, right? What is. What is a. What is a suitable dream to have in your life a suitable goal? And it makes me think of the very first philosophical thought that I was aware of ever having. Like, I kind of distinctly have this memory from when I was a little kid, and it was the first time that I probably thought, had an abstract thought, and I forget how old I was, but I was. I was in Russia. I was born in Russia, and I was probably five or maybe six or something. And we had gone on some trip with my family and I really loved it. I think we were like two weeks away in some nice place and really having a great time. And then it was time to leave. It was the last day, it was time to go back. And I remember talking to my mom saying I don't want to leave, this is really great. I don't want to go back home, I want this, I just want to stay here. And she said well you can't, our vacation is over. And and I said, well, why does it have to end? Why does it have to be over? And she said, well, everything, everything ends. And I remember being struck by that when I was five. I remember that idea that well, everything ends was something that was kind of non trivial to me. I never thought of it that way before. And I thought, well, what do you mean? Really everything? And she said yeah, yeah, everything. This vacation will end, the summer will end, the year will end, everything ends. And I remember thinking, well, obviously I made the next logical leap for a five year old. I said, well, is the world going to end? And she said, yeah, at some point probably the world will end. And this really fascinated me. I was a little five year old nerd and I immediately fell in love with the idea of the world ending. Probably because it would mean that I wouldn't have to keep playing soccer in the soccer club that I hated and they tried to enroll me in or something. And I spent the next several years thinking about that and wondering and kind of obsessing in a creepy little kid obsessed way about the end of the world. And of course I had no idea how it would happen. But I remember one of the first movies I saw was this horror movie about dinosaurs and dinosaurs had somehow woken up and started eating people. And at that point I figured, ok, well the world will probably end through dinosaurs. Dinosaurs will probably come and eat all of us. And I kind of became an expert on the end of the world through dinosaurs. And then I went to my parents and I said, well, do you think it's going to be dinosaurs? Like what are you talking about? Well, you know, the end of the world. You know, it's what I'm always talking about. You think it's going to be dinosaurs? And I said no, it's not going to be, probably not going to be dinosaurs. What's it going to be? And I think at that point I was probably seven or eight and I was just old enough where they felt they should just tell me the truth. Which was again, this was in the late 70s, early 80s, and they said, no, it's probably going to be nuclear war. Realistically, back then, just about everyone thought that the world would end in 10 years, 20 years. But either us at that point, the Soviet Union or the US would initiate a nuclear war and that would probably be the end of the world. So that was kind of my first realistic thought about it. And then we emigrated to the US and so I got to kind of see it from the other side. But Even in the U.S. most people in the early 80s, I think thought that the missiles were imminent, the world was going to end. And I was really kind of, you know, I was really focused on that. And to learn English, I did a lot of reading. I came here when I was 8 years old and I learned English basically by reading comic books. I read a lot of Thor comic books and I read all sorts of geek sci fi and fantasy stuff. And I kept seeing these stories about superheroes and gods and monsters and the end of the world and Norse mythology and, and Thor and Greek mythology and how they thought it would happen. And then I read something which was kind of the second thing that stuck with me, which was it's from Genesis, from the Bible. But I'm pretty sure I didn't read it in the Bible. I probably read it in Spider man or something. But it was this idea that God created us in his image, right? This line that everyone thought God made us in, made people in his image. And I remember thinking, that's a really interesting idea. Like, what does that mean? Like whether you believe in it or not, that didn't really matter. I thought, what is this? Like it's sort of, you know, it's kind of an interesting thing. God made us in his image. What does that mean? Does that mean that God is, you know, kind of a fat guy with a beard? Probably. But this probably also means something else, something else that's more interesting. And so I started thinking, well, what could it mean? What is maybe something that is more inherently and essentially part of people's idea of God. And maybe it's that essential quality that mankind is made in the image. So maybe it's not a physical resemblance. Maybe it's some kind of an inherent quality that the people ascribe to God and that's the part that we have that's in our image. And some point later, probably in high school, I came upon this idea of transcendence and that this was actually the central thing that many religions and many philosophies ascribed to God was this idea of Transcendence, that God was there before the beginning and God will be there after the end. That he sort of transcends whatever bubble of reality we live in. And that, of course, dovetailed perfectly with my whole sick end of the world fixation. And I thought, okay, that's something deep, at least for what passed for deep in high school. I was also listening to Wham or whatever, actually Dio, probably I was more of a metalhead back then. And I thought, this is interesting, right? This is maybe the central idea is transcendence. This is what God means. And I wasn't saying this in a religious way. I wasn't ever particularly religious. But I thought the idea of transcendence is a really fascinating one. The idea that you. Yes, there is a start and an end to everything, but some things transcend that. And I was really fixated on this idea of transcendence. And this got me beaten up a lot in school because it wasn't a particularly popular topic of conversation. Basically, I was such a giant nerd that I'm not kidding. In high school, the chess team would not hang out with me. Like literally the chess team would not hang out with me. The computer club hung out with me. But I was not nearly cool enough for the chess team. So when I got to thinking about how the world actually would end for real after it became hopefully clear that it wasn't really going to be in the next five years because of dinosaurs and nuclear war, I thought, ok, well, but really it will end at some point, so how is that going to happen? So I started reading basically everyone I could on the subject, Gould and Dawkins and everyone else. And there's lots of theories about how things are going to go down. So an asteroid impact. Carl Sagan was writing about this, where there's actually mathematically extremely high percentage that we'll have an asteroid impact that will destroy the entire planet or all life on it. And it happens every couple hundred thousand years. And just because it hasn't happened in mankind's memory was exactly because mankind came around after the last time it happened. But that doesn't mean it won't happen again. And of course, there's, you know, there's viruses, there's all sorts of stuff. At some point the sun will burn out. At some point after that, the whole galaxy will collapse. So there are actually interesting ways to think about how the world will end. We're probably, hopefully. We're not talking about decades, maybe talking about thousands or ten thousands of hundreds of thousands of years. And I Combined that with this idea of transcendence. And I thought, well, this is actually kind of cool, right? Maybe the way in which humans are made in God's image, in this image of transcendence, is maybe we have this spark that we have a chance to actually transcend the natural way that otherwise the world would end, all life would be destroyed and so on. So if we didn't do anything, obviously there's a very good chance that whatever the end is, people would have brought it about ourselves. We would kill ourselves off through pollution or overpopulation or something. And so there was a. A goal of not doing that. And for a while, that was kind of became my goal in life, was I said, okay, I'm going to be basically an environmentalist. I'm going to try to prevent mankind destroying the planet. But then I realized, well, even if we don't do anything, it's still going to end. It's just a matter of time. If there were basically no people, if chimpanzees were the highest organism very similar to ours, and you can argue they have the same kind of emotion and a very similar intelligence, but there was no pollution or anything that wouldn't save all life on the planet. It would still all get wiped out. The next meteor impact or something. In fact, the only way that there was even a slight likelihood of the planet or life on it transcending that event was people was if we actually got our act together enough to do something about it. So mankind would have to actually organize and get our act together in such a way that we advanced forward in technology, but did it in a way that didn't cause the end of all life prematurely by us just being stupid and nuking ourselves or polluting the planet. But at the same time, we got advanced enough, quickly enough where we actually had the wherewithal to avert or transcend or live through a ever increasing series of mathematically likely threats going. Spanning thousands and even millions of years into the the future. It's kind of a, you know, kind of an egghead idea. But I thought, you know, that's like a good definition to me of what it means to be in God's image, right? To be. To be transcendent. And of course, we wouldn't. It wouldn't just be about saving us. There's a great scene in Futurama where Bender, it is the robot, and he's in a van with the rest of the characters. And the van goes over. Goes over the cliff and they're plummeting and everyone is yelling. And Bender goes, I'll save me. And he stretches his arms out to save himself. So this isn't just about saving us, saving humanity, but it is very much about saving the whales, like they did in Star Trek iv. If the whales are going to survive, we have to do it. They're not going to get by on their own. The only way they can actually survive in the long term is through people. And so I thought this was around high school. I put these things together and I said, ok, that's. That's a big enough dream for me. I want to work towards getting humanity to the point where we can survive and guarantee the survival of us and of life and of intelligence for millions of years. That was sufficiently epic. And I thought, okay, now I've got something. But it wasn't exactly actionable. I couldn't quite figure out a way to actually do that in a meaningful way. So I just continued kind of being a nerd and reading a lot of sci fi and fantasy. And when I got my. After college, I got a job and I was working with a few friends of mine in Boston as a software engineer. So I'm a programmer by training and I got a job at a company in Boston called ATG Art Technology Group. That's what it was called at the time. I think it's since been bought by Oracle a couple of years ago. And ATG was this amazing company. I joined them right before they IPO'd, and we just built all this awesome technology. We invented a lot of the stuff that you just sort of take for granted on the Internet, like dynamic web pages and stuff like that. This was in the late 90s. And I had this phenomenal experience at ATG, which is up to now, at every point in my life. I was sort of used to feeling like I was the smartest person in the room. Totally not justified, obviously, but that was the feeling I had. I was kind of the snotty, nerdish kid. And I always felt that, like, I was always the smartest person in the room pretty much all the time. Yeah, yeah, sure, the other kids had curl friends and were good at sports, but, you know, I always got the sense that I was the smartest person. And at atg, that was the first time where that was patently not true, where, like, even somebody like me could look around and be like, man, I suck. I am below average here. This is a brilliant group of people, a brilliant group of developers and engineers, and they are getting stuff done in an amazing way. And I am in awe of this team. And I frankly was below average. I kind of got the feeling that they were putting up with me because I was like, it was just worth it to put up with. But I certainly wasn't one of the star developers, one of the star programmers. There were other people were. When I first realized this, first it really troubled me, you know, greatly. But then I realized, this is awesome. This is like the first time I'm ever really enjoying myself. This is the first time where I felt like the environment that I was in that I locked into by joining this company. And it wasn't the first company I worked at, right? I'd worked at tons of places where I did feel like I was the smartest person in the room. But in this environment where I clearly wasn't, where there was everyone around me or almost everyone was much smarter than I was, was the first time that I was actually happy and comfortable and not stressed out and not thinking about the end of the world for some strange reason. And I thought, this is great. This is how I'm going to structure my life. I want to structure my life so that I'm never the smartest person in the room. I want to go to other rooms, I want to make friends. I want to create a bubble around me where everyone else is just so much better, smarter, more productive, more capable, because that's how stuff actually happens. And that's how I get to feel good about things. And that's how I learn things and learn. Learning is actually really fun when you're learning things that you care about. And I kind of resolved to actually structure my life that way. And that meant not working in places that were going to be stupid, not doing things that I didn't have any respect for, not associating with people when I could have avoided that I feltly thought weren't going to add to this, but actively cultivating friends and relationships and work environments where I felt almost everyone else was smarter than I am. And I've managed to hold onto that up until now. That's been one of the fundamental things that I've done that I think has worked really well. In fact, that's clearly the case here. Just me being in this room, I think, is an example of that. I couldn't get into Stanford. By definition, you guys are all smarter than I am. This is me. And if being here is very much part and parcel of that lifetime experiment of trying to surround myself with the most interesting, the best possible people and then just kind of seeing what happens. So I had this realization at atg and all of a sudden it kind of made sense. I kind of went back to my whole end of the world, whole transcendence, whole like general goal of saving humanity and life and intelligence and everything from total extinction. And I thought, now I kind of connected the dots. It makes sense to me because what's going to prevent us, what's going to prevent humanity from achieving that level? Well, it's stupidity. That's what's going to prevent us from happening. It's every time you turn on the news and there's a politician saying something jaw droppingly stupid, it's the amazing power of the torch wielding mob to just destroy things to get in the way. It's going to be stupidity. It's going to be stupid people and assholes that are going to prevent us from doing this. And then I thought, okay, now that's becoming actionable. So now my dream became I'm going to spend my life trying to reduce the amount of stupidity on this planet. And that was something I felt I could do. I felt like I'm not going to get rid of all of it, but I can get started, I can have an impact. And that became my dream. My dream became to change the world for the better by reducing the amount of stupidity, reducing the number of assholes in proportion. This still grows with population in several different ways. And I said that's what I want to do. So the first thing we did when I had this realization is I got a few of my friends together from college who were at the company and we decided to start our own company. So we started our own company called Engine 5 in 1997. And we were all geeks. We did software. We didn't know anything about business, we didn't care about business, we didn't know anything about money. We didn't even know, literally. We did not know that there was a thing called investors. We didn't know that what you were supposed to do when you start a company is get other people's money and spend it. We didn't know, we never read a business book. And this was in Boston where things aren't kind of bred. Entrepreneurship is not bred into the culture like it is here. And so we were just three engineers. We started a company called an Engine 5 because there was going to be five of us. But the two chickened out. They know who they are and they deeply regret it. And we just showed up and we started writing software. And we got very lucky because 97 was just right as the first.com phase was really starting to expand and so there was an infinite demand for good programmers. We started building e commerce systems and stuff like that. And we did it with no money. We never put any money in. We never took a penny of investor money. A couple of years later, our accountant actually made us put $100 in each because he said, you have to put some money in, otherwise I can't do the books. We said books. And our entire company was structured around this one idea. They say that the most successful companies have a big idea. Our big idea was no assholes. We didn't know what we were going to do. We knew it had to do with computers because. Because that's what we were, we were computer guys. But we thought, ok, here's this experience that we had very often, including at this other company that had brilliant people. You would sit there, you'd sit at your desk and you'd look over at somebody. I don't want to point at anyone in particular. You'd look over at someone and you'd go, that guy over there, that guy's an asshole. Why is he here? When they interviewed him, didn't they know? Couldn't they tell? Why did they hire him anyway? We couldn't figure it out. So we thought this was our big idea. We're going to start a company and when we interview people for a job and they come in and we interview them and if we think, huh, that's very nice, you're well qualified, but you're kind of an asshole, we're not going to hire that guy. And we thought, is it feasible to do that? Can we have a company like that? Obviously it's hard because it's never been done before, But we thought we'd give it a try and we did. And that actually worked really well. And so with that as the focus, that as our strategic vision, plus the fact that we got ridiculously lucky in the timing, we sold that company a few years later. I think we grew to like 12 people and we sold the company for something like 25, 26 million dollars, which was a lot of money back then in the 90s, especially since there was zero investor dollars in it, because. Because again, that was when the accountant had made us put $300 in because he's like, OK, I need a base price for something. And the way we sold that company is we wound up doing this project. We did e commerce sites. So back then, E commerce wasn't really. It was just getting started. And we build shopping carts and websites where you can buy stuff and we did a really big project for. I think it was for Nokia. So one of the major companies at the time, they wanted to sell stuff online, and the client had decided that they were going to use this thing called Vignette Story Server, which was this giant content management package from a big company that had just gone public. And we begged them not to use it because we looked at it and we said, this thing, the Story Server, you paid a million dollars for it. It doesn't do anything. We know. We are technical guys. We're in charge of implementing it. I'm telling you, it doesn't do anything. Do anything. I mean, it costs money, but it doesn't actually accomplish anything. You still need to customize it for a year, but we can do that year of customization without that thing, and it would be just as good. Please don't use it. Just give us the million dollars instead. And they said, no, no strategic decision. CEO played golf with somebody. We need to do it. They said, all right. So we had to build this very big, complex site using this technology, and it was impossible because the thing didn't do anything more than it didn't do anything. It kind of prevented you from doing anything. And so we had to fight uphill to actually connect it. We had to build all this plumbing to connect this Story Server thing to real things that actually did something. So you can have shopping carts and inventory and whatever. And it was really difficult, far harder than it would have been without it, but it worked. And we launched a product. And then we were sitting around right afterwards, we were just kind of joking around, and one of my friends suggested, hey, we should send a letter to Vignette. And we should say, like, dear Vignette, just thought you'd like to know that we had to do something with your crappy product. And we managed to do it, and it worked. But, like, boy, it was difficult. Your product sucks. And we were sort of laughing about that. And then I thought, why not? Let's do that? So I wrote a letter to Vignette, and I wasn't quite as rude about it, but basically that's exactly what I told him. And three weeks later, they bought the company. Because they immediately wrote back, like, really? We would love to get it to do something. And, yeah, we know that. It's, you know, back then, everything was booming so fast, right? They didn't have time to, like, to actually write a product. They were too busy selling it. They were too busy growing. And they knew it, and they were actually really good about it, and they Bought us pretty much immediately. And then we helped kind of redo the architecture so that a couple years later, it actually did do something. And so the lesson we kind of learned from that is A, this whole experiment of just really trying to not tolerate stupidity and not have any assholes. That worked really well, although we may have just gotten really lucky the first time around. And B, we would just be direct about what you want. We had a thing that we thought that would be useful information to tell this big public company. And we did. We told them and they did the right thing and they bought us and everyone. It kind of worked out well for everyone. And then we spent about two years at Vignette, and then we started our second company, same team of people, right through college, from college, we started our second company, which we did on October 11th of 2001. So exactly a month after September 11th. And I think, like everyone back then, we sort of felt, you know, we need to do something more substantive. It seemed like the stuff we were working on before. Yeah, it was interesting technology. We were doing e commerce and collaborative filtering and dynamic recommendations, but none of that seemed to matter. A month after September 11, we wanted to do something more fundamental, more substantive. So we met this brilliant professor out of MIT who had this idea that would really revolutionize security and cryptography and smart cards. And we did a startup out of mit, a spin out of MIT called Core street, basically, to productize this idea. And we applied the same rules, no assholes. Except by that point, of course, I was grandfathered in and small group of people and just build this technology. And that worked well. But what I learned from that is people don't get excited about security. We were basically selling big systems to the government. And I kind of became an expert on DoD procurement schedules. And I didn't want that in my head. And even though we were doing interesting work and important work, work that actually today is used by millions of people and really, I think did improve security worldwide, no one cares. No one is excited about it. Because in the security field, what I realized is the best case scenario, the best case scenario in security is your customer resents you because nothing bad happened. And they feel like they wasted their time and money. They didn't need you. Nothing bad happened. That's the best case scenario. It's all downhill from that. And once this company started, kind of got on its feet and got to the point where we're stable, we thought, okay, we need to. It's time for adults to come in and take over and run this thing. And it's time for us to do something consumer based. We wanted to do something that people would fall in love with. We wanted to take our plan of reducing the amount of stupidity in the world to the next level and say, rather than just doing it based on example, like no stupidity in our company, let's actually make something that tries to make the world smarter, or at least its users smarter. But more and more importantly, we said, let's make something that a billion people, if we execute it well, I want a billion people to wake up excited about in the morning. We didn't know what, but that was the idea. We said, we probably want to move to California because it's going to have to be consumer based. And consumer technology is really like, we want to be in Silicon Valley. And I remember talking to Andrew, one of the guys on the team, one of the co founders in these companies, and I said to him, I said, andrew, I want to build something that a billion people will wake up in the morning excited about. What can we build? And he said, chinese breakfast. I said, no, that's not the answer I was looking for. Let's think about it some more. And then we realized that it should be Evernote. It should be something that there's universal demand for. Because we thought, well, none of us are fully happy with our meat brains. All of us wish we had better memory. Yeah, that's not an original idea. There's nothing new in that. Right? People have been thinking, people have been creating technologies. They used to be rocks for helping you remembering stuff for tens of thousands of years. But if we can execute it, if we can do it really well, if we can execute this idea of building something that will improve everyone's memory, and we execute it so that a billion people would use it, you'll have something. And we took a gamble. We took a bet that technology had just gotten to the point where that was feasible for the first time ever, that we could do something that was really, really mass market. And that's how Evernote came about. So we started working on this idea of a human memory extension. We immediately ran into another small team that was working on the exact same idea. That team was led by a really brilliant Russian American inventor and scientist named Stepan Pachikov. We met, we decided to actually combine the two teams together. In 2007, we said, rather than two small companies competing with each other, let's just join forces. And so we did that. In 07, we formed the current entity called Evernote. And it's been a lot of fun ever since. And the main goal of Evernote was to just take that mission of reducing the stupidity in the world and make it more direct. Because we said we're going to run the company using these principles, we're going to talk about these principles and we're going to have a product that if you use it, it has a chance of actually just improving your memory of making you smarter. So we decided to do this more directly. So this is our dream, this is what we're pursuing. And I finally feel like it's a suitably epic dream that it's actually worth devoting my life to. And so that was always the plan at Evernote. There is no exit strategy at Evernote and there never was. It's our third company and this is the one we get to keep. The first two we didn't build for us, right? The first two we built for somebody else. Well, we built it to manipulate our environment so that we can have a fun place to work and to make some money. But ultimately the products we were building weren't for us because the first company built e commerce products for retailers, but we weren't a retailer. And the second company build security products for big governments, but we're not a big government yet. And we said, well, the third time around, let's build something for us. Let's build something that we want, that we love. And if you're doing that, why would you ever want to exit? And so there is no exit, there is no acquisition strategy. We've turned down every acquisition offer, we've structured the board, we've structured our investment in such a way that we can build a hundred year company, because that's much more fun, that's much cooler, it's much more interesting to come into work every day and think, I'm pursuing my life's dream and I'm doing it in a way that I intend to do in all seriousness for the rest of my life. And I'm not taking any shortcuts about building the company in such a way that I can flip it, that I can sell it, that I can exit. Because if you want to exit, if you want to sell your company, something's wrong. If you want to sell it, something isn't correct because you're obviously not sufficiently in love with it. You're obviously valuing it less than the acquirer. So why is that? I mean, maybe there's a legitimate reason. Maybe you think that your dream has a much better future if you combine forces with the acquirer. That makes sense. But if you're just doing it to exit, that doesn't make any sense to us. And so, having exited two companies, we explicitly said no exit at Evernote. In fact, about a year ago, kind of got tired of having some of this conversation with a company where people at a small company, everyone just talks about it, right? Your executive, your staff would be like, hey, who do you think will buy us? You think Google will buy us? You think, whatever. And I finally said, okay, I've had it with this conversation. We just turned on a big offer for acquisition, and I said, we're no longer talking about who's going to buy us. No one's going to buy us. Let's talk about who we're going to buy. And let's do that. Seriously. Let's seriously say, let's just shift gears. Just go, who do we want to buy? And people said, okay, yeah, that's a more interesting question. That's actually more fun to think about that. And we all said Skitch, because we all love this little product called Skitch. And we actually thought there was a tip of the iceberg what we could do with it. And a few months later, we bought our first company, and it was Skitch. And it was actually awesomely fun to acquire this great team, this great technology, a product that we had already been in love with that actively helps you be smarter and more productive and a better communicator. And we'll buy several more as well. But the kind of companies that we're buying now, we have the same discussion. We don't buy a company that somebody wants to sell to us. We buy a company like Skitch that has founders who are fundamentally in love with this idea that getting out is the last thing on their minds. And we have to convince them that the best way to reach their idea is to do it inside that. We share the same passion, we share the same vision. We will get there together. You guys will actually wind up fulfilling your dream better inside Evernote than outside of it. And that worked really well. In one case. We actually just purchased a couple more companies that we haven't announced yet, but hopefully we will soon and we'll do that for the next hundred years. And this 100 year plan is a hell of a lot better, a hell of a lot more fun than. Than any of the previous things I've done. But the secret is it's stuff that we're building for ourselves. I do not think I would have the patience to spend 100 years building software for banks. So, having said all that. I think we can get back to where this all started, right? The kind of standard entrepreneurial talk. So you want to be an entrepreneur? Well, I don't. I never did. The first time, I remember the first time somebody called me a serial entrepreneur. I think I just started my second company and they're like, phil Liven, serial entrepreneur, serial entrepreneur. Like the Quaker Oats guy is a serial entrepreneur. I just started a company. I'm not really sure what that means. My goal wasn't to create companies and sell them. My goal was to do something meaningful. And I thought that lacking any artistic skills, the best way to actually have this kind of impact is to make an entrepreneur, make some money for people. Because the universe lets you do more and more interesting things if you can actually demonstrate an ability to make money. And that's how it's worked out. So if you want to be an entrepreneur, I think the first thing is to really ask yourself is why? Because there's many bad reasons. There's only one good reason. There's many bad reasons. So if you want to be an entrepreneur and you fall into any of the most common bad reasons, don't do it. I think the number one mistake, the number one bad reason for being an entrepreneur is because you want to make money. If you're thinking of being an entrepreneur because you think it's a good way to make money, you're just bad at math because it isn't. Or you just have to look at the statistics. Thank you. Right. Depending on how you count, 95 or 99% of the if companies fail, and if you're smart enough to be in this room and you're talented enough and you're driven enough just to be here, and you want to optimize for your lifetime earnings, being an entrepreneur is stupid. If you want to optimize for your lifetime earnings, having already gotten to this room at Stanford, you're much better off just getting a job, become a banker or something. You'll make a lot more money. The expected case will be a lot more. Now, some people get lucky and make significant amount, but being an entrepreneur is not a good idea if that's your main goal. So if you want to make money, I would say that it's a serious mistake if you're doing it because you have some sense of power, like you want to be the CEO because you're going to be at the top. There's this pyramid, right? This org chart, and here you are at the top. And here's all these people below you that's ridiculous. It doesn't work like that. When you're the CEO of a startup company, everyone is your boss. You're all the way at the bottom. It is an inverted pyramid, like you're down here. And then it goes like that. All of your employees are your boss, all of your investors are your bosses. All of your customers are your bosses. Everyone in the media is your boss. I've never had more bosses than I have at Evernote. So if it's a power trip, if you want to be an entrepreneur because it's a power trip, that's just a ridiculous idea. I've had some people say that they want to do it because they want more flex time. Oh, I've got this job and it's nine to five, and I really want more flexibility. So I'd like to do something entrepreneurial so I can kind of control my own hours. You do get flex time as an entrepreneur. You get to work any 20 hours a day you want. So lots of really bad reasons. And if you're thinking of being an entrepreneur for one of those reasons, I would say. Really? Yeah. Take this class. Just learn about it. It's all good. You can learn about art appreciation without becoming a professional artist, but don't do it. If you want to be an entrepreneur because you want to change the world, because you want to do something that has a fundamental impact on the universe, and you have a decent idea of the direction of how you want to change and what that change is, then I actually think it's an unparalleled time to do it. And to wrap up where I started, now is the best time in the history of the universe to start a company, because we are living in a geek meritocracy today, or as close to a geek meritocracy as has ever happened. My first two companies, they were all software companies. We had to spend probably 70% of our time and resources. We spent 30% roughly on making the product. We spent 70% on all the other crap. Marketing, logistics, channel partnerships, advertising, all of that stuff. It's like 70% now, especially if you're doing something for consumers, you can spend 95% or 99% of all your resources making a great product. And. And you get massive leverage in everything else. And this only happened two or three years ago. It's because of app stores, because I used to have to worry, well, if I release a new version, how are people in a different state going to get it? Well, I better have a deal with a retailer that works in Tennessee now. You make a great app. Everyone on the planet can have it tomorrow. Same thing for advertising. I used to worry about, how do you reach people? Well, now you don't have to worry about how to reach people. What do you mean, reach people? You make a great product. Everyone's already having an infinite number of conversations on all their social networks. You just want to be the thing that they talk about. So be great. People will talk about you. End of the story. Smartphones, Computers are everywhere. Without smartphones, this wasn't possible. Freemium economics. I've got lots of things to say about freemium in different talks, but freemium economics works really well if you know what you're doing. If you build a good consumer app, these things put together app stores, smartphones, open source infrastructure, network services, freemium economics. All of this is new. In the past five years, all of it together, make this a geek meritocracy, make this the best possible time in the history of the universe to innovate and to start a company. And all of the depressing stuff you hear on TV about how it's a bad economy and it's a bad time to do it, it's complete nonsense. All I ask about that is, I say, well, when would you rather be alive? Is there any point that you think you would rather. Would you change your life today? Would you be back in 1992? Would you go back to the 70s? Would you go back to the 1500s? Like, when. When was there ever a better time? There hasn't been. There's always some feeling that, you know kids today and there's malaise or whatever, but the facts are, the verifiable facts is we've never been closer to a meritocracy. And if you're a geek, pretty sure some of you are, now's the best time to be an entrepreneur if you've got the right reason to do it. So thank you very. When somebody asks a question, would you repeat it so the online audience can hear the question? Sure. Please, just. Thank you. That was great. Thank you so much. First question. So you never want to sell the company. Yeah. But you raised $50 million from recently, from people who generally like to get their money back and multiples thereof. And also I think we read somewhere that when you raised it, you sort of said you kind of didn't need it. Yeah. Yeah. So can you rationalize those comments against what you just said about building a 100 year company, never selling it? You know, how do you actually make all those pieces fit together? So the question is I said, I don't want to sell the company. But we raised a bunch of money, close to 100 million from people who like to get their money back. How do we rationalize that? Well, pretty easy. So there's actually been this complete revolution just in the past two years in the VC industry, which I think people here kind of know. But the memo hasn't quite gotten out to the rest of the world yet. But there's a total fundamental change of shifting, change of shifting, shift of thinking about this, which is sophisticated. Investors like Sequoia and Morgenthaler, our main investors, have totally decoupled Exit from liquidity. Those two things used to be together. So you start a company and the investors want you to starve until you're done, until you exit, and then everyone gets their money back. And that's fundamentally stupid. And look, in hindsight, obviously it's stupid. Who does that benefit? Why would anyone want to put pressure on the founders of a company to potentially sell prematurely? Because, yeah, they're kind of successful, but they also got to put their kids through college and they have a lot of money on paper, but they don't have any money, really. So this whole idea of coupling exit and liquidity, which was 99% of the time before, doesn't make any sense. And it was people here that figured out, boy, that's dumb. What do you do when you see something as dumb? Well, you just stop doing it. So the secondary markets today provide all the liquidity that you ever need, totally separate from an exit. So when you do a round, especially any of the later rounds, it's usually not only possible, but it's usually quite encouraged to allow existing shareholders to sell a certain portion of their shares. The bigger funds, like Sequoia, Sequoia is not a monolithic entity. They have many funds with different risk profiles. So they can actually. Some of their funds that have more startup profiles can get out. Some of their growth funds can get in. They can shuffle that through. There's tons of other investors that are happy to buy shares from founders, from employees, from shareholders. And so you can have multiple liquidity events all the way through. And then at some point you'll IPO and you have the liquidity that way. But there's no exit. There's no synchronized event where everyone is like, we're done, because why should there be? That's not good for anyone. So that's. The separation of liquidity from Exit, I think, was like a profound shift that happened, really. Facebook, I think, is probably the first company that really figured this out. Facebook and investors like Sequoia, like dst, like Yuri Milner, they were kind of the first people to do it. And it's like you're watching history happen right now, and it's fantastic. Like, I go to Boston and like, the Boston VCs didn't get that memo yet. So they're still conflating those two things, but it's only sooner or later, next decade or two, everyone will figure it out. Please, can you talk a little bit more about when the team broke up when you were doing Engine five and how you dealt with that change. When the team broke up? Yeah. You said there were going to be five founders and then two left. Yeah. Yeah. Well, that happened right before we founded it. So we basically got five co workers together, five friends, and we said, let's make a company, called it Engine 5. And everyone said, awesome. And then when we got the name and got the domain name, because back then you can get domain names, you'd just be like, engine5.com, hey, it's free. And then two people just. They just chickened out. Appropriately so. Right. Because of everything that I just said. Like, why be an entrepreneur? Like, these were two people who, they didn't want to change the world. They wanted some stability, they wanted to have a family, they were making good money. They made the perfectly rational decision to not join three crazy people that were leaving a good job to go do their own thing. So, yeah, they just chickened out and we just said, okay, well, we'll do it without you. This could be a lot harder if that happens later on, of course. But ultimately, if you already have a company and you have a co founder and it's just not working out, I mean, that's painful. But here's a little mental tool that I thought of several years ago. So a management tool. How to be a good CEO. There's this fundamental thing, which is most people conflate difficult decisions with unpleasant decisions. Super common cognitive mistake made by everyone, but particularly devastating if you're in management and you make it. There are decisions that are difficult in that you don't know what the right answer is. And then there's decisions that are unpleasant in that the consequences of making them are deeply unpleasant. And almost everyone thinks that those two things are the same. In fact, when they say that's a really hard decision, a lot of time they mean like, no, it wasn't. It was easy to see what the right answer is. It's just really unpleasant. Like when you have to Fire someone. It is not a difficult decision. Very, very rarely are you actually on the fence about, like, does this make sense? Does it not make sense? It's deeply unpleasant, especially if it's a friend of yours. So one kind of central thing, whenever you have any kind of disagreement is you got to separate those two things out. You got to be like, what's obviously the right answer? And you totally separate that out from whether or not it's fun, from whether or not it's emotionally pleasant or not. And you make the decision based on what's correct, and you deal with it. And it's almost always better to do it sooner rather than later. Please. You said that you joined with another smaller company. How did that process go as far as managing ownership and sticking those two companies? Well, it was mixed, frankly. On the one hand, it was really good in terms of the two companies meshed together. And Stepan, the founder of the other one, and I just got along fantastically well, and he was just fantastic about kind of being extremely helpful, but also not getting in the way because I was the CEO of the combined entity. And sort of culturally, it worked out. So the mix between the two people, that actually went great. The two teams, there were some difficulties, but for the most part, that was very good. The main problem that we had, which I totally didn't anticipate and why I do not recommend doing this at all, is it made us unfundable. Because what it turns out is investors, especially here, but really everywhere, they don't want to see creativity on the cap table. Anything that doesn't start like a normal startup is like two friends in college, and you get started, you get some founder shares, and you do friends and family, and then you do an angel. That's normal. As soon as you have something weird, you're like, whoa, there's like two different companies, and one had some investment and one had others. And the cap table is too long, and there's already multiple classes of stock. As soon as it looked different, basically, until we had enough traction to actually make it worthwhile for investors to look beyond that, no one would look beyond it. So we probably struggled for a year longer than we would have otherwise because of that. And I had no idea. I had no idea that investors were kind of, we're going to be like this. But it was very difficult for us to raise money because we had an unconventional structure. And that kind of taught me an important lesson, which is startups. People say that startups should be innovative as sort of the engines of innovation. At a startup, completely wrong. Startups must never innovate on anything at all whatsoever except your one thing. So the thing that you're doing, your product, you pour all your innovation on that. Everything else, it's got to be completely by the book, completely cookie cutter. You do not want to be smart about anything else because it'll just get in the way of it. So when an engineer comes to you and says, hey, Phil, maybe we'll call you Phil. But this database we're using is really crappy. I've got an idea for a totally better database that I can write myself and it will totally be better for us. I'm going to write my database. You say, no, we're going to use the boring database off the shelf. Because. Because that's good enough. If you are passionate about writing a better database, you go and start a database company. And then you do that. And if somebody else comes in and says, hey, I've got a totally clever way that we can figure out our stock options that are like, not really how other people are doing stock options, because the way other people are doing them isn't fair, and I've got a better way of doing stock options, you say no, because that's going to make us unfundable. If you're passionate about a different way of doing stock options, you go and start. I don't know. Well, whatever, you're screwed, I guess. So the mistake we made is we innovated in the initial structure of the company, which is not something that I would repeat. Please. I would disagree completely with you since I have more money than God. So anybody know what to do with 10 million bucks? Now, question to you is, in a world that's accelerating so fast, why would not countenance or why would somebody like me who's giving away the money, not countenance somebody who's innovating in a number of different areas. Granted, their main innovation is their concept, but I'm fascinated when people bring me different kinds of structure, like, say, a flat screen. Okay. But it's like stretch. Right? I love that you're up. So the question is, as someone who self proclaimed has more money than God, which is. That's great. Oh, behind you. Okay. My motivation for having a thoughtful answer decreased all of a sudden. Why wouldn't somebody want innovation in multiple areas, including things like structuring the company? Well, I think they would. Obviously, if you're an investor, you want innovation everywhere you can get it. Because there's always, every time you see it, there's Always a very good chance that, yeah, this could be the thing that's really big. In fact, maybe it's the auxiliary innovation that turns out to be the much bigger idea than the actual company. Absolutely. If you're running the company, which is the position that I'm in, then especially if you're running the company like I did with a whole bunch of brilliant people, then your number one enemy is distraction. Because there's an infinite number of great ideas and an infinite number of things that they can improve. And it's keeping that tight. Focus is super hard, especially super hard when you're working with people like I always am that are smarter than I am. And it's tough, but that's why. So it's basically a question of focus. Please, in the back. Interested about your. I'm sorry. Well, how about you first? Yeah, please. I was interested in your prior experiences with WeberNote, where at APG and NP5E commerce, very enterprise went in and you switched to MM for consumer. Was that a hard transition to make comments on? Does it feel different to you? It sounds different to me, but I'm just curious your experience. So the question was, was it difficult to make the transition from Engine 5 and ATG and Core street, which was an enterprise focus, to Evernote, which was a consumer focus? Yeah. Yeah, it's quite difficult, but it's a huge amount of fun. And I was never really motivated by doing things that were easy. I am extremely motivated by not doing anything boring, by not putting myself in environments where I'm bored, where I have to interact with people that I'd rather not interact with on a regular basis. And you find a lot more of that when you're dealing with governments and banks and businesses than you do when you have smart investors and you're building consumer products. Because the testifier, right, is are people using it? And the gap between somebody at Evernote has a great idea and they tell me about it and we're like, oh, yeah, that's really exciting. And we kind of work on it the time from that to a million people are in love with it. It's a few months. And that is so personally gratifying that just that in and of itself makes all of the other difficulties worthwhile. It's much harder to bullshit 100 million consumers than it is a giant federal agency. So to me, that's a lot. It's a lot more challenging, but a lot more fun. And also, if you're concerned about making money, the valuation multiples you get are much higher. So I Think you can. Actually, it's probably better off, even if you are financially motivated to be doing consumer stuff. Sorry. Yeah. As I said, I'm a big fan of the product. I've been using it about two years and I think my favorite thing about it is how it's evolved from a place for me to take notes to. Ever since people have gotten more tablets and smartphones, a way to sync between all my devices. Can you talk more about the product itself and its evolution over the few years, and also what you see it moving towards the future in terms of future technologies, as well as the trends in the social and shared space? So the question was about the future evolution of Evernote, especially around social and tablets and other experiences. Well, at a high level, our goal with Evernote is to be 100% buzzword compliant. So whenever the important new buzzwords come around, whether it's social or tablet or at some point it'll be olfactory, that's going to be a big thing. We'd be like, yes, we're there. At a higher level, we got extreme. Somebody actually asked me recently in an interview, how did you guys predict the success of smartphones and tablets? Because in 2007, actually, it wasn't successful. How did you guys predict that? And I said, well, we didn't predict it. We bet on it. We made a fairly foolish gamble. It's like, how did you guys predict that it would come out 35 black if it did? Well, we didn't. We just bet on it. And we got lucky. We bet right. We bet right that smartphones were going to be huge. We didn't even know about app stores. We just got really lucky on that. We bet right on tablets. As soon as we heard about the iPad, we were like, yeah, we're on that. I think my official quote, I got contacted at that point, I think by, I forget which magazine, they wanted quotes from CEOs about whether or not you're thinking of supporting the new iPad, the new Apple tablet. This was like when Apple first announced it, but it was a few months before they launched it. And they ran this article with quotes from other CEOs, and the quotes were all very nuanced. It was like a paragraph or two about, well, we think this and this, and it'll be exciting to see this. And my quote was, I was quoted in print saying, yeah, we're going to support the hell out of it. In fact, the day that Apple announced it, we obviously couldn't get them ahead of time or anything, but they published the dimensions and so we had cardboard. We cut out cardboard into the perfect physical dimensions of an iPad. And we carried around these cardboard iPads and that's how we built the whole interaction design. We put them in and out of our bags, we carried them. We photoshopped pieces of paper with where UI elements could go and we stuck it on there and we tried to figure out, well, do my thumbs go here or do they go there? And we bet on this being huge and it paid out. In fact, I didn't see Evernote running on the iPad until I stood in line with everyone else and got the first iPad and saw, wow, it actually runs pretty well on it, better than it did on cardboard, although the cardboard was lighter and it had better battery life. And on social, we actually went the other way. We went anti social. So our pitch in 2007 was, Evernote is antisocial because everyone else at that point was doing Facebook, Facebook for dogs or something. And we said, no, no, Evernote doesn't care about your friends. Evernote cares about you. Evernote cares about what's in your head. And we want users that have substantive things in their heads. We don't care about what your friend's dog feels is depressed today or not. And that actually worked really well for us. Now we've actually added a whole bunch of sharing and collaboration functionality into it and we are intending to do a lot more than that in terms of the future goal. It's a hundred year company and I only have the plans locked down for the next 20 or 30 years. So there's still a lot of uncertainty. But in a nutshell, we're making this very perilous transition right now from a single app to a family of products around your memories. So by the end of the year, we'll actually have several products available that all work with your same account, your same memory, your same thoughts, but that do different things with it. The main idea is to go from this unstructured mass of memory and then incrementally add intelligence and structure to it to actually let you do specific things. But there's obviously lots of ways that that can go, but that's, that's the high level picture of the long term. Direction, please. So with Apple launching iCloud today, officially, which is going to be a very similar platform to what Evernote is, how do you think that's going to affect your market in the future? Well, it's hard to say. I think the rule of thumb is, I think the rule of thumb in Silicon Valley is if Apple features you 13 times in the keynote that they don't plan on putting you out of business for at least a year. So I think we have at least a year where we don't have to worry about it. I actually think every time Apple releases anything, you never know, right? You never know. Is it good for you, Is it bad for you? It's always been great for us. So just the preponderance of evidence is every time Apple does something that gets more people using smartphones or tablets or into the cloud or with app stores, it always works out great. You never know how long that's going to hold up. I actually don't think there's anything in icloud that's actually similar to Evernote. We don't really care about so storage so much. In fact, we were thinking of. We got some really nice ideas about how we're going to work with icloud to make other icloud apps a whole lot better and more interesting. So I don't think there's a particular icloud threat. But that's not to say that there's not some threat somewhere, maybe by Apple, maybe by Google, more likely by someone we've never heard of. But we do have a very specific philosophy about competition, which is, in all of my previous companies and in the companies that I've worked with or at in the past, we always had a list of our enemies. We always had like, oh, those guys. We always had a list of people like, that's our nemesis right there. We're going to crush those guys. We always had that one or two companies. And it turned out it never mattered. Not once. Not once did the people that we focused on in the competition actually significantly play a role in terms of the success or failure of our company a few years later. It was always something else. And so at Evernote, we decided explicitly, again, because we're not that smart. It takes us three times to actually figure this out. We said explicitly, we aren't going to look at competition. We're not going to look at it. We're not going to pay attention to it. Not because we're not threatened. Of course we're threatened, but because looking at it doesn't help you. It doesn't actually make your product better. The only way that you can win, the only way to increase your chances of actually succeeding is just to make a great product. And you don't do that by looking behind you. You do that by typing and looking at a screen. And so we just don't look at it. We don't think about things that might potentially disrupt us. We do think a lot about partners and how we can work together. And we have an API. We have about 7,000 partners. Many of them started as competitors, but then wound up working in the ecosystem. But ultimately, the competitive threat I don't think is is in the top 20 threats to a company at this stage, and especially for all of you guys, if you're thinking of being entrepreneurs, I think if you sort of lay out the possible things that can go wrong, that can kill your company. Just, like write them out in order of probability. The probability of your company failing because some competitor beats you is not in the top five. It's probably not even the top ten for early stage. And. And anything that's not in the top five, you don't have time to think about it. So my advice is don't even bother, please. In the aisle. So my question is about switching over from kind of paper to electronic. So I'm somebody who signed up for Evernote, well, a long time ago, but haven't used it very much because I really value having my notes. My plan is generally on paper. What's your take on switching those people over? I use smartphones, I use my laptop, but I just haven't been able to sync those to you. So what are your thoughts on that? This will be the last question. Okay, so, last question, Sorry. And the question was about paper and how we switch people over from using paper to Evernote. So that's a really great question. So the short answer is what I recommend, what I do myself, is I take a lot of notes on paper because I love my Moleskine notebook and a nice pen. I kind of have a pen pen fetish. And I'll take notes and I'll just take a picture of the page with my iPhone in Evernote. And to me, that's the best of both worlds because I get to take the notes. It's unobtrusive. I get the notebook, but it's also in Evernote, it's synchronized, it's stored forever, and it'll actually find, as long as I write a title, the notes scrolling across. I can actually use Evernote to find those notes because of our handwriting recognition. So to me, that actually works really well. In fact, Mashable. No, not Mashable. Lifehacker. Lifehacker does a survey every year where they ask people, like, what's your favorite note taking tool? And they did it the first time three years ago. And it's like Evernote, Microsoft OneNote, a bunch of other stuff. And paper. And always, every single year, we are the most popular app by far, but paper always beat us. It's always like, pen and paper is number one. And then Evernote, and then everyone else is far behind. And this would happen for years. And for years, we were like, ah, paper. It's our nemesis. But this year, they just did it a month ago, and we beat paper, So we're number one. Thank you all.