Reid Hoffman: Entrepreneurship Rules of Thumb

The first rule that I discussed was to look for disruptive change. And the reason that I said look for disruptive change is because it's what are the opportunities that come about that are really new opportunities that are something. Because the opportunity, generally speaking, has to be large. It can't be something that's like, well, boy, it's been sitting there for 10 or 20 years and no one's ever really thought about it. That's very rarely the right answer. And if it's not large enough to be something that you could make something significant out of, it's not really high impact. And the kind of pioneer parallel to this is that if you're going to actually kind of pack up your wagons and go somewhere, make sure that where you're going is potentially really good and that the algorithm by which you can think about that is all of a sudden there's a new opportunity. It's a change in technology, it's a change in competitive landscape, it's a change in kind of how the global ecosystem comes together. The second rule that I was kind of was aim high. And part of the kind of aiming, actually I aim big. Same thing was because it's the same amount of blood, sweat and tears when you start a company, whether or not it's kind of a fixed vertical market or whether or not it's something really, really large. And the difference is that you might as well shoot for something large because you can still end up with something smaller. But aiming for something large is really important. And part of the reason why this is kind of a rule of entrepreneurship and maybe this is the kind of thing that this room is like, yeah, yeah, we already know this. We're living it, I hope, is because if you don't start out aiming for the big game, you almost never can get there. It's got to be the kind of the how do I have kind of global impact? Like, I think all high impact companies basically have to think globally in nature these days because of the way that the market ecosystem is going. And so you go, okay, how do I play onto that stage? And part of that in terms of a pioneer parallel is again, how do I go somewhere that is substantial and unique? The third, and this is one of the things we're going to come back to, is how do you build a network around your company? Because as much as we tend to glorify the entrepreneur as kind of a, you know, like for example, LinkedIn is the product of Reid's brain, it's actually brought about by lots of different People, there's everything from your co founders, there's the early employees, there's investors, there's customers. Some businesses have distribution channels. Investor, you know, there's a whole set of. There's a network around it. And that's even true, for example, when pioneers very rarely did one person get a wagon and head west. That was usually a recipe for failure, really. One of the things that's really important to make these things more likely to succeed is to assemble a network around them where that network helps you get intelligence, helps you get the right resources, and drives forward. And so thinking about it as, what kind of network are you assembling around your company? So, for example, the practical advice is when you're looking at financing, it's what additional strength of network can I bring to my company when I'm doing the financing? Because it's a very good opportunity to get people to have their interest align with yours. The fourth, and this is actually a tricky one to explain, is the plan for both good and bad luck. And part of what it is, is people say, what do you mean, plan for good luck? I have this idea, it works out and then things keep going. Well, good luck actually comes in opportunities that you don't normally see. So, for example, PayPal started as a encryption on mobile phones company because it was. Two close friends of mine. I joined the board when they founded it, even though I thought encryption technology on mobile phones back in December 98 was not a good idea, which I told them, but it was kind of like, you also back people. And then they were like, well, okay, not encryption on mobile phones. Maybe cache on mobile phones, or maybe not just cache on mobile phones. Maybe cache on Palm Pilots. Maybe cache on Palm Pilots and payment service to the Web. And then they launched with that. And for the first week, they said, well, all this growth is coming through ebay. But that's not really what we planned. We planned on people bringing their Palm Pilot around with them, exchanging money. These aren't our customers. We should figure out how to get them off. And then, of course, part of PayPal's great strength was being able to pivot fast. And they went, whoa, whoa, no, these are our customers. All the rest of that stuff doesn't work. This is the thing that we need to go to. And that's an instance of what I think of as planning for good luck, which is you basically, you go, okay. Sometimes what happens when you start the journey of going down a company is you're looking for an opportunity that you may not have thought of. It when you started it, but then suddenly you kind of, you know, like the pioneering parallel, you come around the corner and all of a sudden there's new opportunities available to you and that you head very strongly to that. So good luck is not just, oh, look, my plan worked. It's, you will encounter opportunities that you will need to move quickly and grow into an exploit by having been on the journey. Now, planning for bad luck is unfortunately a little bit more straightforward, which is sometimes you find yourself pioneering, going, you can't find a way through the mountains. What's your plan B? And one of the ways that I frequently think about this is I kind of have a plan A, a plan B and a plan Z. The plan A is, okay, this is what we're thinking of doing. Plan B is, well, if that's not working, what are my parameters of flexibility? I'm still trying to get to that. The same, you know, build the same product, the same product market fit. I'm still trying to get there, but maybe if I try this rather than that. And so, for example, when I, when I, when we launched LinkedIn, our hope was that people would just invite each other and the invitations would work and it would grow into a big network and that would be all we need to do in order to grow the network. Well, as it turned out, we launched the network and a couple weeks later we're growing at 2,000 people a week. And I was like, well, that's not fast enough. So what were the other ideas we had in mind, the kind of plan B? And the plan B was, well, actually, one of the questions that people most have when they come to LinkedIn is, who else do I know who's here? So why don't we build an address book utility that allows the people to say, okay, how do I quickly find out who else do I know who's here? I upload my address book, I see who's here. We invented that whole pattern and that caused our growth rate to go from like 2,000 a week to like, I think it was about like 20,000 a week. Right. So, and that's, you know, without that, I don't know if we would have succeeded. Maybe other plan B's would have worked. And then plan Z is what happens when it's just not working at all. Right. It's kind of the lifeboat plan. And that's part of how you plan for both good and bad luck. The last. Well, no, there's two more rules I'm going to go through. One of them is, and I Think it's funny there's only a partial pioneering parallel to this, but it's so important for entrepreneurs to understand this, which is maintain flexible persistence. And entrepreneurs are given two pieces of advice with equal vigor. When you look at them, they're in contradiction. One is, have a vision. Plow through the wall. Keep your vision. Don't allow yourself to be defocused from that. Keep going. The other one is listen to your customers. Listen to market feedback. Listen to your network. Be really adaptive. You're like, well, okay, how do you put those two things together? And that's part of, again, where it's a very difficult thing to teach other than by doing, other than by the activity of going out and being an entrepreneur and making those decisions. And so the reason that the rule is maintain flexible persistence is because it's both keep a vision and be flexible. So, for example, if you think about the kind of the ABZ planning framework, it's like, look, I've got a plan. I want to try to get there. This is my main plan. If that's hitting problems like I'm not growing fast enough or I'm stalling out, ok, here are some things I can try to keep trying to do that. And if that doesn't work, how do I shift to a different destination, a different location? That's part of the plan Z. So the last rule that I'll go through for today before we get back to kind of entrepreneurs as pioneers in education, is that these rules are not rules of physics. They're not natural gravity. Gravity, not just an idea. It's the law. They are kind of rules of thumb by which you navigate. And that's part of what makes entrepreneurship so interesting because usually almost every company has something of a unique pattern to how it operates. Now, sometimes a unique pattern is where it's operating in the world. Sometimes it's a question of which distribution channels it has. But one of the things I love about the consumer Internet, which is what I focus on with the vast majority of my time, is that each thing to elevation kind of defines its own unique space. And that what you're really looking for is a unique pattern of getting there. And so the, the problems that are in front of a company, even though there's family resemblance to them, like, well, okay, how do I scale a sales force or what do I do in terms of financing, or how do I work with potential financiers and all the rest of this? How do I make all that happen? And there is a skill set there. The combination and how you pull together and which is your strategy that pulls it off. That's how new strategies are created. And entrepreneurial companies are usually the ones that create the new strategies. And so usually when I'm telling someone that I think something isn't going to work, I never say, well, that'll never work. Well, actually, sometimes I say that, but usually it's like, well, that's going to be really hard. And you're really betting the farm on that one idea, which doesn't strike me as it's potentially going to work. And so these are the kinds of rules that are the kind of things you have to learn in the journey that you take when you. The metaphor that I use for entrepreneurship frequently is you jump off a cliff and you assemble an airplane on the way down. And the reason I use this metaphor is because it's kind of the gets you really focused because the ground's coming. Financing isn't success. It's a thermal draft just makes the ground a little further away. You have to get the plane working. And of course, if you get the plane working, maybe it goes up and off to the right, and that's good.