Reid Hoffman: Live Life in Permanent Beta [Entire Talk]

Without further ado, Reid, thank you. Before I start, I thought I would make three remarks. One of them is, this is a little intimidating because one of my professors and advisors who taught me a lot when I was here is sitting in the audience and giving a talk in front of him is going to be ok. This is the first. That's Terry, who's sitting over there in case people don't know Terry Winograd. The second is I decided to experiment with this format a little bit and I've actually done something which I don't normally do, which is I actually wrote out a talk which I will try to give relatively faithfully, which means I'll be glancing down some, but the goal was to actually say some crisp things and then convert into discussion and questions. And what I would say is, so think a little bit about the questions that you may be having, try to make them general. Right. So, for example, this isn't the right form for what do you think about my startup idea? And I'm going to have to run immediately after this. But if you do have a question like that, just put the title of the class and the subject, kind send me email at R. Hoffmanlock. That's fine. Unfortunately, I do have something immediately afterwards. And then the third thing is I'm going to blend a little bit of kind of thinking about entrepreneurship, a touch with my life, not too much a touch with the book, and kind of thinking about why this matters to all of us. And so with that, I'll open. So this may seem a little odd or even a bit slow, but it took me a long time to realize that entrepreneur was a good word for what I've ended up doing. Because when I graduated from here, I basically was kind of like, oh, I want to figure out how to improve society. And originally I was going to think about, okay, well, maybe I'll be an academic, I'll be a professor, and I'll use that as a podium in order to. In order to write to folks. And I had no idea what entrepreneurs did other than they somehow were involved with starting businesses. I mean, one of the benefits of being here at Stanford is that you have a fair amount of exposure to it around you. But I was kind of like, well, I know that that happens, but I don't know what that is. And it was only years later, in fact, after I had worked on several different entrepreneurial companies and years into having founded LinkedIn, that I began to realize that entrepreneurship is a good word for what I was doing. And I've become a General advocate for entrepreneurship. I've become an advocate for, in terms of government thinking that this is a key thing that they can actually do some positive things on and not do negative things for companies thinking about in terms of how they are both formed and also how they're also innovated and also basically kind of the. One of the things that's odd is kind of the nonprofit world, which is how does entrepreneurship not just work there, but also as a cause for entrepreneurship? And I think that that's all really important work, and I'm happy to talk about that in the Q and A section. But the thing that I most want to focus on is what I've come to realize is entrepreneurship applies to all of us and how we lead our lives. And I think that everyone needs to be the entrepreneur of their own lives. And that's, of course, part of the thing that I've been doing in the book. I won't go through the book in depth. I'll touch on it briefly because I figure you guys can read it if you're interested or comment on it. But I do think that entrepreneurship is important for everyone because of several different levels. One of them is the question of what's the playbook? How do you drive your own life from this, but also how do we adapt as a society to the overall world? So let's start with kind of what the implicit model has been. So entrepreneurship of your own life. That's a nice phrase, but what does that really mean? Well, historically, there's this thing kind of called the career ladder or career escalator. And what that is is a progression where you kind of start in your life and you get good grades in high school. Matter of fact, presuming that many of your students here, you all did that, you compete in that kind of academic decathlon, plus other things, you get into a good university. We'll all presume, since we're here, that this is a good university. Obviously, I think so, too. But then when you get through this, you now have a set of doors option available to you. You figure out which of those doors work, maybe you jiggle around a little bit, and then you start this career path as a career path. What's happening is you say, all right, I initially start as kind of a. As a young apprentice. I'm learning skills. I'm kind of proving myself. I'm being involved in these things. And then I move to kind of being a journey person in my chosen career. And maybe no longer it's just one company. And I've jumped around a couple companies, but I'm still on this kind of coherent path. And then I become either a master and an expert, or I move into management and all in all, thereby have a successful life. And there's just one problem with the story is it's no longer really true. And the reason it's no longer true is because the world is changing. The world's changed. People write about this. Tom Friedman, most notably. The world is flat, but also now, that used to be us. And part of this is because with the increase of globalization, two forces are driving changes that affect the country, affect industries, affect essentially all of our lives. And those two forces are people and technology, and they're interrelated. So in terms of globalization, you end up having the fact that now competition can be from anywhere because products can be shipped anywhere, work can be done anywhere. This is very broad brush, but you have that force, and then you have how technology disrupts industries. And if you, you know, there are certain industries that are massively in disruption. I mean, you look at music, you look at news, you look at retail, you look at manufacturing, there's a ton of industries that are massively in disruption. But to some degree, this pattern of changing what products and services are offered, what the cost basis of industry industries are because of people and technology. That game is an accelerating game that essentially everyone is involved in. And you can't just simply kind of wish that it moves slower because other people are part of what's moving that game ahead. And that kind of competition is what sets the pace. Now, what that changes is it changes this kind of old static notion of what happened is, well, this is the industry and this is the company, and this is the role. And then there's this ladder in the roll where you progress your way up, and the company's all static while you're doing that. And that model doesn't work anymore. You have to look at this and say, what are the kinds of things that I can potentially do about that? Part of the thing I think is key is to say, all right, given its change in adaptation, it's no longer a fixed master, apprentice, journey person kind of model. It's a question of adaptation. It's a question of how do you invest in yourself? And I think this hits us, by the way, at all levels. So, for example, one of the responses that I've had from a book in the last week, because, by the way, it shipped on Tuesday, one of the odd things about shipping books, which some people in the room know about, I am Learning is that you finish the product in October and now you're beginning to figure out what people respond to it now, which is in the consumer Internet industry, which I prefer. You launch it and you're getting feedback within an hour and then you iterate. And one of the things is it affects all levels. So part of the feedback that I was getting was, well, that's great for college kids was one set of feedback. And it is of course extraordinarily important for folks leaving universities and going out because you're like, ok, how does this game work? I've been told that the simplicit game, as I run through the system as it exists, I get good grades and then doors open and that that's the path. And how does that path continue once I graduate? And the answer is it doesn't really. And so what you have to do is you actually have to be charting a path where there isn't. It's going over an ocean as opposed to, oh, here's the road. And I can choose Road 1 or Road 2 or Road 3, and you're kind of navigating that way. But it's not just college students. This is actually, I think, one of the really key things because the notion of how a career progresses is now substantially different than it used to be from the notion of, okay, well, I put in my time as assistant product manager and now I become a product manager and now I'm a senior product manager and so forth and so on. I think that what happens is that now industries are changing. What you think might be the right thing to do, what location you might be in, it's not that there aren't coherent skills that you learn, but the notion of how to essentially navigate this career, both for downside and for upside, has changed. So mid level professionals, it changes for them as well. Similarly for executives, because executives, I've gotten response from somebody, yeah, that's great for the young folks, but what does this mean for me? And the answer is, well, if this is the way the whole industry is changing in terms of how organizations need to adapt and how the people that you are recruiting and bringing into the organization and managing a coherent organization, if this is the reality that they are all facing, you need to adapt to be part of that reality. Otherwise you also essentially don't adapt the right way. And so I think it's at all levels that this is really key. And so my thesis is that this entrepreneurial mindset is now critical for everyone. And so let me focus on one of the things That I think is particularly key about thinking about it as an entrepreneur. And I do a number of each chapter in the book is one of these threads. It's how to have competitive differentiation and how to do flexible planning and how to maintain a network, build a network of relationships and these sorts of things. But the key one, I think that is startling for most people is to take risk. Because one of the things that happens is. And by the way, one of the joys you have being an author is you read the reviews. Hoffman tells this story of you'll succeed no matter what in terms of risk. I'm like, no, you didn't read the book. Risk is real. And sometimes you fail with risk. And taking risk is essential because if you're not taking risk in order to make it competitive, different, make yourself competitively different, to potentially have breakout success and to be learning and adapting to the changing game around you, then by playing it totally safe, you essentially marginalize yourself over time. Which is one of the things you can see happening with large businesses that don't take risks as a function of that. But the question is, risks are not just kind of like, oh, jump into the unknown, do anything. There's different kinds of risks. And part of what is to do is to figure out what risks are intelligent risk, which risks have manageable downside, which risks have potential for upside, which ones you can get a sense of early and it's not fatal. These sorts of things are part of taking intelligent risk. And the whole point about taking risk is so, for example, classic good so 1950s investment dictum is buy low, sell high. Well, how do you buy low, sell high, whether it's in your career or stock market, et cetera? Well, the way you do that is you have a contrarian viewpoint that happens to be right. Because if everyone thought, oh, that's what you should buy, well, then of course it's impossible to buy lower because everyone else is doing it. So part of taking that risk is figuring out essentially, how do you see something that other people don't see? And then test it in terms of what you're doing. And there's all kinds of ways to try to figure out how to minimize what is scary about risk. You can, for example, figure out, well, is there some way I can test doing this? There's things about talk to other smart people, get a sense of feel of what it is to essentially kind of go, okay, one of the frameworks we have is called ABZ planning. Well, the Z plan is all right, when I know this is going Bad, how do I reset to doing another plan? And this kind of risk taking, of deliberately going, what kind of risk can I take? That establishes something that's different, potentially. Breakout is one of the things that entrepreneurs do all the time. They do all the time in their companies because they essentially, if they don't have something substantial competitive differentiation, the market's occupied. So you have to take a risk in going somewhere. And while most people tend to think that entrepreneurs essentially kind of take blind risk, actually there wouldn't be such a thing as a successful serial entrepreneur unless you knew how to manage risk the right way. It's not just kind of like, oh, I know the playbook. Because any time you do an entrepreneurial effort, it's never a guaranteed thing, or almost never. I mean, those ones are really great, but rare. And so what you have to do is you have to say, okay, how do I do this in a good way? And so a couple of personal anecdotes from my own life. I took a number of risks throughout my life, and I was actually only in writing this book and kind of thinking about it that I realized I started with this book on the whole view of, well, let's take the parallel of what entrepreneur is doing and then refactor it in individuals. And so that was the argument. And then as I was beginning to read, I was like, oh, yeah, actually, that's what I did. That's good. That's confirmation. And for me, for example, one of the things that I did pretty early on is, as I mentioned at the very first outset, I thought I was going to go try to be an academic. And I was like, all right, I'll study at Stanford, go to Oxford, come back, get a PhD somewhere, become a professor. And what I realized about four months into my time at Oxford was that academia was not the thing that I wanted to do. I basically was having a discussion with my advisor at the time, who didn't quite say it in these words, but it was like, if you write something that more than 50 people can understand, you're insufficiently professional. And I was like, oh, that's a problem, right? That's not what I want to do. And I'm sure he would object to my characterization of his statement, but it was largely correct. And so what I did is I said, what do I want to do? Well, I want to still kind of figure out how to contribute to society. And so I made the decision to move back to Stanford or actually San Francisco and say, look, I'm going to figure out this whole Building software thing. And maybe it's software entrepreneurship and maybe it's working in companies, but as opposed to writing books and essays, maybe it's constructing software. And I had no idea if I'd be any good at that. I mean, I'd done an internship at the center for Study and Language and Information, which is kind of around the corner from here. And I had interned at Xerox PARC and I'd written code, but none of that's the same thing as writing a product. And so that was kind of a big jump into the unknown. And it wasn't completely unthought. I talked to people. I kind of went, all right, if I go there, I'll connect with these friends, they'll put me in touch with us going. But I moved back here kind of without any fixed job. I actually took myself out of the McKinsey recruiting process because I was like, no, no, I want to build software, and McKinsey's not the path for doing that. Yeah, the annoying chuckle. So then the second thing that I did is, and I was quite lucky because I'd known a bunch of people from Stanford who had gone to various points in the Valley. And I got a job at Apple Computer and eWorld, and I started in the user experience Design group. And one of the things about competitive differences is you really have to think, how am I almost world class? It doesn't have to be absolutely world class, but how am I really different in this and in user experience design? I was okay, but I wasn't like some. I know people who are world class and I wasn't like them. And so I'm like, I'm working here in this job on this kind of thing, because I still had this implicit career path in my head. On this kind of path. I'm essentially not. This isn't going to work out. I'm going to have a kind of okay thing. Maybe I'll be able to build some software. Well, what can I be truly good at? And I said, well, I think I could be good at this product management thing. And so I went and kind of looked at what it takes to be a product manager. And every job description I read, literally of like 200 said, product manager, job necessary requirements, five to seven years of product management experience. I'm like, okay, how do I solve this? And so I scratched my head about it and I went, all right. I went over to the director of product management at eworld, a guy named James Isaacs, someone I'm still friends with, and I said, look, I have this idea. If I write for you some product plans of some things that I think we should be doing and you think they're good, could we at least have a group huddle about them? Could we at least kind of get the product management group together? We'll talk about it, critique it, we'll get a sense of understanding it. Well, this is a risk because one, James can say, who is this young whippersnapper who's in my office, who's wasting my time and why aren't you doing your job as a function of that? Number two is, well, I was pretty anxious about the first couple of things I constructed because if it's not very good, it's like, great, well now we know you shouldn't be doing that. And no, you can't have a meeting with folks. And it also kind of leads to the ok, well what are you doing in the organization? Are you doing your own job? These sorts of things. So I did that and actually because I had done that, that directly led to my being able to be a product manager at Fujitsu as my next job. Because when they were kind of saying, well we normally say five to seven years of product management experience, they were to call James and some other people and they said, well actually he did a pretty good job on the stuff and we think he can do the job, so we think you should take a risk on him as a function of it. And those are examples of risks that work out. Now classically of course, people say, well here are the risks that work out. Let me also detail risks that don't work out as an instance. So one of them was my very first company, SocialNet and my earlier 2007 talk that I gave in the series, I gave a whole set of lessons about kind of entrepreneurship that I derived from all the failure points of that company. Of all the things that I did wrong, it's like, well, I learned this and I learned this. And one of the things that's funny about these kind of learnings is that what not to do, you learn very fast because it's like a two by four hitting you to figure out then, okay, not that, but what's the thing I should be doing? That takes some, usually some integrated learnings and basically, and I won't repeat that talk, but the high line was that essentially there's a difference between starting a company and revving a product that currently exists. And there's all kinds of differences. There's a difference of how do you establish your initial customers. There's a Difference of how do you do your product definition? One of the things that I have said then and said a number of places that in the Internet, if you're not embarrassed by your first product release, you release too late. Because the natural thing in product people is to say, oh, it's got to be perfect. Everyone loves me, everyone knows that I've done this great thing, which is what I did in my first company, and I was half right and half wrong. And being half wrong late doesn't help you. So what you do is you go, all right, what's the minimum viable product and how do I launch that? And all of these lessons came from my very first company, where I was literally every week going, I wish I knew that at the beginning of the week. And part of the reason why Peter Thiel, who was also same class as me here at Stanford and we met each other here, said, oh, well, I'm founding this company, by the way, originally called FieldLink, later known as PayPal. Would you join the board? Is because I had been literally, I saw him every couple weeks. I'm like, here's all the things that I wish I knew. A couple weeks ago, I'm figuring this out. And he was like, well, how about you help us short circuit that as we're going? But overall, Jariski didn't play out because socialnet basically didn't really amount to anything. It was years of hard labor together with millions of dollars in investment, and it kind of sold for return on capital, which is not. That's not as bad as not selling at all. But that's not in valid terms. That's not actually a big step up, because what we try to do is you try to get something that has a breakout opportunity, and SocialNet clearly didn't have that. Now, the second risk that didn't work is a little trickier and a little harder to understand. But it's important from a viewpoint of thinking about how do you invest in yourself and how do you take risk intelligently? Which is I figured out by month four at Oxford that I didn't want to be an academic. Now, there's a lot of good reasons that I finished my degree, I signed up for it, you complete what you start, these sorts of things. But one of the things that I only realized years later that if I said, okay, this is what I want to do, and I'm going to take the lumps of saying, this isn't it, that's it, I'm moving back now, I'm starting to do that, you know, I would have been here at a time where the Internet was being formulated for moving from, you know, the academic confines into the rest of the world, as opposed to kind of catching up when AOL and Prodigy and eworld were kind of big things. But the Internet was starting. And what it points out is frequently one of the very big risks is the risk that you don't know that you're taking is in fact one of the ones that can be serious. And so simply saying, well, I'll finish the degree and then in two years I'll go figure out what it is. Well, that means that you're not in that game and you may lose key breakout opportunities for playing that game. And so that was actually one of the risks that I most substantially took. Now, again, no complaints, but it's illustrative in terms of thinking about how you think through what does this pattern of activity mean for your own career. So I think one of the things I'm going to make about another couple minutes of comments and then we'll shift into Q and A. But one of the things that I think is key in terms of how do people look at this is this being the entrepreneur of your own life is not go start a company. It can be absolutely. But for example, there's a whole stack of things that go in to start a company that you have to decide if that's what you want to do. It's also not like, oh, disloyalty to an employer, like, I'm always going to be job looking. I don't know if I'm here. Part of what you need to do is you have a contract, this connection with your current scope of work, which I roughly think comes into kind of a tour of duty, which is like, look, I accomplished this here. This helps my employer, this helps me. And then there's kind of another iteration cycle that could very well lead to my staying here for even decades if it works out that way. However, it doesn't always do that for the reasons of the world change that I was talking about at the very beginning of the talk. Part of that is for several reasons. One is companies change. Second thing is, look, if you've got a whole stack of people, everyone wants to try a new thing. People, for example, want to be the head of sales. Well, there's only one head of sales. And so they say, well, I want to try that and that's the next right step for me. So maybe doing that somewhere else ends up being the right thing. But what I think happens in the startup of you world is that the relationship between how employers recruit and manage and have a kind of an employee contract with people changes. And it changes on both sides. But it's not a change for disloyalty. It's a change for, okay, accomplish some serious real things and then we do another kind of tour of duty cycle. And so now from the employer side, what I see still even a lot of Silicon Valley companies is this kind of like, well, hope. No, actually all of our good people are going to be here forever and they're going to have grandchildren while they're working here and all the rest of this stuff. And you're like, look, it's simply not true, right? I mean, look at this. And that's because the right match between the right opportunities for, for great employees and the employer, some of them will really work there for a long time and some of them won't. And as opposed to kind of being an ostrich and putting your head in the sand, it's much better to be adaptive and say, ok, that's the universe in which you play. How do we make this so it's maximum benefit to both the employee and to me or the employer as a function of making this work. And I think this will lead to a lot of changes in the evolution of the organization. Now the kind of last comment that I'll make about this is that actually I think a whole bunch of folks thinking about this clear headedly with a look I have a deal for like I'm trying to accomplish something of note here at this company, for the company while I'm doing it is that will help organizations be much better, that will help them essentially adapt to the world better. Because part of the reason organizations tend to not be adaptive is they end up being insular. And, and none of the folks who are in them are really thinking, well this is the world we live in and we need to really figure out this adaptation. And if more of these skills are present across the organization, across the network of the company, then I think that the organization itself will be a lot more adaptive. And I think that one of the things that's particularly key about this kind of adaptation is I think that it's almost like a progress of the theory of capitalism. Because part of how capitalism works is distributed. Resource allocation, decision making and generation across a network, across a market creates a massive amount of value. Because as opposed to having a centralized system, we can actually do all of this. We can have competition, we can have all of this moving and adjusting to the information of what's going on in the market in fast cycle time. And I think having more individuals capable of doing that within the working groups of their companies is something that I think can generate a massive amount of value. So I don't think it's just a question of it's the world as it is. Take it, love it or not, but it is the way it is. But I also think it presents great new opportunities in terms of how do we operate. And just as globalization is scary from a competitive standpoint, it also creates a lot of opportunities because the same thing about, well, competition can come from anywhere. The way that you can scope anything from your career to offering a product and service also has a similar structure to it. And so with that I think I'll move to questions and try to keep them general.

So I was actually planning to declare some log systems next week, but speak up more.

I'll repeat the question too for that.

So you, you made quite a few predictions, and Ben has too, in his blog and in your book that you've written together about the nature of the future of the workplace. Now are there any predictions that either you or other people, well, probably not you, but other people have made about the nature of the future of the workplace, like Tim Ferriss or any of those other folks which you do not believe are going to come?

So the question is, are there other visions, prognostications on the future of work and the workplace that I disbelieve? This is always an interesting question to be asked in front of a camera. Because, you know, I guess the. I think there's a number of thoughts that it's kind of all we have to do is work a little harder, go back to our entrepreneurial roots, get our educational system a little better, that sort of thing. I've seen a number of solutions along those lines which I think are insufficient. I've also seen a number of so I've elected not to call out people by name on camera, just to be transparent about it. But I've also seen a lot of things that just say, look, it's all about good management just being better competitive in companies and then the career ladder and everything else can stay. And I think it is about better management, but I think it's about better management working with a network of people within the companies. So it's not just that as a function. And part of the thing is I think we're working it out because what it comes down to, let's talk a little bit about, like to have a competitive edge, competitive differentiation, one of the phrases that I use when I talk to entrepreneurs, if it's not 10x different, it's not different at all. And the reason is because frequently people will say, well, I'm a little better at this. Well, a little better doesn't really count as a competitive edge. So what that means is when you think about the future of the workplace and whatnot, people, for example, part of what we're trying to do when we solve American industry is we said, well, how do we have really strong industries here? And with globalization in some areas of the world, we're competing. And by the way, classically, we discussed this with China. China's now experiencing this with Southeast Asia, which is like, okay, all of these other labor forces who are very dedicated, who think and act like immigrants, are committed, are coming out and saying, look, we have much cheaper labor. We can offer as good a product or service, maybe better with cheaper labor. That's our competitive edge. So you say, okay, well, that's not our competitive edge. What do we do? And what you have to do is you have to have something that's really coherent about that. I think one of the things the US Is particularly good at is entrepreneurship and immigration, and that's one of the things that we should be focused on in terms of what we're doing. And I've seen a lot of Silicon Valley people say that, and I agree with them. I haven't seen that percolate as much to the national discourse as I would like to.

So you described the future of work as moving from one lifelong relationship with a company to more being the entrepreneur of your life, building a network around you and then moving your career. And then you created this company, Social Net, in the field of relationship. So my question is, do you see the same evolution in how people form personal relationships?

My wife will be watching this. Well, I guess what. I think that if it were. If we were on the relationship side, I think what it comes down to is it comes down more to individuals and the network of relationships between individuals. So I don't think it. I don't think it changes. I don't think it changes very much between, like, for example, you know, dating and other kinds of things that still are very, you know, two people, very interpersonal. It might say that a lot of the whole notion of kind of how much does civic or religious institutions validate your relationships, that that trend may trend more to the individual and there may be more individuality there maybe. Right. I mean, that's a highly speculative answer of a question by the Way congratulations on this. That I've never heard before. So I'm thinking about it. So anyway, other questions in the back there. Yeah.

So my question is on monetization. So the first thing obviously is the consumer Internet is built on the idea that you get millions of users and then you sort of monetize on that front and then now the next wave is mobile first. But if you look at the sort of space you have on a mobile phone, you don't have places to put adverts. So if you're going to do mobile first and you're going to go with the consumer Internet strategy, which is getting millions of users, how do you actually monetize? Do you take them back to the web, to the browser and then you monetize there or you look for a B2B thing.

So the question is classic consumer Internet dictum, some of which I probably said in 2007, is to focus on growth and engagement first and think about monetization. But don't sweat it too much in the beginning. The challenge when you think about this from a mobile standpoint is that it's unclear what that unlike consumer Internet, which you can add advertising and some other things, it's unclear what that future of monetization potentially looks like. And I have two answers to this question. One is, if anyone has a really good answer, my email is R. HoffmanRaylock and I'm really interested in this question myself. The second answer is that in the compacted space, the generic we just put ads on is much less likely to work on mobile. So what that means is the other kinds of models, when I think about mobile, the other kinds of models is like, well, is the ad somehow more deeply part of the product, not just oh, and here's the space and there's some pattern for that. Or is it premium services that work or is it things like Zynga and virtual goods? So there are models that could still work on the mobile side, but the generic will just trust that we can slap up advertisement, as you point out, won't work. But that's. Anyway, those are the two answers to that question. Let's see, seated on the floor, do.

You think that before people have gone and started that next big company in.

The meantime, are they cultivating a consulting.

Brand while they build that experience since.

They can't expect to get a long term full time engagement with the company? So the question is, if you're thinking about starting a company, should you be doing consulting as a way of evolving your career, getting skills, building a brand? Since you're not necessarily doing a long term relationship with the company. Well, I think the short thing is I think that almost every realistic company understands implicitly if not explicitly this tour of duty notion. So I don't think that the vast majority of modern good companies to work at have this notion if you go and really do some great things for a couple years there, that they then kind of beat on their chest and say, what? You're leaving to start a company now? How could you possibly do that? Given of course us being here? We all do that to some degree. That's what happens. And one of the reasons I would actually tend to encourage people to go work on teams rather than as a consultant is because the relationships that you form are really important. The ability to actually see how the team works. And if you yourself are going to start a company and say, how does this group dynamic work in terms of everyone? So I, generally speaking, don't think that consulting is a particularly good path for doing the actual entrepreneur starting company as a path. And really what you just have to do is settle between being a good employee where you have a tour of duty, eg, you're there for a while, you do some stuff, but with a look, you achieve some things and then people are happy with you. I mean, I think if you go back, it'd be an interesting question. If you go back to most of my employers, I think they were happy that I worked there and not, not now, like, oh yeah, good thing we got rid of that guy Hoffman. And I think that would be more of the direction. And actually I realize I've answered, is there anyone on this side since I've been. All right, great, thank you. So there are a few very common downside risks that a lot of entrepreneurs seem to forget. Family, friends, finances. What are some of the other ones, especially in the strategic side that you see people overlooking downsides for being an entrepreneur? Downside risks that they. So the question is downside risks for an entrepreneur. There's some obvious ones, financing not working out, et cetera, I would say, let's see, there's a couple. So one of them is part of how the trends of these companies really become great and massive is that there's a limited number of companies that kind of get to breakout velocity. And this a little bit plays the competitive differentiation point, which is to think seriously about your gamble of can this get to something particularly big and breakout and get network intelligence and so forth. Because very often actually you could have a much more successful career path of going and joining really hot companies and working with things that have that trend going than in fact actually just go start on your own. And I think we talked about him in the book. Matt Kohler was someone that I recruited out of McKinsey to join LinkedIn. He's now a partner of Benchmarks. Great guy. And he made an awesome career at saying, look, I'm going to be a really essential person to founders in terms of what I'm doing. What you really do have to do is you have to trade off of, ok, is this really going to be either I just have to be an entrepreneur, I have to work on this idea, I can't work for someone else. Or does this really have a shot of being big? Because one of the things that I tell folks is if it's not a really big idea, it's usually not worth doing because it's the same amount of blood, sweat and tears with a much lower impact and a much higher likelihood of ending up in real tears, as opposed to just frustration at the end of the week. So maybe that would be kind of the thing to think about. And then on the very left.

So it's very interesting thinking about some of your comments and remembering a book that I read a long time ago. There's a journalist by the name of James Fallows, and he wrote a response to America's obsession with competition from Japan in the 80s. It was called More Like Us. And he asked the question, he said, we're looking at Japan, what Japan's doing well. And we're thinking, we're down in the dumps, we've got to copy the Japanese and do what the Japanese do well. And he just said, let's do what we do well. And ask that question, what do you think on a. From a perspective of American entrepreneurship, and specifically the Bay, you know, what are the things that we could do to do what we're doing better, to deal with a lot of competitive forces around the world? And also on an individual company basis, what do you think most companies you see in your investment career could do a lot better than I would do it?

Well, the second question is a whole question of itself. So the first question is basically was a report from Fallows, who I think also coined the term career escalator, if I recall, but I'm not absolutely positive of that, who basically said, look, what we need to do in order to be globally competitive is more play to our strengths, not try to copy other people on their strengths, which may or may not be our weaknesses. For example, in the 80s, rage about the kind of perfect manufacturing and other kinds of things that the six degree manufacturing that the Japanese were doing. And I said a little bit of. I gave a partial answer to this question when I was talking earlier, which is we're really, really good at attracting high quality talent entrepreneurs from everywhere in the world. We're better at immigration than anyone else. I think also that one of the things that is a good upside of not having an overly formalized education system that has extremely long exams like the baccalaureate in France, ranking everyone from 1 to X and so forth, allowing some room for risk taking, creativity, et cetera. I think that's another thing that's particularly useful. I actually think we have an awesome university system. But I think also that part of the thing that as an entrepreneurial country, the phrase we use in the book is being in permanent beta, e. G. You're never finished work. And I think that one of the things that we can also do is we do the. We don't treat ourselves as finished work. We have to kind of go back to the grindstone and reinvent. And that reinvention process is I think, really key. So those would be the kinds of things that I would say apply to strengths. Now in terms of companies in the Valley, I think the primary time where they start going wrong is when they start becoming their own kind of little solar systems and they're no longer integrated into the pace of activity. What's happening in the Valley. And that's not always an executive mistake, although frequently. And the key question on technology, because we focus on technology here, is essentially you always have to be investing in the next curve. And so the moment that you don't say, I have a really good idea that I'm playing for, it's like, for example, well, I've got an idea for optimizing this web page that's not a big idea. And so you should be thinking to yourself is, do we have a big idea in terms of what we're doing? And the big idea has to be a legitimate one. I mean, one of the things that woke me up to competitive differentiation as I asked someone at eworld, I said, well, we're licensing technology from AOL and we're putting on this graphic front end. What's our competitive advantage? And they said, oh, it's the Apple brand. And you're like, no, I mean, the Apple brand's great, but that's not a competitive edge in that thing. You have to actually have something that's a, a great product. And Jobs obviously proved, I think, quite well that there is no business or industry that's truly so far gone that a great product couldn't fix it. But great products are really hard as addiction. And so I think that part of what's happened is the companies that you see around the valley that are kind of large companies that have historically been very well, that are now flagging, aren't investing well enough into their future. And I think that's one of the key things that they need to do.

You mentioned a couple of times about wanting to make a contribution to the world. So I was wondering about how do you balance that with the need to make a living and make money? And I was also thinking about it not just from the personal side, but also from a company side, especially say in the realms of education and products for kids, where you need some sort of altruism and some aspect of really caring in order to make a great product. So how do you prevent, say, the introduction of investment money from making you too focused on the money you spent?

So the question to repeat in brief, is how do you balance both the economic necessities of a life that you need to make money, the economic necessities in an organization when you get investment, and that dictates a certain pace to the company together with changing the world? And there's hours of answer to this question, but I will be brief. The high line is to try to try to create the right kind of alignments. And so, for example, if you're founding a company, you try to find a company where the mission of the company is something that actually also changes the world in a good way, because businesses will very naturally go to, well, what's the way that I maximize revenue and maximize my business potential? And if you can create that in a way that's a very good alignment with things that make the world a much better place, then you're good. So that's kind of one fundamental. So, for example, if your business. I'll be hyperbolic. If your business is selling cocaine, it's very difficult to do that. And so the second part of it is, is, for example, when you think about an individual life, one of the moral principles that I think everyone should follow, and this was actually the very first commencement speech I gave to a friend of mine's college over at University of California in Santa Cruz, was to do something that's not for yourself every year. And you could choose how much that is. If you're a struggling single parent trying to make things, Maybe it's a McDonald's gift certificate for a homeless person, that's the thing. But to hold yourself up to a standard where you say, there's something that I'm doing, that's really just not for me. And for the first few years, I did that by serving on nonprofit boards as a way of kind of doing that myself. I eventually decided that generic nonprofit boards didn't work. I wasn't able to be effective. It wasn't doing enough. And I had this kind of episode where I resigned off all of them. And I was trying to figure out what to do. And. And for example, I was on the Mozilla board, which is a nonprofit board, but it really wasn't. Not for me. I mean, 20% of the Internet traffic is really interesting. If it was a fully commercial business, I'd still be on the board. It wasn't just because it has a mission to change the world, which is important, keeping the web open and free, and people should look at the Mozilla mission. But what I then realized, a friend of mine pointed out Kiva to me, and I realized that my consumer Internet abilities, all the things I'd been developing from the commercial side, would also be extremely helpful to this thing, which is microfinance, enabling essentially everyone to kind of a person to create their own taxi business and these kinds of things, and that I could help them with that. And so looking for synergies, like saying, well, this is what I'm doing. What are the things that I could do that take some time because I need to provide for my family, provide for my life, but I could still also give to the world. And I think those are the brief two answers, but it's a great question for longer in the back in the center. Hi, Reid, my name's Danny. Simple question for you.

This is my sixth day in the Valley.

Welcome.

Thank you. And I just moved out here from a different country where I helped you found a startup. And I'm a business guy and I'm looking for an engineer, co founder. So if you were in my shoes, other than going to the meetups, what would you do?

Well, that's almost on the edge of a generally accessible question, but, you know, good entrepreneurial hustle to ask it. The short answer is go to the folks that you meet and ask them who the smartest folks they know are, and then go meet those folks and doesn't just ask for engineering folks and don't just ask for people that you could have as co founders, because simply going and co founders is a lot like a marriage relationship. And you're going to have to be built. You probably have that experience if you've built a company before. So you're going to have to go build those relationships. And that may be too brief of an answer, but only some people in the audience may be interested in an answer. So that was quick here. If you had to create a startup tomorrow, what industry would it be? So the question is, if I had to create a startup tomorrow, what industry and what would it be? Well, I decided pretty early on that I was a consumer Internet guy and that's what I was going to do. And if the consumer Internet became no longer the right thing for me to be doing or for the Valley to be doing, then I would retire. So it would be something in the consumer Internet. And there's still a lot of room for interesting marketplaces and social networks. So for example, the Valley likes to go kind of say, oh, here's the new future, and also likes to say, oh, that trend's done. And so for example, oh yeah, social, that's so last couple years. So last quarter I invested in a company called Edmodo, which is social networking for K12 teachers and students. And that's an instance of something that I think they have very good traction, something that would be big. It's a wide swath of life. Now the thing to think about is always, if it's a marketplace or a network or a platform, how is it that millions or hundreds of millions of people use it? And one of the things that's more challenging about starting businesses now than it was in 2002, 2003, 2004, is I've given talks at startup schools, which is roughly this amount of people in the room. And if you presume that there's two founders per consumer Internet company, you got 200 companies in the room and five to seven will get to breakout per year as a function of it. So you have to look at what that is. But people are still doing it. I mean, there's Instagram, year and a half old, doing great for mobile, sharing of experience and so forth. So you have to look at what's the idea that I have that has a potential breakout here. And right now all of my time and energy on that goes to. How do I further elaborate? LinkedIn. So I don't have a specific answer for you in the back in a tour of do the universe, what are.

The things that you as a self entrepreneur should be focused on growing and building up throughout your entire life? Is it industry knowledge? Is it your network?

Is it skills in the tour of duty Universe, what are the fundamentals for investing every year after each other? And it's a great question. It's definitely your network because ultimately part of what makes you better is the people that you talk to, the people that you work with, the people that share perspective on what's going on in industries. Some skills kind of come and go like you might like. For example, I haven't written a product plan in years. I wrote a lot early, but not now. But that was important to do at that stage of the career. And by the way, even that helps me. Talking and working with product manager is because I know what competence looks like having done that. I also think that part of the whole point of advancing the thesis that we should all be entrepreneurs of our own lives is to keep us adaptive. And that being in what we describe as impermanent beta, as never thinking the game's over and always thinking about what's the next play in terms of what I have to learn, all of the skill set that goes into that learning and that ongoing adaptation is, I think, absolutely critical. And one of the mistakes that people make is they say, well, I've learned the game, I know what it is now. And that's why you see a lot of people who you go, okay, you are really good at what you were doing even five years ago, and now it's no longer as relevant in terms of how you play. And so, for example, I worry about this with me. And so one of the things when I'm working, one of the things I love about working with a group of entrepreneurs is part of what I'm constantly doing is paying a lot of attention to what do I need to be learning now. I don't just go, oh, yeah, yeah. I understood virality and understood all this stuff. And from 2002 until 2005, 2006, I knew how to play that game. I'm constantly relearning that game. And so all the things that go into that's part of the reason why the network was a key thing. The things that go into constantly learning and adapting are the things that until you're done, you always need to be playing in the back again. In terms of your vision of the future, where do you see the recruiting industry going? Recruiters also for the candidates looking for jobs. And if you're an entrepreneur or me, then there are too many entrepreneurs. Where is the recruiting industry going? Well, the short answer to that is I think that, like all markets being made a lot more efficient, I think there will be recruiters. I think they'll be made a lot more efficient by tools like LinkedIn and others. And that I think that part of the thing that people are sorting out is like the biggest challenge for recruiting in the Valley is not competing with Google, Facebook, LinkedIn et cetera. It's all the startups and the things that people are doing. And that's both something that helps us get things going, but also makes things difficult as you go. But I think we work that out. Some folks have said, look, I wish that more folks would aggregate to the truly breakout opportunities. And I think that's a good thing to pay attention to, as per my earlier comment. But part of how we have a very adaptive system is people go try startups and they kind of try and fold and restart all the time as a function of this. So I don't. That's a partial answer anyway. There was a. Let's see at the very, very back. That's you. Yep.

Hi, I'm also Dan, I'm also kind of new here. I wanted to ask in the universe where there are a lot of entrepreneurs and it's almost like a revolving door, what a startup that's one or two years old faces is very different than a 30 year old company. So how do you, you need people to kind of give you a tour of duty this a little bit longer so you can kind of, especially with the core team people immediately around the core team, how would you address that for specifically targeting the early stage startups?

So the question is tour of duty is early stage when you're really just getting things formulated and going and there's a lot of knowledge in a few heads. How does a tour of duty differ between that and larger companies? And you did answer your own question as you were, as you were asking it, which I'll just confirm is true, which is basically in very early stage companies, a tour of duty is. I'm going to make a real go of this. Unless the company, the investment thesis turns down, I'm not planning on leaving. I'm doing this as a function of it. Because if a very early person leaves, like say for example, one of five people leaves, that can make it almost like a restart in terms of difficulty. So the folks that you want to have as part of that initial, you want to have those folks be as long as this is working out, to be committed for years. Because that initial core group then actually forms the core of the culture, the heart and soul of the companies that's going forward. And it's very painful when you lose those people even when you're much larger, you want to have folks that have an intent to, to go long. And that's one of the things that's an important bidirectional relationship. And it's important in terms of equity compensation, it's important in terms of all these sorts of things. Actually, following up on that question, I had a question about company culture, and I was wondering if you could speak a little bit about your experiences with that, maybe tell a story about when.

Things didn't go as well.

It's one of those things that tends to. You have to be really intentional about up front. It will happen whether you like it or not. Yes. So company culture, what you have to do is think about what are the things that we are all going to hold ourselves accountable for. And so, for example, one of the things that we did pretty early at LinkedIn is we decided that while we had a very strong belief in our mission, we would have a very kind of open and rational discussion about whether or not what we were doing was right or not. So we would allow our core tenets to be challenged. So people could say, for example, well, we don't have as much engagement as those social sites. We have this theory that social with pictures and games engages a lot more and professional engages less. But are we just gluting ourselves? How do we figure out if this theory is right or not? And there's, I think, strong upsides to that culture in terms of the fact that we actually have a relatively broad, rational perspective on what's going on. There's also downsides because it wasn't as much true believers. And so there wasn't as much as, no, no, this is absolutely going to work. There was a lot of, every year we'd have the conversation, is this working well enough? And that does mean that you have additional kind of morale. Now, most times when people think of culture, they try to think of things that everyone wants. Everyone wants high energy, everyone wants problem solving, everyone wants high integrity. Those are good things. But the real nuances when it comes to culture are the things where there's actually a strength and a weakness that are combined together. That's where the identity is. And so when you think about it, you say, okay, are we, for example, a broadly inclusive culture? Well, of course, then you have some difficulties when people start disagreeing. Or are we an autocratic culture where one person makes the decisions and that's where we go? And what is the blend of that and those. Those kinds of things have strengths and weaknesses together. And that's where the real interesting cultural discussions occur in the middle. Do you think we're in a bubble or why is the answer is do I think I'm in a bubble? And the short answer is I'm long on the ability for technology to change the world. And whatever the market valuation happens to be. Is whatever the market valuation happens to be. You mentioned that we have a fantastic university system and that was the main.

Driver for me to immigrate from India. But it seems like the business model.

Of the university has not kept up.

With time, and it seems like entrepreneurship is disrupting education.

I just want to hear your thoughts on that. Of course, when we're 15 seconds overtime, the treatise question arises. Well, I think education also needs to be. I think there's a lot of great strengths we have in this university and in a number of elite and great universities in the us But I do think that the whole notion of educational model and what kinds of things will present how we do education in a really good way is actually very much open for disruption. Now, how that happens exactly with these deep institutions that have a lot of inertia around them and everything else I think is very open. And it's one of the reasons why people have been celebrating things like the Khan Academy, because even though the technology is pretty simple, it's pretty interesting what you can do with something that's that simple with a guy who really knows how to give smart, good lectures with YouTube videos and then build around that. And I think we'll see more and more of that when it comes to education generally. Please join me in thanking Reid for this evolution.