“Build An Elite Navy Seals of Business” - Lessons from Airbnb’s Founder

What's up, everyone? Welcome back to another episode of The Crazy Ones. This is Alex, one of your co-hosts, and I am back with a Founder's Journal style episode where I break down a topic ranging in length from 5 to 20 minutes. And it's something that either I've been dealing with in one of my businesses or a recent podcast I listened to or book that I read that I feel like I have to share with you. And today I'm talking about lessons I learned from a podcast I listened to, specifically a conversation between Brian Chesky, the CEO of Airbnb, and Jason Calacanis, the host of This Week in Startups. So I'm going to share 9 lessons from Brian Chesky and Airbnb. Let's hop into it. What's up, everyone? I'm Alex Lieberman. Yo, this is Jesse Pujji. And this is The Crazy Ones. So this conversation between Brian and Jason was super interesting. There are a lot of takeaways I have. I'm going to go through 9 of them. But first of all, if you want to hear the full conversation, we'll include a link to the podcast in the show notes. But let's hop into the lessons. Lesson number 1, Brian, Joe, and Nathan, the co-founders of Airbnb, are what I like to call cockroaches. Early on, as they were funding Airbnb with literally a binder full of maxed-out credit cards, they ended up selling 1,000 boxes of election-themed cereal. So they were selling Obama O's and Captain McCain's. They sold 1,000 boxes of these to raise $30,000. Not only did they raise money so they didn't have to just keep maxing out credit cards, but also These boxes of cereal was how they got into Y Combinator. The story goes that they were interviewing with Paul Graham to get into Y Combinator when the accelerator was in its early days, and it seemed like people were pretty uninterested by the idea of strangers staying in your home. And as they were leaving the interview, I believe it was Joe who left a box of cereal with the interviewers, and they were basically like, what is this? And they went on to tell the story of how they had raised $30,000 selling these 1,000 boxes of cereal that were themed for the presidential election. And then on the spot, they got an offer to be part of Y Combinator because they had just shown so much grit in doing anything humanly possible to keep the business alive. So that's an early-on example. But to me, them being cockroaches spans the entire length of the company up until most recently the pandemic. I mean, you think about a pandemic, basically world travel and hospitality went from 100% to 0% in a day. And Brian was sharing on the episode that Airbnb lost 80% of its business during the pandemic. Even with all of that, the business is doing just fine now. No matter what happened to Airbnb's business from the beginning up to the pandemic, They simply just won't let it die. And I think this is a trait that so many successful entrepreneurs have, is they just will their business into existence and they are just unkillable. Second big lesson is that Brian is wildly obsessed with the customer. He literally reworked the entire Airbnb organization so he could be closer to the product. And I'll explain in a minute how exactly he did that. But basically, when Brian was asked how he spends his time today, he spends his time on only 3 things. He spends it on product. He spends it on marketing. And marketing and product are really intertwined at Airbnb. They have a product marketing function versus a product management function. And then he spends his time on hiring. And as you'll hear in a minute, Brian basically knows at any point in time every project that is happening within the business related to any of their products. So he knows what's happening with Airbnb's product and the biggest complaints that customers have, as well as honestly, like a 5-person company CEO would know. It's, it's incredibly impressive. And I think he gets a lot of this both intuitively, but also he draws inspiration from very product-obsessed CEOs as well. During this conversation he had with Jason Calacanis, he was talking about Steve Jobs and Apple's obsession with customer constantly. So it's also about the inputs he's putting into his brain to reinforce how important the customer is. Because if your customer doesn't like your current product, then when you come out with a big idea in the future, they're just going to associate that new product with all of the problems that your old product has that these customers face. And so basically what he mandated to the company is before we do anything new, before we build out any of our new big ideas, We need to solve the biggest customer pain points today with the current app before doing anything new. And so what he ended up doing is he went through with his team and he storyboarded out all 150 screens from the Airbnb app. So Airbnb has 150 screens. They literally laid out all 150 screens. They also laid out all 72 user policies, which my understanding is they're these 100— each user policy, all 72 have 100 pages each that basically dictate the way that Airbnb interfaces with its customers. They went through all of these just to identify what were the most common customer complaints. Then basically he focused the team on finding the high severity, highest frequency customer complaints that require the lowest lift from their engineering org. And his view is we are going to fix these most important complaints before we do anything new in the business. So I feel like those are all just amazing examples of how close Brian Chesky, even with over 5,000 employees, stays to the customer and to the product. Third lesson from this conversation is that organization design is a must-have skill at scale. I feel like people don't really talk about org design a lot, but it's so important. I see this within the context of Morning Brew. All of the org decisions that my co-founder Austin makes on a daily and weekly basis in order to optimize the productivity of our business and how you set up your org chart. And your org chart dictates everything from communication flow to speed of product releases. And I feel like it's an unsexy topic, which is why it's not talked about a lot, but it really is a skill that you need to have at the top of your business, meaning the CEO of a company doesn't have to be exceptional at org design, but someone on your executive leadership team, once you've hit a certain scale, once you're, let's say, past the startup phase into the scale-up phase, you need the skill at the top. And so just to give a sense of what happened before the pandemic, Airbnb was organized by divisions. So it had 10 divisions for basically 10 different parts of the business. And in this old design of Airbnb's organization, Brian Chesky shared that he was very hands-off. He would spend his time on strategy and capital allocation, which is, I would say, what people usually associate a large company CEO with doing. He said data was democratized and because there were 10 divisions, there were 10 different marketing departments. And he shared this story where He was trying to understand like what marketing looked like at Airbnb when they were organized this way. So he asked all of his divisional marketing heads to get into a conference room and put every marketing material that the company was using on the walls of the conference room. And he said that it took them weeks. It took them weeks to get all of the different marketing materials into a single room. And then he said when he looked at all these marketing materials, it looked like marketing that was being done by 10 different companies. And so during the pandemic, Brian rethought the entire organization's design so things could move faster, so he could be closer to the product, and so the company would operate on one single product roadmap. And so what he did is he moved the company from being divisionally organized to functionally organized. So now today, instead of there being part of the company for, let's just say, AirCover, which is like their product that they offer Airbnb owners, and then another one for Airbnb Experiences and another one for long-term stays. Now it's functionally organized. So there's a product org, there's a marketing org, engineering org, a design org, an ops, legal, and HR org. And Brian now operates in an extremely hands-on way where he is involved in every single project in the company. And the company only does as much as Brian can personally focus on because his view is they're not going to dilute themselves if he is able to focus on everything that they're doing as a company. The only way you're able to make that change where you go from being a CEO who's not very focused on the product to being a CEO who's entirely focused on the product is you have enough of an understanding of organizational design and how to make those changes to be able to accomplish that. So I think org design, wildly underrated skill to have at the top of your company as you grow. Lesson number 4, Brian Chesky considers his team to be, quote unquote, Navy SEALs of business. So just as the Navy SEALs are this small, highly selective elite group of folks within, you know, the armed forces, that's how he views Airbnb employees. And he considers Airbnb's culture to be super intense, such that he said in lots of interviews he actually tries to convince people why they shouldn't join Airbnb because he argues like, this is a really tough environment. I don't know if you want this, but the result is that Airbnb is able to do a lot with very little resources and people. So in the last 3 years, Airbnb has shipped 340 upgrades and innovations to its product. And last year he said the business did $3.5 billion in free cash flow across 5,300 employees. I didn't have an exact reference point for is that a lot or a little, but he basically shared that on a percentage basis, Airbnb is more efficient than Apple or Google when it comes to how much cash they actually generate for how much revenue they do as a business, which I think is pretty wild. The 5th lesson from Brian Chesky is that intuition is an art. Intuition is really important, but it is not arbitrary. So the way that decision-making works within Airbnb's business is it starts being scientific and data-based, and then it evolves into being art and intuition-based. So he was even talking about how they prioritize customer problems. So I was telling that story before, how he laid out 150 screens of the app, 72 user policies, and their goal was to find out what are all the customer complaints and then figure out what are the, let's say, top 30 customer complaints that we actually want to focus on fixing. And he broke down into steps how they do this. So step 1 was they take all of the inputs, the data from Airbnb. So customer service calls, social media posts, they do listening sessions with guests and hosts. Then they look at frequency and severity. So how frequently are certain customer complaints coming up and how severe are these complaints? Is it a safety issue or is it an issue with how things are refunded. That's like the data part of their decision-making process. But then he says for any product change or customer complaint that they want to prioritize on fixing, it ultimately comes down to a group of 20 people in the company who understand the customer and the product so incredibly deeply. And his view is, yes, they use the data to maybe get to like a list of 50 customer complaints that they are thinking about fixing, but to ultimately get from 50 to, let's say, 20. These 20 people leverage their intuition to decide which things to actually fix. But his view is that intuition isn't this arbitrary thing. It's not just gut. These 20 really smart, immersed people have millions of data points that have fed through their brains to inform their intuition. It's leaning on kind of the human brain computer as a collective to make final decisions, which to me was such an interesting way to actually frame intuition in a far more scientific way than I've ever heard it kind of talked about. Lesson number 6. So the way that Airbnb organizes its product function is there's basically 3 roles within product at Airbnb. There are product marketers, and these are senior product managers, and they're responsible for marketing of the products that Airbnb has, as well as actually working on the products. So they are responsible— what he would say is for the external and the internal of all of Airbnb's products. Then there are just true product managers at Airbnb, and these are junior product managers that just do the internal-facing product building and work, but they don't focus on the marketing, the external. And then there are program managers. And the way he described these is oftentimes the role of a program manager is bundled into a product manager. But his view is it's an important enough and distinct enough role that people should have a title for doing this responsibility. And what a program manager is, is it's basically like a project manager. So it is the individuals who are responsible for keeping every project at the company on timeline, like keep the train on the tracks. So program managers are— managers are responsible for timelining, for pulling everyone into working on pushing things forward. They're responsible for reporting. So I think of program managers like I think of project managers. Lesson 7 is that constraints are a great thing. Brian basically shared that he thinks the zero interest rate environment that we were in for several years created this world without constraints where there was a lack of prioritization, there was overhiring, there was inefficiency because money was free. And he admits that Airbnb fell prey to this constraintless world. He thinks the company hired far too many people because we lived in this zero interest rate environment where the markets only went up. And he believes that constraints are actually an incredibly important and valuable thing because they force you to make hard decisions. They force you to prioritize well, and they force you to be ruthlessly focused. On the customer. So I think whether it's for late-stage entrepreneurs or early-stage entrepreneurs, even if you don't feel constraints, creating constraints in order to prioritize your business well is a really important thing. So even I think about at Morning Brew, we use the EOS management process for setting goals and timelines within our business. And part of doing that is you set quarterly goals and it forces you— you can only set 3 to 7 quarterly goals. You can't set more than 7. And to me, that is a self-created constraint to create discipline and focus on what's truly most important within the business. Lesson number 8 from Brian, that he was asked by Jason Calacanis what are his views on AI. And basically he thinks that there are inevitably risks around AI, but he is wildly optimistic about the future it can create. He thinks people are kind of dumb for trying to ban AI. He thinks banning AI is like trying to ban electricity. You know, I kind of read between the lines thinking ultimately, if there are any people who don't ban AI, it just puts the countries or the organizations that ban AI at a significant disadvantage versus the people who don't ban it. And his view is that basically there's 2 types of companies or 2 types of ways to build within AI. You have base models like GPT-4 created by OpenAI, and there are other base models as well by Google and other businesses. And he views those as like the highway, like the actual infrastructure of the roads. And then he views Airbnb as being a business like other businesses that is going to— that are going to create tuned models based on having great internal data and great sensibility around the user experience. And those are going to be like cars that are on top of this highway infrastructure. And the final thing he shared around AI is that he believes that AI is going to make everyone a programmer. Much like the Kodak camera made everyone a photographer. So before the Kodak, you had to be a professional photographer to take pictures. After the Kodak, it brought the camera and it brought photography to the masses. His view is, you know, in the past, to be someone who built software, you had to speak the language of computers, which was code. Moving forward, you're going to be able to speak your natural language to a computer and be able to build product just based off of that, which is super interesting. And the final lesson from Brian Chesky in his conversation with Jason Calacanis is around remote work and how he views kind of the balance of in-person versus remote. And he believes that in-office work is important and it serves a very specific purpose. He thinks that a lot of people try to use in-office work as a way to better track employees, track their movements, track if they're productive, etc. But he said, ironically, remote work makes it way easier to track employees because you can literally see exactly what they're doing on their computer at all times. And so if you're having issues with tracking employees and that's something that you want to be able to do, you should look at yourself as the manager or leader as not having the right processes in place to track. And if you're looking to bring people in office, his view is there should be 2 reasons why you bring people in office. Otherwise, you should be fine with remote. The 2 reasons to bring people in office are for trust building and collaboration, and that's it. And so these are my 9 lessons from Brian Chesky and Airbnb based on his conversation with Jason Calacanis on This Week in Startups. As I mentioned, these lessons are a great starting point. If you want to go deeper, make sure to check out the episode, which we'll put in the show notes. On top of that, just let me know what you want for a future Founder's Journal, whether it's a big challenge you're going through within your business, Whether it's a business book you want me to read and share my biggest lessons from, any topic that you think could help you build your business better, we want to talk about. So shoot an email at thecrazyones@morningbrew.com and we'll use those suggestions to help inform future episodes. Thanks as always for listening and we'll catch you next episode.