Innovate with Intention - Joe Gebbia + Alfred Lin

Well, thank you for having us. Joe and I are really excited. We said we're gonna have some fun on stage and. But I get to ask all the questions, and so you have to be all the entertainment.

I'll turn it around at some point. Don't worry.

Why do you always start with the founding story? Can you just, like, remind us? It never gets old hearing about it. I'm sure you've told it 10,000 times. It doesn't seem like it gets old for you telling it because you're so excited when you tell it.

It's like it was still yesterday, but there's actually a pre founding story, which maybe many people don't know about. So it's the summer of 2006. I've got my life spread out on a sidewalk in Providence, Rhode Island. I'm having a yard sale, and I'm selling all my things before I move out to the west coast to San Francisco. And it's towards the end of the day, and I'm getting kind of tired, and this guy pulls up in this red Mazda Miata, and he gets out and he starts looking at my stuff. He's like, a T shirt over here and a piece of art I made over here. And we get to talking. It turns out he's going to the Peace Corps, driving cross country, doesn't know a soul in Providence. And so just sort of. It just comes out of my mouth. I'm like, you want to grab a drink tonight? He seemed like kind of a cool guy. So we're getting a drink later that night, and it's getting really late, and I'm super tired, and I'm motioning for the check, and I make the mistake of asking, so where are you staying tonight? And he makes it worse by saying, actually, at your place. Well, he didn't have a place. And I'm thinking, oh, my God, what do you do, right? Hotels are probably closed. It's Providence. It's like, do I offer to host this guy? I mean, I just met him. I mean, he doesn't seem that crazy. He's going to the Peace Corps, but who knows? And before I know what I'm saying, I go, why don't you stay on an airbed in my living room? And so, sure enough, 15 minutes later, I set him up at the air bed, and I go back to my room to fall asleep. Or I should say, try to fall asleep. I'm laying in my bed. My eyes are wide open. I'm staring at the ceiling, going, oh, my God, what have I Done. There's a stranger in my living room. So I get up and I tiptoe over to the door. I lock the bedroom door. Turns out he was totally fine, totally cool. We got breakfast. The next morning, he went to the Peace Corps. He sent me postcards from where he was stationed. And to this day, his name is Joseph Maffey. He's a teacher in Chicago. And my piece of art's hanging on the wall in his classroom.

So what did you learn from that experience?

I learned that it can be terrifying at first to conceptualize bringing someone you don't know into your home. You know, we've all been taught since we were kids that strangers equal danger. And I grew up believing that myself. And, you know, here was faced with this moment of truth. Like, is this person who I just met gonna be dangerous? And it turned out, you know, getting over that hump, like, there's kind of, like, no looking back. Like, the minute you can have that kind of interaction with somebody, you can extend that much trust to someone and have it reciprocated. You can't really look back on that. In fact, he has come back to San Francisco since he's run the marathon here, and I haven't had a chance to host him again.

Cool. So you guys have stayed friends?

We have.

So the world's moved from home sharing to being friends, never being a stranger into belonging anywhere. So it sounds like this. So the session's about innovating with intention. That sounds like innovating by happenstance.

Well, you know, necessity is a mother of intention. I think. You know, Airbnb's story, which I assume most people here have heard at this point, was really that, you know, so when I packed my car and drove to San Francisco, the one thing I did put in the back was the airbed. And so, you know, a year passes. Brian and I are roommates in San Francisco. The rent goes up beyond our means. We have a math problem. We quit our jobs to be entrepreneurs, and here's a rent check that we can't pay. We're on the verge of getting evicted. What do we do? The design conference comes to the city, wipes the hotels out. I'm on the website on my laptop in the living room. I distinctly remember big red letters across the front of the website. Sold out. No hotels. And in that moment, I look up over the edge of the laptop into the vastness of the living room and think, hmm, that sucks. I mean, there's going to be no place for people to stay coming last minute. We need to make rent. There's an airbed in the closet. What if we brought the air bed out and put it out in the living room? I wrote a note to Brian. He loved the idea. We actually got two additional airbeds. So by the end of the night, we had this concept of three airbeds in the living room. We would pick people from the airport, we would provide a map to San Francisco, a BART pass, and of course, we would cook breakfast. Lo and behold, the birthing of airbed and breakfast.

So you had a math problem, but it was really a crisis that you turned into an opportunity and now into a great story. So lesson learned. Never waste a crisis.

Never waste a crisis. We're very good at that.

So when did you know that you were onto something big, that you should raise money for the idea? This is a. Did you imagine it to be as big as it is today?

I think that Brian and I always had ambitions of doing something big and significant. An early inspiration for me in my design education was Charles and Ray Eames, very famous designers from the mid 20th century whose sole purpose was to design. Put out the best design to reach the most people for the least price. And there was something really inspiring about that for me, of using design to try to reach as many people as you could. And so for us, you know, this weekend experience of just trying to make rent, which we made $1,000 that one weekend and saved our apartment, it wasn't immediately clear to us that was actually the big idea. We sort of went back to the drawing board and said, okay, well, what other ideas can we come up with to start a company together?

What are the other ideas?

You don't even want to know. Come on.

What's the. This number two idea? What was the number three idea?

I don't even remember. They're that insignificant. But there was a point in time where I think three months had passed and we both went home for the holidays. And we both had similar experiences where I went back to Georgia, where my family was living at the time, and everyone's like, what are you doing? How's San Francisco? And I go, well, it's great. We didn't really have jobs. We don't really have a company or anything really going. But we could talk about this one thing that happened this one weekend, and people either did one of two things. They're like, that is the weirdest thing I've ever heard. And they would turn and walk away, or they'd be like, oh, my God, I would love to travel that way. What's the website called and you'd start a whole conversation. So there was like enough of it. Got this visceral, emotional response out of people where Brian and I came back and we're like, maybe there's something here, maybe there's something to this that is worth us exploring a little bit further. The other thing I would say is hosting three people, complete strangers, Kat, Amol and Michael. That one weekend they came as strangers and they did leave as friends. And we're still friends to this day. We still keep in touch. And there was something magical and something unexpected and something so delightful about that that in the hardest times, especially in the early days of the company, when we had all the people in the world telling us, this is never going to work. This is strange. This is a weird idea. We could always go back to that experience with our three guests and be like, you know what? We know something that they don't because we've experienced it firsthand.

So you took this small experience that made you see something that was possible, but you had to solve a big problem. A lot of things. You knew that everybody said it wasn't going to work because there is a trust issue. You needed people to trust each other. You needed a community of people who were going to follow some form of the best hosting standards that you had not created at the time. It's not like today where you have some standards around that. You had to sort of create this movement of people who wanted to travel differently. They're used to traveling in hotels. How did you intentionally go solve those problems one by one by one?

It was really hard and it took a really long time, like a painfully uncomfortable amount of time to figure this out because you basically have to build this Olympic sized trust between two people who've never met. How do you do that on the Internet? There was no real guidebook or playbook. We looked to ebay a lot in the early days as a community marketplace of two people interacting with each other. But that was really just digital until the box showed up. You're letting somebody into your home. How on earth could you overcome this incredible hurdle? And so for us, there was a very distinct moment that I'll never forget. And to understand this moment, you need to get inside of our minds of what we subscribe to as Internet entrepreneurs, especially in this part of the world. And there was kind of a law of the land going back to the first dot com, which was that if you have a problem, you have to code your way through that problem. You have to apply computer Science and programming capacity to try to solve every problem that comes your way. And so we did exactly that, and it got us nowhere.

That's an interesting sort of insight. People work very, very hard. They may be working in the wrong direction. You needed programming wasn't going to solve the trust issue. Programming wasn't going to solve the community issues, the standards issue. So it got you nowhere. When do you realize that? How did you intentionally go back and say we have to go solve these problems?

Well, I wish we could say we realized it ourselves. It took somebody that we really admired to basically yell at us, to kind of wake us up. And it was Paul Graham who at a certain point said to us, it's okay to do things that don't scale, especially in the early days, especially when you're trying to bring an idea to life. You don't have to solve things programmatically. That's not the point. The point is just to figure it out, whatever the medium might be. And so for us, this was a breakthrough moment where we thought, oh, wow, okay, well, if we can do things that don't scale, that means that we're free to leave our desks and step away from our computers and. And think even more creatively about this issue. So in one of those sessions, a very famous session with him, we're looking at our search results, and he asked us this question. He goes, what's your biggest market? And we go, well, we don't really have a market. Site wasn't really working.

And he goes, how many listings did you have at the time? A thousand, maybe.

Barely, if we were lucky. That's all over the world. There was one city that had promise, and that was New York, where we had maybe 30 listings. And so we're looking at these 30 listings in New York, and we all sort of have this epiphany together. We're like, wow, the photos of these places are terrible. Like, I wouldn't want to stay there. They're blurry. They're taken at night. Pictures of the kitchen with dishes in the sink. It was just kind of like, well, because you have to understand, at the time, the standard of photos for a home on the Internet was Craigslist. Like, that was literally like four little tiny blurry images. And that's what everybody thought. Well, this must be the way you do images on the Internet. And so it wasn't until we had this moment of, like, it's okay to do things that don't scale, that we said, well, I've done photography in my life. I Went to art school. Why don't we just go solve this problem ourselves? Doesn't scale at all, but almost. It doesn't matter. At that early stage, you picked up.

Your bag, you picked up your cells, maybe with a sleeping bag, and went to New York.

We did.

Started meeting bunch of hosts.

Yeah.

At meetups.

Yeah, we didn't do meetups at first. At first we emailed our hosts in New York, all 30 of them, and said, hey, we want to send a professional photographer to come shoot your place. And the response rate was pretty high. People love the idea of free photos. And so we go and we knock on the door and we introduce, hi, I'm Joe, I'm the co founder of Airbnb. And they go, cool. And then they'd like be looking over my shoulder. And I realized they were actually looking for the photographer. And I said, well, no, actually I am the photographer too. And so they said, oh, okay. Kind of with that discerning eye. So I go into the home and we rented this. We couldn't afford to buy a camera, so we rented this Nikon D X thousand something. The widest angle lens we could find. Tripod. The whole setup, super pro. And I went in and took good photos. And I'd show the host on the back of the camera, go, hey, so what do you think? And the host would be like, oh, oh my God, my apartment looks amazing. Why don't you stay for some coffee or tea? And so.

Oh. So that turned into the meetups.

That turned into the meetups. So kind of the photography was like the sort of in. But once we got there, what we realized is that these early adopters, and I think this is true for any company, any startup, the early adopters have so much information to share about what's working with your product and what's not working with your product. And again, coming back to that old mindset of, well, we have to do things at scale. We stay behind our computers and code. There's no way that we would have ever gotten the information that we did from our hosts, our early adopters, if we didn't throw that mindset aside and say, you know what, Eff it, let's go do things that don't scale. And so in these conversations, they began to tell us things, things that we had no idea were problems and such as, well, like, people would just be like, I can't use your calendar. And we're like, oh. And then this is the best part, they'd pull out their laptop and I'd be sitting next to them. And, you know, coming from San Francisco with our design backgrounds, we thought that we had birthed the greatest interface on the Internet, right?

As every entrepreneur does, right?

We toiled over every pixel and we said, oh, this is it. This is the perfect calendar. So there I am in the real world, sitting next to a customer somewhere in Brooklyn, and they're on their Windows ThinkPad using Internet Explorer, and I'm watching them try to use their interface, and it is a train wreck. I am so.

Did you not use your own interface?

We could, but, you know, it was so embarrassing. I just remember thinking, like, oh my God, like it's taking them 13 clicks to do what we thought we could do in one or two clicks. And over and over again, I'd say, well, how do you send a message to a guest? And I'd watch them try to navigate the menu and go through these different horrible flows. And I'm thinking, oh my God, we have so much work to do. And then they'd tell us. I'd ask them the question. So there's one question that I learned in design school, which applies to any company, any business that will give you incredible insights into what is, what will close the gap between product and market fit. And when you're doing design research, when you're doing customer conversations, it's really important that you don't lead the witness. And that's an open ended kind of question. It's not a yes or no question. And so the question is simply, tell me about a time that you felt a challenge using our service. And so what you're looking for is a story. You want to hear a story from somebody about a time they tried to do something and they couldn't. And so I sort of instinctively went into this design research mode and started asking these questions. And these early adopters had so much to say. I was taking so many notes in my sketchbook. One guy, I'll never forget this, he goes, oh, you want information on ideas on how to make your website better? Hang on. He runs to his bedroom, he comes back with this spiral bound notebook of ideas that he'd been writing down for years, just waiting to share with somebody. I was like, oh, my God. So I took a bunch of notes. We came back to San Francisco after that weekend, sat down with Nate, who stayed back to keep the site going. And Nate looked through the list and he goes, guys, these issues aren't that hard to fix. He actually started making changes that night. We emailed the customers.

I know how that works.

Yeah, right. When you just like, just listen, just listen.

Listen to your customer.

So we did the listening. Nate made the changes. We emailed them the next day and said, hey, it was so great to meet you. We posted the photos to your listing. Tell us what you think. And the idea you had for the calendar is now implemented. People fell in love with us. Think about that. What other service had they signed up for where the co founders fly across the country to meet you, take free pictures of your place, listen to your problems, and then fix them within a matter of days? So we took this impassioned early adopter community and just put fuel all over it. And so our organic listings in New York City started to grow from that 30. Suddenly it became 55, then it became 73, then it became 112. We had no marketing, no press whatsoever. It was probably the most pure word of mouth growth we ever had in the company's business.

So one thing that I think people don't understand about the Airbnb story is how long was it just the three of you?

How long is the three of us?

This is. Did you have. Was it just the three of you back 2008 to how long?

All of 2008 and a good half of 2009. It was just Brian, Nate and I doing the work of a lot of people.

So like almost 2 years? Year and a half.

Yeah, it was a solid year and a half before we then got introduced to Sequoia.

How did you meet Sequoia? We.

We met Sequoia at a YC dinner. And I'll never forget, we knew about Sequoia, obviously, from a previous startup conference where one of the partners was speaking, and he was Greg McAdoo. Greg McAdoo, right. Greg McAdoo was giving a talk about waves and about surfing, and his whole analogy was about great entrepreneurs ride great waves. And Sequoia was there to back the entrepreneurs as they sort of gotten to the wave. And so I remember sitting in the audience very distinctively, kind of maybe like you are now thinking like, wow, Sequoia.

Gosh, this is embarrassing.

One day, I remember thinking, like, one day maybe we'll be lucky enough to pitch Sequoia. And it wasn't six months later that we found ourselves sitting at the table with Greg and other partners at Sequoia.

Because you followed our guide to writing a business plan.

We were reading everything we could on Sequoia's website, and you guys have a great template for how to put a pitch deck together.

What was the initial check?

Initial check was $600,000, which for us was like a windfall. That was so much money because we were coming off of $20,000 from YC and we had credit card bills on all the credit cards you can imagine. And so that was just. We could start hiring people. That was actually enough to hire a person.

So you raised $600,000 from Sequoia as your first round, and since then you've. By my last total, you've raised 3.3 billion. But you have more cash in the bank than you've raised. Why raise so much?

Well, we want to hire more people.

You don't need it, you're generating cash. But like, I think the thing about time is it warps. I think what you're trying to tell the audience is like most people, this is the Bill Gates line about most people overestimate what they can accomplish in a year. You just celebrated your 10 year anniversary last year and most people underestimate what they can do in 10 years. And you guys have accomplished a lot in 10 years. So, like, advice for the entrepreneurs out there. Like, I have two questions related to that quote. One is, what is your single biggest advice to entrepreneurs as they're building from this from the start? And the second thing is, if a year is not the right time frame, what's the right time frame? What's a right unit of time to think about your company?

Those great questions. I was watching Morgan's talk from the Green Room earlier and something that she said and embodied couldn't be closer to the piece of advice that I give to people, which is an entrepreneur. The gift of an entrepreneur is to reframe things. And the gift of an entrepreneur is to take a rejection and turn it into an invitation. It's as simple as that. Every rejection for us was an invitation to keep going. And it's up to you if you want to say yes or not to the invitation. And so we were hit with some of the fiercest rejection you can imagine by some of the smartest people, which made it even worse. People we really looked up to, and people who picked some of the Internet's greatest companies of our era. With each one of those, it was a hit. Personally, it was a hit sort of on the company's idea. But we always took that and said, okay, well, what can we learn from this? Cool. They didn't like it. Let's keep going. There's actually. So there's an equation for this. One weekend back in college, I got wind that there was an entrepreneurship sort of workshop taking place at Brown University. And I was very entrepreneurial in college, and so I was like, okay, I need to get into that, but I'm not a Brown student. What do I do? So actually, I figured out how to sneak into the thing, and I was in the middle row, and there's a guy talking about sales and building relationships and the nature of rejection, and he gave this equation about rejection. And the equation is simply SW squared plus WC equals mo. So I'm sure you've all heard that before. I didn't explain it, or do you want to hear it? So SW squared is some will love your idea, some won't. Plus who cares? Equals move on. And that was literally, like, all I could think about in my head. With each of these investor rejections that we kept getting, it's like, okay, some are going to love our ideas, some aren't. Who cares? Let's keep going, move on.

Well, we're glad we didn't reject you.

Me, too. Sequoia has good insight, and I have.

To say thank you for letting us be a partner for you for over a decade. It's really been a wonderful journey. I continue to learn a lot from you and Brian and Nate and many of the people that you've brought on board. It's been a fun journey. So now that you've finished your 10 years, your first decade, what's the next 10 years going to be like? And what are you institutionalizing today for the future?

We got some advice from former colleague of yours, Tony Hsieh. Early on in Airbnb's formation, I think there's a couple paths you can take as an entrepreneur. You can have an idea and you can build it, and it can fund your lifestyle. And you call that a lifestyle business? That's totally cool. You can have an idea and you can go raise money and try to create a lot of value as quickly as possible so that you can get acquired by a bigger player. And that's totally cool. And then there's at least a third path, which is you can have an idea, raise a lot of money, and then try to stay independent and maybe go public one day and have an independent company. A generalization, but those are kind of three paths. When we had your term sheet, I remember distinctly sitting in our living room at the table with Brian and Nate, and we're deliberating. We said, the minute we sign this term sheet, we're changing the trajectory of this business. We're changing the path that we're on. And so we had to make a real decision there because at that Point, it was roughly a lifestyle business with ambitions to be more than that. And so we did the math and we saw how the travel industry was growing huge and continuing to grow. How accommodations really hadn't changed all that much since sort of the OTAs went online in the late 90s, just bringing inventory online. And we thought we had a really unique and novel approach to travel and that it didn't even have to end at accommodations, that there were all these other parts of travel, from transportation for what you do once you get there, et cetera. And so we said, you know what, we're 26 years old, let's go for it. When else would we have a chance in our lives to go after an industry this big with a truly radical idea? So we signed the term sheet, and in doing so, it's sort of like there were these dominoes that fell. And one of those important sort of trigger points was somebody said to us, well, if you intend to build a company with long term ambitions, maybe to be in independent and republic one day, make sure you get the culture right at the beginning. And Tony's advice to us was, it's a lot easier to mold concrete when it's still wet than to chip away later when it's dry. So put all of your effort into the front part of hiring, of your values, of the things that you stand for as a business, because it's not your culture that will make your people, it's your people that make your culture. So get the people part right, and then the culture will follow. So it took us, now we just raised money, 600k in the bank. We're interviewing people to be our first hire. Nate's doing the job of three or four engineers, by the way. Payments, a search algorithm, reputation system. We need an engineer. Like yesterday, it took us three months to hire somebody because we were so deliberate about our hiring process.

You're probably the only company that I know, since you came and visited Zappos, that wrote down your core values before you hired anyone. Most people just, they hire, hire, hire, and then they mold their core values. But that was pretty interesting to see how long it took you guys. It's just the three of you. You were very deliberate about every single thing that you did. Some of them, obviously, you learned from happenstance. But that is probably the most interesting sort of aspect about innovating with intention.

Well, we became cultures, we became students of culture in that we wanted to learn. Like, what is this culture? What does that even mean? So we just reached out to companies that we really admired. And Zappos certainly is one of those companies. And so we flew to Vegas, did the whole tour, met a lot of the team members, and there was, I left with this very crisp impression because everybody that I met at Zappos, every single person I met at Zappos was so happy to be at Zappos. They were so friendly and warm. Even if you're like, we're on the tour and we bump into somebody and they'd be like, oh, hey, you guys lost? Do you need anything? Can we help you? I was like, what are they drinking in the water here? Like, this is.

Well, now everybody who works at Airbnb loves being at an Airbnb. So you learn something from that experience.

The important takeaway was we left. Brian, Nate and I left that tour, flew back to San Francisco. We got back to the table in the living room and we said, how do we make sure that one day, if we're lucky enough to have you guys, had 700 people at the time, if we have 700 people working for us, how do we make sure that our place is as fun and exciting and welcoming as what we just experienced? And we kind of. Well, how did they do it? Well, they were clear about their core values and they hired and fired on those. So let's get clear about ours. We sat there that, that day and each of us wrote a list of our non negotiables. What are the things that. Even if it's the smartest engineer that we've ever met and we need them yesterday, what is the list of things that we're not going to compromise on? We had that conversation. We crystallized eight or so things that became the origins of our core values.

Thank you so much, Joe, for all that insight and the sort of emphasis on institutionalizing your intentions and, and innovating from there. Thank you so much.

Thanks, Alfred.