Blitzscaling From Startup to Scaleup with Reid Hoffman & Josh McFarland | Greymatter

This episode of Green Matter was recorded at the 2019 Recode Code Conference.

Greylock's Josh McFarland moderates a discussion with.

Reid Hoffman about the principles of blitzscaling, including when it is the right time.

To blitzcale, why it is important to build the right company culture early on, and risks to consider to responsibly blitzscale.

All right, thank you all for being here. I'm Josh McFarlane. I'm a partner at Greylock. I'm actually thrilled to be up here. So Reid was a personal investor in my company called telepart that was backed by Greylock. We raised our series A in 2009. We carved out a little bit extra for some angels that we wanted involved. And so Reid was actually quite helpful in the early days of my company, which went through its own type of blitzscaling. So we grew from zero to about 170 million in revenue in five years. And looking back on the lessons taught in the book, I wish he had written it then because it would have helped me sleep better at night, quite honestly. So Reid really needs no introduction. One of the founding board members of PayPal, executive vice president, went on to start this little company known as LinkedIn, but also is a best selling author. So we're excited to host this today. We're doing this in partnership with Code for the Rising Stars program, which is really meant to support and bolster the next gen of entrepreneurs, some of whom are from the Greylock portfolio in the audience here. And so really excited to be able to host Reed talk about the principles of this book. We're going to take some of the questions that we had from social media and then we're going to dovetail those into the audience, leading primarily with questions from entrepreneurs. So with that, Reid Hoffman.

Thank you.

So, Reid, let's just start with the basic premise of the book. Tell us about why you wrote it and what you think the main takeaway should be.

Probably around 2014, I was on a panel in London with a bunch of other Silicon Valley people and asked, why does Silicon Valley successfully produce so many interesting global tech companies? And they gave the classic answer, which is, well, we have an entrepreneurial culture, immigration, venture capital, large tech companies, technical universities, stir them in a pot. A culture that allows kind of the less fear for taking shots on goal, enough shots on goal, great companies emerge. And that's true, even exempting China and at least 100 other places in the world outside of Silicon Valley. And yet Silicon Valley still continues to produce these massive companies. So roughly speaking, half of the nasdaq. And so why is that in a population that rounds up to three and a half million, that's not the tech industry, that's all the people. And one of the things that I'd realized in kind of realizing why that answer was now wrong for what kinds of things that Silicon Valley was doing that made these very large companies and these industry transforming companies possible was actually, in fact, kind of a living playbook about speed to scale. How do you innovate business model? How do you innovate, go to market? How do you innovate building companies very fast? And one of the things that I think we're all better off, like, if we worry about where does the next 600 million jobs, et cetera, come from? And how do you actually, in fact, do things like creating good jobs? It's going to be through entrepreneurship. And you're going to need to get the entrepreneurship to scale. And so I decided, okay, I would essentially write this book. Now, I started thinking it would be easy because I would just teach a Stanford class. I would invite a bunch of stars like Brian Chesky and Marissa Meyer and Reed Hastings to all come talk, and I would just kind of decant what they said and I would write it down and, and then I would ship it out. And we did that Stanford class, but then we realized that we needed a bunch more work to encapsulate it. And that's why we got to the book and also the podcast. And actually, just before we get to the rest, I'll start with a simple definition of what blitzscaling is, which is prioritizing speed over efficiency in an environment of uncertainty. And what that means is that you're saying, okay, if I'm in a place because of competition, because of possible network effects or other kinds of things, where you're in what we call a Glengarry Glen Ross market, which is first prize, Cadillac, second prize, steak knives, third prize, you're fired. Which is what happens more and more in this kind of network world. And if you're in that environment, you're being the first to scale is what really matters. Not first mover, first to scale. And so you figure out what is the set of things that you can do to move very fast and become that first to scale. Is it that you only do email customer service? Is it that you have a lightweight product that you launch early and you're somewhat embarrassed by, and you iterate on these kinds of things as a way of possibly doing that, but that means that you're spending inefficiently you're not being as disciplined about hiring. You may be trying things where you, for example, you don't know your customer acquisition costs, you don't know your ltv, but you're actually in fact still prioritizing on speed of motion versus efficiency of business operations. And then in an environment of uncertainty is that you actually don't necessarily know how all the components are coming together. You have an idea, you have a theory, you're smart about it. That's part of the difference between blitzscaling and what was happening in the first Internet boom. But you actually don't necessarily know how all that comes together. So you're making these decisions in an environment of uncertainty. And that's what makes the blitzscaling stuff interesting and difficult to do.

Great. So now, as somebody who blitzscaled and now invest in companies that are blitzscaling, there's a bunch of discomfort that goes into this phase. You talked about the inefficiency of it. Tell us about your perspective as an investor. When you see one of your own companies, like being extremely inefficient with some component of their business, maybe in how quickly they're hiring or how fast they're spending in a particular area.

Efficiency, by the way, is never a goal. Right. All of these businesses get to a point where they're tuning towards efficiency because that's part of of smart business is saying, hey, I invest a dollar and I get $2 out, I get $3 out. That's the way that you generate profits, reinvest in the business. But when you're in this place where there's competition coming from around the world, there's a place where being the first to scale really matters, then the question about how do I look at the inefficiency is, is the inefficiency intelligently spent towards speed to scale doesn't mean all inefficiency good. Doesn't mean you're just like, oh, who cares? It's actually, in fact, we need to be expanding in a number of different geographic regions immediately. And so we know that we're going to be replicating work across them. We know that we don't necessarily have our playbook per geographic region, but we're actually going to go do it anyway. We know that we're going to have a whole bunch of duplication. We know that we're probably going to be spending 5x the amount of capital. If we actually, in fact, were going, ok, well, let's try one city and do that and then move to the second City and Uber's obviously poster child for this, but there's a whole bunch of these startups that are saying, okay, we're city region based and then we go, okay, well we go one city, then we go five, then we go 30. And we're learning stuff still on city number 22. We're spending inefficiently because we're generating so many different shots on goal that we're not incorporating the learnings until we're actually at City 50.

Right, right. One of the earliest lessons now as an investor that you taught me was when we were evaluating our investment in Coinbase and you were trying to get a real tight grip with Brian Armstrong on like what the moats of the business were. And you described this difference between network effects and scale effects. Can you just talk about that on the path to this scale up phase?

Yes. And by the way, that doesn't mean scale effects are bad, right? Because network effects are definitely better. But the basic idea is a scale effect is your value proposition. You have new value propositions based on the scale at which you're delivering. Like a simple one is thinking of a catalog. Like if you have a full catalog and you sell everything and you have everything, then you have a scale effect. But the fact you have 30 of something versus 10 of something doesn't necessarily make a difference to the individual who's coming to buy from you. So scale effects are we need to get to a certain scale before the value proposition kicks in. By the way, sometimes you have both. Like for example, LinkedIn has both. LinkedIn has both. The scale effect without a million people being in part of the service, it's a valueless service. And then a network effect, which is a question of every new node adds a super linear value. It adds more value than just that is there. And that the example you see in marketplaces, you see in networks and the way that that works is like for example, part of that super linear valuable is not per node. But when you have matching functions, for example, when you say, okay, I'm looking for just the right person or company or product or something to meet this, and it's within for example the LinkedIn case, talent matching or finding business or that kind of thing, then the fact that you're that much larger means that you have a larger percentage of a highly on target connection. And that's network effects. And both scale effects and network effects are the kinds of things that if you're going to invest in efficiently in a blitzscaling company, you're going to want to target those kinds of business models. And that's one of the reasons why the business model section of Blitzscaling, the book and so forth, is one of the really key things to pay attention to.

So one of the most common questions that we got from social media and that you've obviously fielded over the years is when to blitzscale. I remember this acutely. So my own company, we'd gone from 2 million in revenue to 7 million in revenue over the course of one calendar year. And I was sitting down with Phil Libin, who was CEO of Evernote at the time, and I was bemoaning all these growth problems that we were having during our informative Blitzscale. And he says, great, what's your plan to get to 100 million? And it hit me kind of like a freight train of saying, wow, I really need to change my attitude towards all this stuff. I basically say it's the point that I went from thinking of myself as a founder to thinking myself as a CEO and really having to dedicate myself to an entirely new way of looking at the problems. It was deeply uncomfortable because at the time, even though we were having such great success, it didn't feel like we were ready to Blitzscale yet. So how do you counsel entrepreneurs on when.

Most often blitzscaling is driven by either extant or anticipated competition? Because if you're sailing downstream, clear day, you're all by yourself, prioritize efficiency, unless you think competition is going to come in. Blitzscaling is not a target unto itself. It's a means for getting speed by doing a set of things where that speed is critical for you. And now sometimes that's you need to get to the scale effect, you just need to get there. Fine. That's also a good reason. But most often it's competition driven. Now, sometimes because we're in a global world, you don't necessarily know if the competition's coming. It may be coming already and you don't know. And so if you can anticipate the competition, sometimes you'll elect to do it anyway. Now, the other conditions that you'll need is that because you're spending inefficiently, you'll need to be able to raise what we call blitz capital. Right? And you'll have to actually have the capital in order to spend inefficiently. This is actually one of the advantages that startups in Silicon Valley and China have over startups in the rest of the world is it's easier to raise blitz capital in those environments. And that Makes a difference. Do you have enough product market fit? Product market fit is always described as this binary thing where you have product market fit. You don't actually. In fact, there is. Do you have initial product market fit? Do you have scale product market fit? Do you have product market fit for specific features? There's actually in fact worth being much more detail on it. But do you have enough product market fit that if you're going to essentially pour in the jet fuel to the afterburners, that you're actually taking off versus hitting the mountain? That's a useful thing too?

Hone in on this concept of blitz capital for a minute. So you talked about product market fit, about having some of the team in place. How does an entrepreneur know that it's time for the fuel by way of capital? And how should they think about how much? As much as they can get their hands on.

So broadly speaking, it's as much as you can get your hands on. A classic early entrepreneurial mistake is to maximize percentage versus maximize value. And actually, in fact, what you're really trying to do is do the calculus of how do we grow the value of the company and the value of the shares as reflected in the value of the company in this really great way. And that's the thing that matters, not the exact percentage. Now, that being said, if the capital is extremely expensive, then that's usually a time where you're probably not yet at that locus where you can blitzcale in a good way. But for example, part of what Uber was counting on was Lyft being unable to raise capital, and yet it kept raising the capital. And so that essentially kept Lyft in the game. And so sometimes you just have to do that in order to be able to play.

When you talked about the reasons why you wrote this book, you talked about the uniqueness of Silicon Valley, absent China and its own set of conditions. So capital obviously unique to where we live. How about the talent itself? Just access to people that have blitzscaled or have the muscle memory around doing that before. How do you think about Silicon Valley related to all the other areas in which we see really great companies starting to. To pop up?

Blitzscaling is clearly possible anywhere. Spotify, Adjen and Europe, Flipkart, India. It is actually, in fact doable. It's harder partially for reasons of talent, because part of the benefit you have, especially within Silicon Valley, somewhat also. I mean, China is there now, but the ability to hire people who said, well, I've done this before, like I did this at PayPal and so now I'm doing this again. You have to learn that each new one's new. Each of these kind of scale playbooks within the consumer side, within the B2C side tends to have unique components. You can blitzcale on B2B as well. Usually blitzscaling in B2B, depending is how much advances you get to hiring, the sales force, which number of markets you're going after, that kind of thing, and do you have the right product market fit for doing that. But it is also doable. We put workday in the book, I think, as an example, which is kind of a Neil Bussery is a way of doing this. You have to figure out how do you get that talent in? How do you grow that talent? Generally speaking, if you're doing it, you need to be thinking, okay, this is going to be harder for me. How do I take advantages of where I'm in the market, where I am geographically, what are the things that I can turn this to my advantage. Now on the good news, in terms of competing with Silicon Valley companies, the Silicon Valley, it's still pretty easy to start if you have one of the companies that's blitzscaling. That's also like Silicon Valley is a very great place to do that. The intermediate cases where you're not quite ready to blitzscale but you're trying to scale in Silicon Valley is actually harder now because of all the competition from blitzscalers, from the large companies and so forth. And some of those, you actually have more advantages when you're in Europe, Asia, Africa, et cetera. You can actually kind of say, okay, I can do that. Now. You still need, generally speaking, a pool of talent, a place where you can move talent to a place where investors will trust to put capital in all the preconditions. Exactly.

You've spent a bunch of time in China, probably the other incredibly capable blitzscaling community.

We call it the land of blitzscaling.

Yeah, perfect. Okay, so tell us about some of the things that you've learned that are similar to or that Silicon Valley can learn from China.

One of the things I learned is that when I used to go places from Silicon Valley, before I went to China, things felt like they were in slow motion. Right. Silicon Valley was always the fastest moving because the speed to scale and speed as one of the key things. And for those of you who listen to the podcast, one of the things that we talked on the podcast was Ooda loop. This fighter pilot terminology. Observe, orient, decide, act. In Silicon Valley, this is used as this way to describe individuals and companies for that speed of decision making, that speed of motion. And so I go to China and I feel like Silicon Valley is in slow motion. That was a little uncomfortable when I was talking to Lei Jun, who is the founder of Xiaomi, when there were about 4,000 people, my very first meeting with him. Because I try to meet with entrepreneurs when I go to different areas, it gives me a good sense of what's going on, how things are changing, what does the future look like. Because entrepreneurs are trying to predict the future of product market fit, which opportunities are opening up. And Lejeune tells me, oh, you Silicon Valley people, you're lazy. And I'm like, lazy. That isn't usually the way I think of myself. And he says, well, you know, here, and this is when there were 4,000 people. I think we have a 9, 96 policy, 9am to 9pm, six days a week, you're discoverable at your desk. And I was like, oh yeah, we don't do that. We work hard, but we don't do that. And so part of the thing where China does things much, much faster than Silicon Valley is the raw effort and speed and aggression of the workforce putting in all the hours. Like for example, when Hugo Barra worked for Xiaomi, he recounted to me a time where he was called, and this is not just once called at midnight saying, hey, we're making decisions, come into the office, call these three engineers, wake them up, get them into the office, et cetera, et cetera. Now that being said, you can obviously say there's parts of that that are maybe disastrously inefficient. Because while, for example, you are prioritizing speed over efficiency, you do want your best possible decision making. Like if you look at a subset through the book, it's how do you make the right kinds of decisions? Because if you don't have a intelligent, risk taking, decision making kind of apparatus, then you'll waste a lot more. And so China does speed. It also does more pure business model invention. A lot of the digital good stuff that are now doing, actually most of that innovation originates in China and Asia, Korea, other places around there. So those are the kinds of things that we're definitely learning from China. And then there's things that in Silicon Valley and in Blitzscaling, we still kind of said, well, we've been doing this for a few decades and here are still some ways of thinking about how in a single threaded versus multi threaded, because that's actually another ones that China, like when they did WeChat they set up three different competing groups in different cities to figure out which would be the mobile thing. Those three different groups competing with each other is something an American company generally doesn't do. Right. They kind of go, okay, we do one. That's sometimes the right thing. WeChat clearly showed that. And so how do you do the single threaded one? The right way is also in some of the chapters in Blitzscaling.

One of the questions that we got from social media asks about how culture changes within a company that's going through a phase of blitzscaling. The example that you just highlighted about China being hyper competitive, setting up three different folks internally, ostensibly on the same team, but actually forcing them to compete internally. How do you think about how to manage culture during a time of blitzscale and just avoiding pitfalls that you've seen in the past?

Culture is one of the ones that you want to get right as early as possible. You want to get to kind of the culture of, you know, who are we? What's the change in the world? You want to get the culture of diversity and inclusion right? Absolutely. As early as possible. Because these things are super difficult to fix later. They're fixable, but it's like doing a complete genome rework once you're actually already an organism. So you want to get those things right. Culture always evolves. One of the mistakes that people think when they talk about culture is they fix your culture. And now we have the canon, and actually, in fact, how does our culture become better year by year is actually one of the ways to. To think about how you do this. And so when you're thinking about hiring a person into your company, you don't think, oh, is this person a fit? For example? They're in the small box. But would this person make our culture better? Right. That's again, part of the reason why the diversity inclusion stuff is so important. So that's one of the ones you get right early. And you see that thread through all of the masters of scale podcasts. That's part of the reason why we've kind of touched on culture five or six times, because it. It's one of the ones that comes up often. It's one of the ones we set as foundation. Now there's other things that you can flail on and solve later. So one of the things we have in this book is the counterintuitive rules. One of my favorites is ignore your customer, because most people say, what are you talking about? And it's really ignore your current customer in favor of your scale customer. Because the real question is as per product market fit. That's the product market fit you want to. Very early days in PayPal, we ended up in a place where we had a partial product. It was embarrassing. We were failing enough that we were going thousands of emails per day in the hole. People were discovering our phone numbers. They were calling our phones at random. 24 by 7, you could pick up a desk phone and talk to an angry customer. And if all we did, kind of classic business received wisdom, was to drop everything and focus on that, PayPal would not exist. Instead, we said, look, we'll take our lumps. People will hate us for a while and we feel badly about that. We're going to ignore that and we're going to go both improve the product and start with 100% customer service center to start iterating on that. And that's ignoring the current customer in favor of the scale customer. And that's the kind of thing that you need to do.

Right? Discussing this genome swap reminds me of almost like it's crispr for your culture.

Right?

You can go in and you can segment out little pieces to make yourself better over time and do a full, full sail swap.

Exactly.

So dovetailing with this idea of culture, tell us a little about what you've learned and how you modified your own thesis as it relates to responsible blitzscaling.

So one of the things we're about midway through the book, one of the opportunities we realized we had was not just kind of taking what we'd learned from Silicon Valley and making that available around the world, but also a way of trying to helping the Silicon Valley practice evolve. Because we're all learners, we're learning the stuff. And we realized that the usual catch 22 that blitzscalers feel that they face is say, well, if its first prize is the Cadillac and sets the rules, shouldn't you throw everything overboard in order to get there? Shouldn't you throw responsibility overboard? Shouldn't you throw culture overboard? It's one of the reasons saying, nope, don't throw culture overboard. And then what we realized was actually, in fact, what you needed was the conceptual tools for understanding how you can still be doing speed to scale and being responsible. What are the ways that you kind of cut that Gordian knot? And so we said, look, here's the basic framework. And we wrote this, there's a chapter on this in the book, is to say, identify which are serious risks. Serious risks are risks to individuals where serious harm could come to an individual. This wasn't in the book, but was in an essay we wrote. Theranos, you're essentially misleading blood tests. Someone may make a bad medical diagnosis, may die, may get seriously ill. That's a risk you should not take. A lot of harm across a lot of people. Right. That's another one where if you're risking people's bank balances, you should make sure you're not taking that risk. And then systemic risk, you're breaking a system, you're breaking a payment system, you're breaking a logistics system where it breaks the system of society. You should not take those risks. By the way, systemic risk is in traffic. Oh, look, there's extra traffic for a year or two. That's painful, but that's something you can work through and then tune to being much better. And so he said, first, identify what those sets of risks are. The second is that one of the patterns as part of blitzscaling is you're going from single threaded to multi threaded. Almost any time that you're blitzscaling, you're saying, okay, we're trying multiple things. So as you move to multi threading, add in at least one thread as trying to do risk, proactive risk mitigation. What could go wrong? What could play to one of these risks? And you have someone or some people whose job it is in order to say, hey, I see these risks as possible. And if we do this little thing now, we can obviate a lot of it, or we could be in a place where we could fix it much faster or that kind of thing. And so their job is to figure out within the speed of which we're moving to be trying to figure out how to proactively address these risks as best as possible. And then of course, that will help you establish trust with your customers, with society and everyone else. Because you say, look, here's what we're doing. We're already investing in it. We already have people whose job it is to try to figure this out and to do it in a proactive way.

Yeah. It feels like it's also important as part of that culture to establish this notion that we are going to mess up. Yes, embrace that and then fix the things that in this particular case are going to be really problematic in the future. But it's a tacit understanding that this is not going to go perfectly well. We're prepared for that. And let's make sure that we're just improving upon those mistakes.

Learn and fix, and then try to prioritize. The errors you make are the ones that are less disastrous.

Yeah, absolutely. So let me ask one more question here that dovetails from social media, and then we'll open up to the audience. Let's talk about capital. So blitz capital. Is there such thing as too much money on the path to something that changes the culture or changes the entrepreneur's mindset with regard to how they use capital? So just tell us about both sides of that. The side from the entrepreneur and then maybe the side from the investor and how you think about eventual liquidity for the employees.

Well, this is one of those places where there's. One of my favorite quotations is, in theory, there is no difference between theory and practice. And in theory, there isn't any trouble with too much capital. But the problem is it almost always changes people's decisions, decision making. So when you do get to a lot of capital, you really have to not allow that to change your thinking. It doesn't mean you're not spending capital inefficiency for speed, but you're still being very choiceful. And you're not just going, oh, I got a lot of capital. It doesn't really matter anymore. You're like, no, no, no, no, no. Right. Because that's an illusion. The metaphor I most often use for entrepreneurship is you throw yourself off a cliff and you assemble an airplane on the way down. The way to understand capital is it's a thermal draft that the ground's a little further, but it doesn't actually help you with the assembly of the airplane. You still have to assemble the airplane. And so I do think that it's one of the things that it's, you know, part of what's happened is the speed to scale. Entrepreneurial games do involve being able to raise significant capital to deploy it in kind of speed to scale. And that is part of the new game. And so I think the kind of, oh, there's too much capital here. It's like, well, it's the game, it's how it plays. On the other hand, the thing. And I've been thinking about writing another essay about this, but I haven't gotten around to it yet, which is how to try to maintain the discipline still. And the discipline doesn't mean desperately watching every dollar, but the discipline of decision making, the discipline of capital allocation still really matters. And the fact that you have a big pile of capital should not change the way that you're thinking within that discipline and how to psychologically construct that. So it's one of those cases where in theory it should be just fine, and in practice it Screws a lot of companies up.

Yeah. One thing that I've noticed just in two years on the investing side as a general partner is that it's never been a better time to be an entrepreneur if things are working. It's never been a worse time to be an entrepreneur if things aren't working. But neither of those have to do with how much money you can raise, because everybody can raise a lot of money in this environment. And so if it's working and you raise and you decide to blitzscale, go for it. Right? Like, those are all the best conditions. Like, what a wonderful time to be alive. If you're raising money on the assumption that you're ready to blitzscale, you end up with all this money on your balance sheet. Now you've set your investor expectations here. You have so much money that you will be able to go into a zombie mode.

Right.

Where you grow to a certain point and then flatline. And you, as an entrepreneur, may be in that mode for seven years. Seven of the most productive years of your life.

Life.

Because you put yourself on this treadmill. And so I think just pursuant to this, the original question of when to blitzscale, seems like you really have to have clarity at the board level around that.

Yep. An agreement, too.

So question from social media here is, how important is it for the entrepreneur to set the right expectations and get everybody on board, whether that's employees or say, the governance body of the board itself, with the notion that now is the time to blitzscale? And I'll add to that, do you think that there are particular investors that embrace blitzscaling, where you've got another set that just aren't on that train yet?

Oh, for sure. Basically, once you start blitzscaling as a company, the employees you don't have buy in from, they should opt to lead themselves. You should help them make that realization. It's not going to fit. It'll create more conflict, and that will slow you down. That will be a negative factor in. And you're now spending inefficiently in order to get there. And then for investors, if your investors are in a place where like. Well, actually, in fact, what we're really trying to do is preserve value currently, and we think we have something. And once you start blitzscaling, you're kind of going, we're going all in. And they don't want to do that. That will also create a lot of problems. So you need to make sure that your board is bought in and that your investors are bought in. It doesn't necessarily happen to be every single last investor. But one of the things that if that's not the case, then what's going to happen is similar to how employees can disrupt your ability to do this, all of a sudden, you'll second guess maybe asking for a bunch of things. You'll have investors who are not supporting you in what you're doing. So it's very important to have the, yes, we are making this decision. This is what we're going to go do, because we're pushing all the chips in. Now, that being said, I do think that just like there's better and worse technologists, better and worse executives, there's also better and worse investors. And investors who have a sense of the fact that you're taking a coherent risk for a really stellar outcome. And how do you take that risk intelligently is what's key in the entrepreneurial investor thing. And that's everything from Series A all the way into Blitz Capital, because the illusion that you're not taking risks can be extremely dangerous. The actual thing is to say what you're doing is we're taking these focused risks, which could blow us up, but if it wins, then we've created something amazing and new. That's what you're looking for.

Awesome. So let's take a few minutes to open up to questions from the audience.

Can you talk a little bit about.

Whether blitzscaling can apply to health care? And then you touched on B2B a little bit, just how the two sort of come together.

So ultimately, blitzscaling is a little bit of a knob. So it can apply. The question is, how much should you crank the knob when you get to these different circumstances? Because blitzscaling is really about competitive speed. Like, are you moving faster than your competitors? So even in hard businesses, healthcare, hardware, et cetera, you might say, well, okay, as opposed to trying to take the knob, I'll do the spinal trap reference to 11. I'm only taking it to 4, but that's faster than the other people at 3. And then you're kind of tuning it in that direction. So it can be. But it doesn't necessarily mean that you go completely to the edge because there's so many different landmines and different speed inhibitors in these different spaces. So, like, how does adoption work? What is the duty of care with customers? There's a whole bunch of different things where you say, okay, we. We're going to move faster, but we're going to move this much faster, not this much faster. And that's the way to kind of look at it generally. And that's true on the B2B side as well, because generally speaking, enterprise customers are unlike consumer customers in which they tend to like a pilot. They tend to like, have a lot of discussion with you before they do it. And so it's a relative speed to your competitors, but also it's how much you're putting on the gas.

We're prioritizing speed over efficiency and taking risks. You also have to be aware enough for your culture and for responsible risk taking. And so this type of person, I'm wondering if you see qualities early on that are indicators of people who have higher risk tolerance, but more specifically who can act in an intelligent way under risk.

It's a great question. Generally, yes. And what you're looking for is that balance of I'm bold and have a predisposition of action, but I am tracking that there are risks than I am trying to mitigate them. So, for example, on the two risky areas, oh, let me enumerate all the risks and let me get like, if someone's natural reflex is, I want to list like the 15 risks that are here. You're like, okay, that's not going to work because we're not going to address all 15, et cetera. On the other hand, if the, ah, we'll figure it out as we go. We don't need to think about it like, okay, you're likely to drive off the cliff. So the middle point in this is. And when you're interviewing, when you're reference checking, when you're talking to people about this is a problem solving disposition that goes to, okay, what are the top risks? What are the one, two or three risks that are risk we should really focus on. And then let's focus on can we do something about them. It may not be solve them perfectly, but it could be the we blunt them enough. It's like these balances you get between art and science or you get between persistence and flexibility. And you're looking for people who have that predisposition to have that balance in this and that. The way that they not only themselves do this, but the way that they intervene in the groups that they're working in is to say, okay, no, no, no, we should pay attention to the top risk. We should try to do what we can and let's make sure they're there. But if, for example, I'm the person saying, no, no, ignore all risk, you're like, no, no, we have to do that. And if Josh is the person saying, here's the 15 risks. No, we can't do that either. And so they center the team that way. And that's the kind of thing that you're. You're looking for that. And if people aren't comfortable fundamentally saying, we know that we can possibly fail, like to your earlier thing, because by the way, there is no risk taking without possibly failing. One of the more entertaining things, I'll take a risk, but then I'll make sure it works. You're like, well, it doesn't work that way. And so they're comfortable with like, I understand that I can fail and that what I will do is I will try to adjust as quickly as possible. This is actually one of the funnier things that I see from a Silicon Valley dictum, which is fail fast. And occasionally run into these large companies that say, we celebrate failure. And you're like, we don't celebrate failure. We celebrate learning. Fail fast in order to learn, in order to do the right thing.

Right.

Hi, thanks so much for being here. This is super interesting to me since we actually didn't raise anything. We're profitable, we're sustainable, and it's actually let us outlast a lot of our competitors that tried to blitzscale and are sort of in that zombie state. Have you been surprised by any maybe counterpoints or different examples that you hadn't thought of previously? And if you were to write a new edition, are there any things that you're like, oh, actually that's super interesting. Maybe it's.

Look, I'm always learning. Part of what I always think about is what would I do differently if I was starting an important project like writing a book. Now, I would say that in terms of counterpoints and I don't have yet a formed theory on this, but. But there are times where you would decide that kind of playing the very careful game and the blitzscales will all die will work. It's a challenging game because frequently when the blitzscalers raise the company and then die, they take the whole market with them. So congratulations for yes. Right. And that's one of the reasons why our general default suggestion is if your competitors are blitzscaling, you need to as well that it isn't safe to play it that way. But the fact that there are some cases where that does work and how do you identify which of the cases are not is one of the ones we've thought about doing some additional writing on and thinking through, but we haven't gotten there yet.

With the recent tech backlash. Did your view on the blitzscaling and how to do it change.

One of the things about the tech lash, I like the fact that there is a lot of conversation about how companies can be responsive to society, how we try to do the right things for individuals inside. And I think that dialogue and that pressure is a good thing. Right. So I'm glad about that part of it. I do think that it doesn't really change the game, that the question is, is the companies that get to scale fast are the ones that tend to set the norms. Now I am trying to figure out, and this is part of the reason why there's a chapter in the book on responsible blitzscaling and we are continuing to kind of iterate on that. And we're doing this podcast that will be answering kind of questions around this as well that are, how do you tune towards less negative and more positive in some of these accelerated cases? That's one of the reasons we have a whole chapter on it. I think that one of the things that, generally speaking, people mistake in the tech lash is they say, well, the tech's the problem, but actually, in fact, it's how you do the tech as a solution, because tech is this kind of scalable solution. So you say, well, how do we deal with a problem of misinformation or election hacking? It's technology, and applied in ways that we have kind of the social permission for that are the possible solutions to that.

Reid, thank you for the book and the talk I've already put in. We are a multi threaded startup. Into my pitch deck as you were talking. I have a more fundamental question, though. I think you kind of accurately describe how to build a successful company in this world. In the world that kind of. We've made you much more than me of this power law, right. Where it's the Glengarry Glen Ross power law. I guess my question is more fundamental, like, is that world a good world? Is it a good thing that first prize is a Cadillac, second prize is steak knives, and then everyone else gets fired? And I guess related to that, is it inevitable? Like, this is what exists now, but does it have to? Should it exist? This is something that we just need to live with, embrace. What do you think about that? I mean, Glenn Garrick, Lyndon Ross is not usually held up as like an example of moral education.

Certainly not. Not in that movie or play, which is excellent coming from the.

Coming from the person who kicked my ass to get to 100 million, by the way.

Yes. The parallel is there's a lot of discussion of capitalism These days. And obviously, if we can figure out a better system than capitalism, that's great. But what I recommend to people is not say, well, capitalism is broken this way, so we should throw it out. You're like, well, actually, in fact, it's how we've generated the productivity that's led to education, health care, a bunch of other things. And so the real question is, okay, what are the specific system changes? If it's a new system, great, what is it? Or what are the system changes for evolution? Because this all comes from the fact that we're becoming more and more connected and the world smaller in that regard because we're getting to a more and more connected world. You get to the fact where you get Gangar Gun Ross markets, that's what's broken the previous fragmentation. Now there's a lot of benefits from a connected world. There's a lot of productivity from the platforms being established. There's shared knowledge, there's a bunch of other things that play this. So you don't just say, well, matter of fact, what we should do is we should remove the Internet, we should move everyone back to villages, and that's what we should be doing. You're like, no, no, you can't do that. So the question is, how do you tune it? I think it's a good idea for people to intellectually think about that, propose things, change things in the right way, and to figure out how do we benefit? That's why it's a capitalism parallel. Continue to benefit from this decentralized system for incentives, for risk taking, for innovation, for hard work and rewards in order to generate that productivity. How do we mod it to be in a better system? Which by the way, the people who think we're in the best of all possible worlds, this is like Voltaire and Candide. That's absurd. That we could of course improve it, but what is the specific plans for improvement is where the dialogue is useful.

Hi Reid, I have a question about specifically human attention, because obviously there's been a bunch of pushback recently around time well spent and this idea of the slot machine and the attention economy. And I'm wondering what you think in terms of for these companies that really are focused on monetizing attention, whether that's social media or other, will there ever be a pushback in that? Like, do you see a world in which those companies in their blitzscaling will be stalled at some point?

So a lot of complicated things in that question. I guess what I would say is there's strengths. The advertising model I think they're as such that we'll be attention oriented companies. I do think that one of the things that happens, just like when you hearken back to the television, like, you know, people used to refer to the television as the boob tube because it was like you're watching television and what happens is younger generation learns to inoculate itself. They're much more TV native, much more mobile native, much more, et cetera. And so I think ultimately we'll play out in reasonable ways that way. Now, that being said, do I think the dialogue's good at trying to figure out, like to say, well, we're actually in fact capturing attention in certain ways. Maybe our advertising system promotes a certain amount of agitation because that gets more people to stay online longer and we want to mod that in certain ways, I think are important things to do. I'm ultimately not really worried about the fact that over time human beings adapt and figure out how to kind of keep their attention kind of more focused. That isn't to say that it isn't worth paying attention to because you want to adapt faster, you want to adapt better. But I'm not that worried about it.

Thank you everybody for your time. Thank you to Reid.

And for any.

Of the entrepreneurs in the room who are in the crucible who are feeling this need to scale over efficiency despite lacking uncertainty. Just know that people have been there, this can work, and you have a handbook to guide you through it. Thank you, Reed.