Brian Chesky | People-First Capitalism

Hi everyone. Welcome to Gray Matter, the podcast from Greylock, where we share stories from company builders and business leaders. I'm Heather Mack, head of Editorial at Greylock. Today we are rebroadcasting our episode featuring Airbnb CEO and co founder Brian Chesky. During this interview with Greylock General partner Reid Hoffman, Brian shared a candid account of Airbnb's many challenges since the company's formation and especially during the COVID 19 pandemic. This episode, which is part of our Iconversations series, is one of our most popular episodes ever. We are grateful to Brian and the entire Airbnb team for the opportunity to partner with the company since its early days, and we are grateful to continue the conversations about company building and leadership. You can find a transcript of this episode on our website greylock.com blog and you can find the entire Gray matter library on SoundCloud, Spotify, or wherever you get your podcasts.

Hello everyone. Welcome to Greylocks at Conversations, where we hear from icons in tech and culture who influence the way we work, live and play. Today, we are thrilled to have Airbnb CEO and co founder Brian Chesky with us. As I'm sure most would agree, Airbnb is one of the most iconic startups to have formed in the world. The company has completely transformed travel and has been a trailblazer for the sharing economy that has come since to define modern life. Throughout the company's history, Brian and his team have shown an incredible ability to grow and evolve Airbnb while facing significant challenges pretty much every step of the way. Obviously, the challenges of 2020 were next level. Airbnb was preparing for an IPO right when the pandemic hit and everything changed in a matter of days. But once again, Brian and his team showed a remarkable ability to adapt, and they did so in a way that preserved the health of the entire network of Airbnb. The company had a wild year. From the initial crisis management that came in the form of restructuring the company and refunding millions of dollars off their own balance sheet, to lobbying Congress to provide support to hosts launching initiatives to provide housing for frontline health care workers, and all of the other smart and operational decisions that have enabled Airbnb to weather the storm and to go to have one of the most successful public market debuts. And of course, most people know most of the gritty details from the toughest moments because Brian never hid from the public like so many business leaders may have done. It's openness, sense of accountability that makes Airbnb so special. And why I'm so thrilled to have Brian with us here today. And actually, on a personal note, one of the things is I always enjoy doing these things with Brian because he has typified that infinite learner. I'm recalling the Churchill Club. Eventually we did. Might have been 11 years ago now. Right. This is the other side of the archive. So, Brian, thank you. Thank you, thank you for coming and joining us.

Thank you, Reid. Yeah, that was 2011, the Churchill event.

Exactly. So let's start with how you're thinking about 21st century companies. And we'll talk about this in a number of different ways, but let's start with stakeholders and stakeholder capitalism. So what do you mean by stakeholder capitalism? What's some of the way that that kind of informs your leadership?

First of all, thank you for having me on. We've had, I think, a 11 year relationship. So you met me in 2010, and just by way of background, I'll answer the stakeholder capital by just giving a little bit of my journey. I came to Silicon Valley when I was 25, turning 26, and it was 2007. And back then, the word technology may as well have been like a dictionary definition for the word good. In other words, all technology was a step forward for humanity. Therefore, if you were doing something, you were growing, you were making the world a better Place. And 14 years ago, that didn't really sound like a cliche. It was something people said and they believed. And I, of course, do not think technology is bad. I'm not a Luddite, of course, but I think that we have a more precise understanding that technology can be used for good and it can be used for intentions that you didn't intend. And I think one of the things that we've learned is, you know, when I came to Silicon Valley 2007, we were starting Airbnb 2008, it was a marketplace. And the iconic marketplaces before Airbnb were probably eBay and Craigslist, especially the peer to peer marketplaces. And the founders of those companies, Craig Newmark and Pure Midiar, really believe a more of a hands off approach, that the Internet's kind of like an immune system. If you give people tools to moderate, they can do the right thing. And so the idea is people are fundamentally good. You give them tools, they'll behave well. And I believe this. But of course, one of the things I learned the hard way is that there are limits. And I think most tech companies got scrutiny because they're big. Airbnb got scrutiny before we were big because Airbnb meant the Internet moving into your neighborhood. And, and so the moment a person's home was trashed or there was some issue with a policy situation, we were still in a three bedroom apartment and we had to start dealing with these regulators. One of the things I thought growing up is if people don't like you, you should avoid them. And I hired a coo, Belinda Johnson, and she said, no, if people don't like you, you should meet with them. That was totally counterintuitive. And I said, why? She said, because it's hard to hate up close. And so I started to go on this journey about 10 years ago where we started talking to different people, had challenges. And along the way I learned a few things. The first thing I learned is I think people outside of Silicon Valley and tech, there's an old saying, the absence of information is filled with dirt. So if you don't understand something, you can be really afraid by it and you can assume the worst of intentions. And so I think it's really important for us. The burden is us in the tech industry to explain technology to people not in the industry. And if we don't and we leave a vacuum and it's very normal, they're going to assume the worst. So we have to think of ourselves as partners. But there's something else that I think I learned and that was that, you know, a lot of focus on Silicon Valley is about growth. And why do we focus on growth? There's a lot of good reasons to focus on growth. I mean, obviously we're a network business and networks get stronger the bigger they get. But often I do think there's maybe over rotation to one stakeholder and those are investors and shareholders. And, and if you think about where modern capitalism comes from, I think that you sort of look at companies in the first half of the 20th century, they had maybe a slightly broader point of view of the responsibility that they were responsible to shareholders, but they were also responsible to other stakeholders, their employees, their shareholders, their customers, maybe their partners and suppliers, and then probably broadly society. And I think where we're at today is our current model of kind of shareholder capitalism is probably becoming a little unsustainable. Now, this is not a radical thought. This is not like something that I'm saying a young 39 year old CEO, the Business Roundtable had 200 CEOs, including a lot of old school CEOs, and they said that they believe that the charter of a corporation cannot merely serve just the shareholders. And what I would say is it's in the interest of shareholders today that society wants your company to exist. And so I think this is not a trade off with shareholders. I think it's important for companies to serve all stakeholders, even if it was for the sole benefit of shareholders. Because young people, let's say people under 30, care a lot more today about the companies that they buy the products from. And so I think you have a much more discerning public who votes not just with the usability of the products, but what the companies stand for. And I also think about regulation. We can either try to step forward and be progressive and really try to lean forward, or we can get dragged into the future. And if we get dragged in the future by regulators, we're probably not going to like the outcome. And so my basic idea is that, and I think this is probably because of my background as a designer, I like to take a very systematic approach. When I was at risd, I went to Rhode Island School design. There was this idea that was emerging called the green movement, the sustainability movement. At the time they said it's not enough to design a product that's good for sales, it must also be good for the environment. Well, that same thing could be said for any product. If we're making consumer Internet company, it should be good for people consuming it. And the burden shouldn't be on us to launch something and magically be good. The burden should just be that we care, that if we learn something, we improve it. And that we don't only use single output metrics and it's growth at all cost. It's we've kind of designed the kind of growth that we want so it works for as many stakeholders as possible. And the last thing I just say is I don't think it's zero sum. I don't think for society to win, shareholders have to lose, or for shareholders to win, society has to lose. In fact, I do think 10, 20 years from now the most valuable companies in the world will also be the companies that serve all stakeholders. Because I just don't think society, regulators and others are going to allow you to, to become a giant company in the future serving just one stakeholder. I just don't see that continuing well.

And I do think it's actually one of the things that's awesome about capitalism and one of the reasons why kind of stakeholder capitalism is kind of how you're thinking about this. Because capitalism isn't one, it's a market, it's a network, it's a set of folks within it 2 follow on questions from this and you've mentioned design, which we're going to get to in a moment, because I think that's a super important thing to understand about you and about Airbnb and all the rest. But one is how is it that you kind of operationalize this stakeholder capitalism within Airbnb? Like what's the way that you make sure that the stakeholders, whether they're communities and hosts and all the other folks and what are some of the things to do? And then how would you prompt other entrepreneurial leaders to think more broadly about stakeholders than even just investors, employees, customers, which tends to be the typical trifecta.

Exactly, Reid. So I can give a simple checklist. I'm not presuming is the right checklist, just a starting place. People can change it, model it. The first thing I would do is identify who your stakeholders are. It's pretty important if you're going to serve all stakeholders, identify who they are. Different people may have more than others. We identified five and the trifecta of employees, shareholders and customers, everyone has those. We also added two more. Our host. We have 4 million hosts. Most people would have, you might call them your suppliers, your developers, your partners. Most companies have a partner group and then society, in our case society, we call the 100,000 communities we operate in. If you're a communications company, you probably think not at a local level, at a more macro level, maybe at a national level. But those are your five stakeholders. So that's step one. I don't think that's a super hard assignment. Step two, I would recommend writing out at least one principle for how you're going to serve each. How are you going to serve them? Not just try to do the right thing. So for example, we said our host, we're going to treat like partners, our employees. We're going to create long term opportunities, communities. We want to strengthen the communities. We're serving guests. We want to provide personal connections because our whole business isn't just around providing space. So you write out what your principle is and we also have a couple that reference all stakeholders like diversity. Now it gets real because that's like the table stakes. But if you stop there, now you have is like words you can put on a plaque and a wall, never look at. And that's not going to get you very far. So now you got to do the real work. Now you got to try to measure your impact on the stakeholders. And so we set a team to try to measure what is our impact on host. Do they Think we're like partners. What is our impact on communities? We try to measure environmental, economic and social impact on communities. So you have to start measuring it. Then ideally, you hold yourself accountable by agreeing to a reporting system, ideally an annual reporting. So if you have a annual shareholder meeting or a quarterly results, you know, you could do something you don't have to do quarterly. Maybe it's annual, maybe it's biannually. And then the last thing is I would recommend a couple other things. Most boards have an audit committee, a nominating governance committee, and a comp committee. Not that we should add more committees, but I generally am not a fan of committees and things that get in the way of moving quickly in a startup. So. But I do think at the board level, I would highly recommend an additional committee called a stakeholder committee. And the stakeholder MIDI is what it. What does it do? It looks at the measurements of how you are serving your stakeholders. And it's just a moment. Just like there's an audit committee to, like, audit everything. But it's taking a very financial lens. It's another lens at auditing the company. And I think this is good for the company. So those would be the checklist things. And I can say they add very little extra work for a CEO. So if you're worried, oh, my God, this sounds onerous, I would say over the course of 10 years, I bet you it's less work because it's a little extra work, but it might be fewer hearings in Congress later and other things like that. So one of the things I've learned with Airbnb, we've had our fair share of challenges, like discrimination on the platform, impact on housing. It is 10 times as much work to clean something up than to try to get in front of it in the first place. And so I do think there's a temptation to move really quickly. That generally is good if you are trying to get escape velocity. But I would caution entrepreneurs that, you know, these companies are getting so big so quickly, you got to be very, very careful the impact you have, and you don't want to have to clean up things later, and society really shouldn't have to pay that price. So these are some checklists. If I could add one more bonus idea, this is if you're incorporating your company, I would think about taking 1 or 2% equity and setting it aside for other stakeholders. I think, you know, I think there's a one for one for one. We took, you know, nearly 2% of the company's stock and we put it Aside and we created. It was actually 9.2 million shares of. And we put it. And we created a host endowment, kind of like a college endowment for our host. And that's kind of the way we thought. So these are a simple checklist, things to do. And I think they're not that hard. And then I think the second question.

Was, I think you actually answered them both together, which was greatly interleaved, which is like how does Airbnb doing it? And then how are some ideas for other entrepreneurs and other people's thinking of doing it and to amplify why it is. I think it's so important what you're doing here, not just for Airbnb, but generally is as technology becomes the firmament of societies, these tech companies become how we live, work, etc. Together. Another way I've put it is, is have society as a customer. Stakeholders is the same thing. Identify your stakeholders. Just as you say, first principles, be great with them. Right. And that's I think really important.

I want to underline this point because I think a lot of times people talk about stakeholder capitalism. It's described as a trade off, as if the most successful, wealthiest, best capitalists don't have to make a trade off. And then the stakeholders are these kind of nonprofit esque companies. And I want to be really clear, I do think the most valuable companies in the long run will be the stakeholder companies. Because let's take our example. We're going to have trouble recruiting hosts if they don't love us. And we're going to have very onerous regulation, 100,000 communities and have trouble expanding if they don't want us there. So I do think there's an enlightened reason to do it, but there's also a kind of self interest reason. I think it's important to say both of those. Otherwise I think it's very easy to this get kind of political and be viewed that like somehow these companies are going to be smaller. I don't think that's the case. I actually think this is going to make you bigger in the long run.

Yeah. And actually when you're good for the societies and good for communities, that's what regulators are looking for. They're not necessarily looking for you to be smaller. They're looking for you to have a positive, virtuous loop with society. And that's part of what the stakeholder capitalism is about. So shifting to the next theme, which is part of the reason, as you know, I kicked off Masters of Scale with youh as the very first episode is because, you know, some of what I've learned along the journey is the design mindset to which you and the company bring to things. And, you know, some of what we did on Masters of Scale was kind of the question of like, okay, well, what's the design? Not just of a website or a piece of technology, but the experience, the sense of belonging within a city. But let's go to a specific part of that because it's obviously one of the things that people have been paying a lot of attention to Airbnb in the last year, which is the response to the crises. Because, you know, it's like an asteroid hits the entire travel industry. It's like, oh my God, existential moment. How was the foundation of being a design led company? How did that help you respond to the crises of 2020?

I think the headline is, I think that my, and not just my, we have three co founders as background. One is a computer scientist from Harvard, but the other two, Joe and me, are designers from the round school design. So we were two thirds design, one third engineering, we started. And I think that our design background of me and Joe and working with Nate really did help us navigate the crisis. So that's the headline. Let me go into why. Let me start with what is design? Because I think when I came to Silicon Valley, the definition design was very narrow. A lot of people were thought designers kind of quote, make things look pretty. They're the aesthetics, they're the patina. But design isn't how something looks merely. In fact, the definition of design is to assemble something. The best way to solve a problem. That is the definition design. Or said differently. As Steve Jobs said, design isn't how something looks, it's how something works. So I think it's starting by saying, think of design as designing an entire system to work better. And so I think it's very normal when the crisis happens. The first thing I did is I went to first principles. A lot of engineers like first principles. Those designers do too. We call them design principles. And the first thing I did is I wrote out a series of principles and I presented them on, I think it was March 15, which I believe is the Ides of March. So it was quite foreboding date. It was we were in lockdown and at this point I felt like I was a captain of a ship and a torpedo hit the side of the ship and it was very, very scary. And we, for the first time since we started, started shrinking as a company. What ended up happening is we ended up losing 80% of our business in eight weeks. Most companies don't lose 80% of their business in eight weeks and live to tell about it. It's kind of like driving a car 80 miles an hour and then hitting the brakes. Like, it kind of ends usually very badly, and you often don't come out of the car. Okay. The first thing it is wrote out our principles. And the first principle I learned in a crisis is act fast. Of course, that's obvious, but I think this is not an obvious statement, which is a lot of people in a crisis try to wait to make the perfect decision. And it's kind of like if you're driving down a highway and you got to, like, take an exit or not, the worst thing to do is hesitate and just drive into the kind of the center. So you've got to make a decision. The second thing I said is we have to preserve cash. Cash is oxygen. So we actually did a whole exercise to preserve cash. The third thing is we have to act with all stakeholders in mind. And I said, if we're lucky, we'll be remembered how we handled the crisis. If we're. If we screw this up, we won't exist, and then we won't be remembered, but we don't want to be remembered as villains. And so the final principle I had is we need to play to succeed in the 2021 travel season. So in other words, you can't just cut our way down to the bone, but we have nothing left to rebound. So those are the principles. The next thing I learned was in a crisis, you actually have to communicate four times as frequently as not in a crisis. I mean, this is a kind of arbitrary rule, but I'd say approximately four times. So, you know, we had monthly all hands. I went to weekly all hands. We had quarterly board meetings. Actually, I increased those frequency by 12x. I did weekly board meetings because I told the board, I said, I'm going to be making so many decisions, it's going to feel like a whole quarter goes by every week. And so, you know, I did that. The other thing I did, Reid, you mentioned this is most travel CEOs and people in our industry just went quiet and went dark. And I thought, well, no one's marketing like, everyone's pulled back advertising. No one's saying anything. There's a vacuum, and there's an opportunity for me to say something. And I also realized if I didn't say something, people would think we're going out of business. Because there was a lot of articles Will Airbnb exist? And I said, yes, we'll exist. And I'm going to go and press and I'm going to tell us why we're going to exist. And it really made a difference. Then it became important to make decisions to all stakeholders in mind. So let me just give you a quick rundown. The crisis happens, and we got more than $1 billion of cancellations by guests requested cancellations. So what happened is the pandemic hits, people can't travel, and a whole bunch of people cancel, Right, because they have cancellation policies. There were about a billion dollars of requested cancellations, but the host wouldn't let them cancel. So we had to make a decision. Do we override the host cancellation policy or not? This was a very controversial decision. We were going to upset somebody. We decided to try to take the side of health and safety. We overrode the host cancellation policies. We refunded a billion dollars of guest reservations because we didn't want them to feel like they had to travel, put themselves in harm's way. But now our hosts are really angry and they have a huge revenue shortfall. We couldn't make them whole. But while we're burning a huge amount of Money, we take $250 million of our own cash and we send it to host. Not loan it, just give it to host. Now, in good times, 250 million is still a lot of money, but you can raise that in a travel company. Pandemic, $250 million. You and I might ever see that money again. And then we had actually raised money, and I made a decision not to do an equity round because I thought it would be a down round. And I said, I think it's going to be a down round because people are scared. So we're going to do debt. Debt's always good if you believe the upside, for sure, and you think there's very minimal downside. And I said, the fundamentals are strong. Let's go at debt that probably saved a huge amount of dilution, rather than doing a down round at between 15 to 18 billion dollars. The next thing I said is, we want to be useful in a crisis. So I said, we're not as relevant as we used to be, but we can still be helpful. And so we saw that these nurses, doctors, firefighters, EMTs were working the front lines, but they had nowhere to stay. They didn't want to see their family get them sick or they were going to, like, three towns over. So we worked with our host. Our hosts are these amazing heroes and more than 200,000 hosts provided homes offer their housing for free or for a discount to workers on the front line. We facilitated this, so we did all that. But then finally we had to confront the hardest decision that most CEOs ever confront. Do a layoff. And I think that's always a hard decision for a company though, that its mission is belonging. Like that's really I, that was a hard thing for me to confront, but I had to, I didn't want to take like a layoff off the corporate shelf and just plug it in. A lot of CEOs they can come across very cold and heartless in layoffs. I don't think most CEOs are cold and heartless. I just think their edges get rounded off because they are overly deferential to well meaning people in other departments. But everyone's gonna being really risk averse. And the number one thing a CEO can do is not lose trust of the employees. And so you gotta be honest, you gotta be willing to, you know, lean in and be open, authentic. So I wrote an open letter explaining step by step, every single thing that we were doing. I think it was pretty unusually candid. But we also, I think tried to be more compassionate. I said we're going to give 14 weeks severance plus a week per year service. Everyone's going to get a year of health care in the United States. You can keep your computer because it's kind of the only way you can get a new job. But we also came up with a couple other unique ideas. And here's the key. A lot of times with creativity, you can do things that don't cost money. For example, one of the ideas that came from our team is why don't we create an alumni directory? Anyone that got laid off could basically opt in to a public directory and we could push your information to recruiters. It turns out half a million people visited those profiles and the majority of people eventually got rehired. It cost us nothing. Most companies don't want to do it because I think they're just paranoid about people deconstructing the org chart. Like that's being very short term. And so I think these are some of the ways we did. So in other words, a designer would be very systematic. You look at all of your impact, you kind of take it step by step. You don't think by analogy, you think by first principle. And you just are very clear in how you communicate. I think these are just some of the things we did just to finish the story. We ended up eventually also Shuttering all these divisions. We had 10 divisions. We went to one division, a functional organization, just like all startups do. And we decided, you know, you probably hear these stories of these people, they get sick, they have like a near death experience and they suddenly get clarity. Well, thankful. I've never had that. But it felt like airbnb got that. It felt like we were staring into the best. And in that moment it became really clear. I said, we have to get back to our roots, number one, back to our roots of connection, human connection, belonging of individual host. And so we started focusing on them again and we got to get back to our creative roots. And so those are the two things we did. And something happened over the summer. People didn't want to travel for business, they didn't want to cross borders, but they got in cars, they went to small cities, our business rebounded and then the impossible happened. Nobody in May thought we would ever go public. And of course, in the summer, we started dusting off our S1.

The other note that I'll have before I do the audience question is that part of the richer sense of stakeholder capitalism you're talking about was to say, no, not just the check the box, but like when we say, well, look, our employees, including the ones that we need to lay off because of downsizing, are still part of our stakeholders, they're still part of our network. So how can we be good to them? Not maximally self protective a la don't deconstruct the org chart, but how do we help them? Well, it's an opt in. It's, we're trying to do everything we can do. We're being very public, we're talking about it. I remember your letter, you know, which was a very heartfelt, you know, these are people we treasure. And I thought it was extremely important. And actually I've seen other companies now go, yep, yep, we're going to use elements of that because that's important. So that's an emphasis on the stakeholder. Now the question we have from an attendee is, so how did you maintain morale and employee engagement and downsizing? Because that's a classic like, oh God moment. Not just the oh God of the asteroid hitting the travel industry and therefore the company, but what were some of the things that you were doing in addition to kind of clearly being compassionate and transparent and communicative?

It's a great question, Reid. So here's something that I think is conventional wisdom that's bad. Conventional wisdom says, don't get too close, don't get Emotionally attached, because if you do, it's going to skew your decision making. I always view the opposite. Get emotionally attached and then see if you can still make the decision based on some real reasonable first principles. Don't make a decision because you didn't have all information, you know, the impact on the person. So when the crisis started, I did weekly town halls. And that's not atypical. Lot of companies do them. Although in a crisis, when the impending layoff, a lot of people go dark. Instead, I said, not only are we going to continue to do town halls, we're going to do more frequently, but I'm also going to answer every question. So they would ask, will there be a layoff? And I said, we don't know. All things are on the table. Here's what we're thinking about it. Here are the decisions we're taking. So I was very, very transparent about every single thing. I usually answered five questions, I answered 10. And I just looked into the camera every week and I would, you know, just try to give incredibly heartfelt messages. That would be one thing I did. The next thing is, and you mentioned this, I wanted to make sure that if people got laid off, they would get it laid off with dignity. And the way to do that is, you notice in the letter, I said a few things. I said, the people being laid off, it's not an indictment on them. They just had jobs, didn't match the future of business. I also said the people we have are great and other people be lucky to have them. I started reaching out to my CEO friends of other companies saying, I'm going to be laying off a bunch of people, but they're really good and I want to send them to you. And so I started calling different CEOs. We even created an outplacement firm of recruiters to help place them other companies. All these things destigmatize the people being laid off as if they weren't as good to say, well, they're great, but, like, they might be working on, you know, the hotel product that just got scaled down. So we don't need as many account managers doing hotels. That doesn't mean they're not good. And so I think these were some of the things we did. And I think again, it's really about, like being totally as transparent as you can be, trying to be incredibly compassionate, speaking from the heart. I didn't really use talking points. I had an internal comms team, but they're a kind of my. Our entire HR department is kind of Like a kind of classic non standard HR team where it's not about mitigating risk for the company because actually the biggest risk of the company is people don't trust you. Not that you're like, you'll say the wrong thing or get sued, but like people don't trust you. That's the biggest risk to most companies. So I think a lot of it was frequency communication, clarity, compassion, giving people dignity, being proactive with them. We did a lot of personal outreach. I did a lot of personal calls to people, emails. And after the layoff, I mean, I literally, we got probably hundreds of personal letters from or emails from employees. And you know, we, I told a lot of them, if we can rehire you in the future, we will. And we've not been able to rehire all of them, but we've been able to rehire a handful of them. So those are just a couple tactics we did.

Yep. When did you begin? Because obviously part, you know, 80% drop in the business, you're saying, okay, we're only going to survive in the long term anyway by being, by not buying like just cutting all costs, but by still being true to the stakeholder capitalism. And so we're going to do that on all fronts and make that happen, which will obviously be increasing the burn. 250 million for hosts when to share the pain, when that's crucial money for the, you know, that, that's life of the company measured in months. When did you say, okay, it's now turned around. We've seen this adjustment from international travel to domestic travel. We see it picking back up. And now we're going to start playing into the adaptation of the entire Airbnb network and community and host to this new form of travel during the pandemic. And we, we see the light at the end of the tunnel. That's not the oncoming train, but actually, in fact, and we'll get to this question next, the dust off of the. You're like, let's go back to the going public process. When did you see that? And then how did you direct yourselves into it?

I tend to pay a lot more attention to data when things are changing. And when they don't change, I don't look at it as much. So last year, you can imagine, things were changing so quickly, we were looking at the data every single day. And one of the data points you would know as a board advisor to Airbnb is that a leading indicator of bookings are searches with dates. So on Airbnb, you go to the homepage or the app, you tap a location and then if you add dates, that's a search with a date, which is a proxy for high intent person. Typically between the time that you search with a date and you book is between two and four weeks, most people, there's a lead time. So what we do is we weren't monitoring bookings, we were monitoring leading indicators like searches with dates. And around a few weeks after the layoff, actually just before Memorial Day weekend, we started noticing surges in searches with dates. But it wasn't the old types of searches because Airbnb used to be a cross border business and borders were practically closed. So we started noticing it was a surge in domestic travel. It was mainly travel within 2 or 300 miles. Basically people would go anywhere as long as it was a tank of gas away. So we started noticing in large domestic markets, us, France, Great Britain, kind of countries of big domestic markets, we started seeing these rebounds of people that are in cities that were like just isolated in these little apartments that wanted to get with friends or family and go to bigger homes and small towns and rural communities. At that point we started realizing there's something big here and the movement is nearby travel. So we pivoted the entire company to nearby travel. We did this campaign called Go near instead of Go far. And we started, you know, changing the app and our ranking algorithm. We also noticed something else which was people were staying longer. So I used to be in Airbnb. It was typically a three and a half, four night stay. We started seeing a surge in monthly bookings, weekly and monthly bookings. And pretty soon Airbnb became a longer term housing accommodation provider, not just a short term. So we started basically noticing how the platform was being adapted. And then we didn't have a marketing budget, But I did 100 press interviews last year. I became like the marketing department, I said, and I just started promoting travel nearby, long term stays. And actually it was really effective. It was really much cheaper than performance marketing. We were spending over $800 million a year in performance marketing before that. And so that was kind of how it happened. And yeah, and then by June, July, it started like just really, we started seeing a huge resurgence.

So resurgence comes, obviously one set of advisors kind of goes, all right, you know, you still hunker down, redefine the new business, have it completely defined, etc. Don't think about going public. Other advisors go, no, actually, in fact, this is the time to go, how did you make that decision? And then what was that going towards now kind of refiling the S1 and going.

So I remember, the funny thing is, right as the pandemic hit, in fact, the day that it was declared a pandemic, I think I was actually working on the S1 with our advisors from Morgan Stanley and Goldman Sachs. So literally, the project I was doing was beginning the founders letter and finishing the S1. Then all of a sudden, the pandemics declared, we lose 80% of our business. So I remember one advisor said, I think it's safe to say you won't have to be looking at your S1 for a couple of years. So as of last April, I think the betting odds were 20, 22, maybe 20 21, but not last year. And, I mean, people basically said it was inconceivable and impossible. And if in May I had said, we're going to go public, you would have basically thought I wasn't mentally fit to be CEO any longer. So it was viewed as impossible. By July, it was not obvious we should go public, but the compelling argument was, you may as well get ready, because we don't know what the window is going to look like. Better to, you know, be ready and then not go, than the inverse. You want to go and you're not ready. So the team. I was kind of, like, ready to move on. And I was like, oh, my God, we got to do this S1 all over again. And the problem, Reed, was the S1, as I had written it, was totally irrelevant now. It described a company that didn't exist anymore. Like, even the way we talked about our mission, I changed the mission didn't change the way I talked about it, changed the focus. Every single thing changed. The other thing I learned in a crisis is, you know, I used to be a real perfectionist when we were starting Airbnb, and as we got bigger, I got kind of more high level. I wasn't as much in the details. I allowed, I think, less perfection. And I think that came through in every part of the company. And I said, we're getting back to perfection. How you do anything is how you do everything. Every single thing we're going to do is perfect. We're going to totally focus on it. So I actually rewrote 14,000 words of the S1 myself. 14,000 words to give you a point of reference and catch and arise, like 70,000. So I wrote the equivalent of a few chapters of the book myself. And we would have, like, eight, ten hour, like, incredibly painful zoom sessions. We were going line by line. Just, like, really, like, what are we trying to say, I said, we have to use this to clarify our thinking. I always thought good writing was clear writing and clear writing was clear thinking, which I think is not exclusive designers, but that's always thought how a designer would think about it. So we ended up doing our writing or rewriting our S1 between I think mid July and mid August. We sit on it and then in mid August we now know Q3 is going to be a screaming quarter. It's going to be totally rocking. And we noticed that what was not recovering was business travel and cross border. But we had a strong enough domestic business and a lot of people thought we were going to be the ones most hurt by the pandemic. Because after 2008 and 911 business travel came back before leisure, but this time because of Zoom, no one was going for business, but everyone was stuck in the house. They wanted to stay in our BnBs and we had found a whole new business line which is long term stays. So at that point I said, I think the kind of first principles and the underlying kind of the underlying data suggesting that even if there's a second wave, we think are going to be better positioned. The other companies we were on offense, we were executing really well. So we made the game time decision by mid August that we thought there's a window and we filed. And then, you know, we never imagined what's going to happen next though, of course, but we had thought at least there was a window.

And so we're going to have to do this again at some point because there's tons of questions we're not going to get to in this time. But it's been awesome. One of the things that I also thought was another kind of crisis moment that was kind of a key thing in leadership was the decision you had to make around D.C. to cancel all the reservations because there's another version of stakeholder capitalism. Because classically, you know, the classic business thing would be like, look, we got customers, they want to pay us money, we've got hosts. You know, like that's just the functioning of the business. Talk us through how you made that decision. And then the principles that you think about because you know, design everything else about making an assessment about making a statement or taking action as a leader in these kind of chaotic times.

Probably like everyone watching, I was deeply disturbed by the January 6th insurrection. But more than disturbed, a thought occurred to me. I said, well, where are all these people staying? And it turns out that a lot of them were staying in Airbnbs. And that was deeply troubling to us. And so after that happened, we started getting a lot of outreach by different, you know, law enforcement officials. But the one thing is, we've developed a fairly proactive army. So we have a user knowledge operations team, and there are a bunch of cybersecurity and former law enforcement officials. And just to actually, to back up 2017, there was this rally that we heard about in Charlottesville, Virginia, Unite the Right. And before anyone knew what Charlottesville was, we started getting information that there were neo Nazis that were trying to book Airbnbs. And so we made a decision, even back then, and I think it was 2017, to ban Neo Nazis. And then we decided to have a policy that if you're a part of a hate group, and we're not going to be adjudicating every hate group but the FBI and the Department of Homeland Security and others say you're the hate group, we're going to take them at their word, then you just can't use Airbnb. And there has to be evidence here in the hate group. But we have evidence. People are in hate groups. You can't book Airbnbs. There's too much of a risk for violence. And if you're in a hate group, you can't possibly live up to our community commitment that you will not discriminate. I mean, how is that possible? So that's 2017. Then the insurrection happened. We actually were able to stop a handful of reservations to go through with the insurrection, but we weren't able to stop all of them. And many of them didn't have criminal histories or no track record of being in a hate group. But we saw it. We were really concerned. We reached out to the D.C. mayor, Mayor Bowser, the governors of Virginia, Maryland. We retained the former police chief of D.C. as an advisor. And I even got phone calls from, like, members of Congress on both sides, not just one side or the other. And it became really clear there was a huge amount of concern that was something potentially really devastating being planned. And the problem is we could not tell one thing from the other. We didn't know who was going to plan something and who was innocent. We didn't want to make the wrong mistakes. So we made a decision. I thought it was an easy decision to say we have a right to just close down the shop. Like, if we were a hotel, we could just close it. We have a right to do that. And so we told the host, we're closing up shop in D.C. for the week, but we decided to still pay the host so we said we're going to eat the cost out of our own pocket. You'll still get paid, but we don't want to have to adjudicate who is doing right from who's doing wrong. And I thought it was really, frankly a pretty easy decision.

And again, by the way, it's part of it is to say, look, you could say, hey, we close it. But the hosts, we don't pay them as stakeholder capitalism. Again, the hosts are key part of this, they're part of how we do this.

It was like, and I can't remember the exact amount, it was a material amount, but again, it was less expensive than our host not trusting us and having goodwill. And I'm not by the way saying therefore all hosts love us. Like, I've made my fair share of mistakes, but that's why I've learned I've made my fair share of mistakes. To know that the most important thing I think a company has, well, in addition to the people and the technology, it's the idea that it's trusted. Like if your stakeholders don't trust you and you lose trust. There's an old saying, things move at the speed of trust and the moment you're not trusted, you can't move fast anymore.

One of our attendees is asking a great follow up question here, which is part of the learning curve the last 11 plus years you've been on is also treating regulators as stakeholders. And this is obviously something that's becoming more important across the tech industry because as all this tech scales, there's going to be more interface and discussion of regulation. So how have you and how can founders help evolve regulation so that we're keeping the baby and we're just throwing out the dirty bathwater. We're also keeping the, you know, the clean bathwater as we're doing exactly what's been some of the learnings.

There's learnings for tech CEOs, there's probably learnings for regulators. I'll focus on the tech CEOs, although I do have some advice for regulators. But I'll stick to our side. I think again, I'll go back to that story. Most of us, I think, assume that if people don't like you, you should avoid them. And there is an old saying, it's hard to hit up close. I for every hundred regulators I meet, I leave 99 meetings better than I started. I think the number one thing a regular wants is respect. That's the number one thing they want. And what do you do in a meeting all you do are two things. You offer to educate them about what you do, but you don't do it in a patronizing way. And you try and you've got to be able to explain what you do in a way that a non technologist would understand. And then the other thing you do is ask them straight up, like what are your concerns? By asking your concerns doesn't mean you have to address those concerns, but at least you know those concerns. And now the person feels listened to and they feel respected. And that's principle number one. Principle number two is if you're late, it's 10 times work to clean it up than if you get ahead of it, whatever it is. So you know, you do have to make a decision. Do you want to just kind of stay under the radar or not? But you know, if you're going to be behind the eight ball, it's going to be 10 times work. So I generally recommend being proactive. So these would be probably two of the things I would do and I would make sure that when you meet them, you treat them with respect. I won't name other entrepreneurs, but there were some that chose a different path. To me people can fill in the gaps and I'm not going to say anyone, but I would go into these meetings and I would hear stories about the experience they had with these other entrepreneurs and they were like, thank God you're not like xyz. And I think that once you lose trust, I mean, here's the other thing, say they all talk to each other. So if you're kind of not a jerk to three of them now, you just made 300 meetings really, really hard for yourself. So I think just showing them respect is really, really important. I think it's important to not assume the worst of regulators. I do think regulators can be pretty antagonistic. But again the apps information is filled with dirt. And I think that the best job for us is to be proactive and to take all their assumptions about us and disarm them and break them down and just reorient them. And so that's, I guess what I would do. The one thing I'd say to regulators is don't over regulate something until you know what it can become. Imagine if we knew then what we knew now what we had done to regulate the Internet. And if we did, would it have been the Internet? So I do think that regulation is generally to kind of regulate really large things. It is really hard for a small child to now have a lemonade stand. I think the amount of restrictions and red tape and appointments to city hall you need for a lemonade stand is pretty onerous now. So I do think that I would encourage regulators. Their number one job or one of the top jobs beyond keeping people safe is creating jobs. So I do think I would encourage them not to not regulate, but to, if it's a new industry, to not clamp it down before you know what it is. But the big companies deserve inspection. Companies like us.

Yep, yep. I 1000% agree. So, last question before we get to the lightning round, since we're going to do a quick lightning round, just off the Masters scale template, but different questions. What's next for Airbnb? And you know, we don't have a huge amount of time, so the quick statements.

Two things. I'll just say I'll do it real quick. Most people think of Airbnb as a way to travel. It turns out nearly a quarter of our nights are more than 28 days. So we're not just a travel company now. In a world where people can work on zoom, they can work from home, they're realizing they work from any home, we're more flexible. And so I think there's a huge opportunity for longer stays. The second thing is we're not really in the business of travel or space at the most fundamental level. I mean, Delta is US travel. Hilton does space. The thing that I think makes there be more different is it's really about kind of living like a local. It's kind of like connecting with other people and communities, human connection and belonging. And so I thought, now this is kind of like the most isolating time in human history. At least modern human history, in fact. This is so isolating. If this was like a thousand years ago, you'd all be dead by being self isolated. And the isolation, I think has caused a huge amount of loneliness, disconnection, division. And so we're thinking about other ways to connect people in the physical world and bring them together beyond just housing. I'll maybe just leave it at that.

Yep. All right, so lightning round. What's the background photo on your phone?

It's a exotic flower.

Which actor would you play in the movie version of your life?

I don't know. Rick Moranis maybe?

Yep. What's your favorite non business podcast?

I recommend this. I listened to President Obama's podcast of Bruce Springsteen and I thought it was just so thoughtful about topics like relationships to your father and being a father yourself and just all these really interesting topics. So I highly recommend that.

Totally agree. What's one thing You've learned about yourself during the pandemic that you wouldn't have known otherwise.

I can handle a lot of pain. I didn't know. I didn't know how much pain I could handle. Unfortunately, I don't know if that's a virtue or not.

I think it's a virtue, but it's also. It's especially virtue in leadership when, you know, like the asteroid in as much as it hit industries, you know, hit the travel industry and center international travel. Everything else in Airbnb, it's a classic. Like, okay, rise from the ashes and be stronger. Right. It's like, what? Yeah, that's the thing.

It's another way of. You're totally right. I'll expand the answer just slightly to say I think I learned about my. And our ability to turn a crisis into an opportunity. And no matter how big the setback, what I mean by handle pain, I guess what I really mean is be able to stay optimistic, because can I really handle pain? I don't think I could get punched in the face any better than anyone else. What I mean, though, is that it's really easy as an entrepreneur to get down to think all's lost. And I think resilience requires optimism, otherwise, you're going to quit. And optimism, critical for creativity, like, you can't be. It's really hard to be pessimistic and creative at the same time. And so to find a way out of a solution, you need to have creativity, and to have that, you need to have optimism. So you have to be able to manage your own psychology. And I think optimism is massively underrated. I'm not talking about blind optimism. I see optimism rooted in first principles.

Yep. So with that, actually, we're at the hour, so, Brian, it's always a pleasure and an honor. Thank you very much. And then also to everyone in our audience, thank you for joining us. And Brian, we just got to do more of these.

I know. Let's do it. Can't wait.

All right, thank you, everyone.

That concludes this episode of Gray Matter. If you enjoyed this interview and want to hear others, please hit subscribe. You'll be able to catch up on Gray Matter episodes you may have missed, like Sam Mota Mahedi's roundtable discussion on company culture. You'll also get new episodes delivered directly to you, including future I conversations with guests like Stanford University Professor Fei Fei Li, who is an expert in AI. You can subscribe to gray matter@soundcloud.com greylockpartners on Spotify or wherever you get your podcasts. You can also find new episodes and blog posts every week on greylock. Com. And of course, you can follow us on Twitter reylockvc. I'm Heather Mack, and thanks for listening.