Chile, Entrepreneurs, Endeavor, and Global Lessons w/ Reid Hoffman Wences Casares

Welcome to Gray Matter, where we bring in some of today's top tech entrepreneurs and business leaders to share their story from startup to scale up. Today's episode was recorded in Chilean Patagonia, featuring a conversation between Greylock partner Reid Hoffman and Wences Casaris, founder and CEO of Xapo, a company that provides Bitcoin wallets and storage vaults. Reed and Wences continue their conversation about global entrepreneurship, covering strategies and tools for creating and growing a completely distributed company.

I am here with my great friend Wences Cazares in Torres del Paine as part of our South American endeavor entrepreneurship trip. And I thought that one of the things that when we are having these kind of conversations, you know, as we're traveling around, I thought it would be interesting to reflect on how you've grown and thinking about hiring talent and talent, because it's one of the things that Silicon Valley thinks that it has some unique access to because of talent, but also because there's such a density here, a learning network. But I suspect the learnings go both ways. So what does hiring talent look like? What does hiring executives look like? How do you think about that on the entrepreneurial journey?

Yeah, so my view on hiring is heavily colored by the fact that we are fully remote. Globally fully remote. So we have 275 people in 62 different countries. And that colors everything. I have to say in regards to that question. And I would say that Silicon Valley may be its biggest asset when it comes to people talent. But also if you think about getting people online as sort of two stages. Stage one, the first 2 billion people, they look a lot like people from Silicon Valley, right? The people that we were getting that Silicon Valley was getting online, people who look like them, people who had a car, who went to college, who had a bank account, who for many, many reasons, they look like them. The people that we're getting online now, the next 2 to 3, 4 billion people don't look anything like them. And in that regard, there is some advantages to finding people who really understand that. Second, public who understand it firsthand, not by watching YouTube or reading a paper or doing tourism. In some ways, there's no other way to understand the public than being there. You have a lot of people from all over the world in Silicon Valley, but very quickly, one of the great things about the U.S. and Silicon Valley in particular, we all get assimilated quite quickly. I think that to understand some of the opportunities that are arising with technology in emerging markets, you really have to understand the people who are there who are very different than people in the developed world. And to really understand them, for the most part, you have to be there.

What are some of the pointers you'd give to Silicon Valley folks? Because it would also give some sense to the entrepreneurs down here about where they have competitive advantages, because Silicon Valley people, you know, don't really try to go figure out other areas of the world very much.

Well, I would say I'm a big admirer of Silicon Valley. I think it's like being in Florence in the Renaissance. If you like technology, if you like business, not only attracts the best entrepreneurs from all over the world and the best investors, but generally, when you look at nonprofits and artists and political thinking, it's really a fascinating place at a fascinating moment in time. And it feels, for a few things, it really feels like it is the center of the world. And in my opinion, it will remain the center of those worlds for quite a while. But having said that, I think something that shocks people who do not know Silicon Valley is how provincial it is, given the impact it's having all over the world. And that being provincial, I don't know if it can be changed or not. If I had to guess, I would say probably cannot be changed. It's part of the ethos. It's what you were saying about people not necessarily traveling that much, not really investing much outside of a very small area. But that opens opportunities. And I think there are very, very interesting opportunities for people who really understand very different parts of the and can have access to the know how and the capital of Silicon Valley.

So let's go back to the talent thing. One of the things that I have a theory on is that you can do completely remote, for example, no office.

Yep.

Or you can do centralized offices. But the blend of centralized office and remote is the hardest of the three. What's been your experience and what pointers would you give to people who are thinking about office versus remote?

I wish the book was written and we just follow the book like we do for so many other things. You know, we're not guessing how to do accounting. The book's written and we just follow the book. I wish remote was one of those disciplines, but it's not. So we're learning as we go. And for us, it's very important to make it work. And I agree with you. It seems to me one of the main lessons is that you either go fully remote with absolutely no offices where you. I'm the CEO, I work from home, and my CFO works from home in London. And my General counselor works from home in Santiago, Chile, and my head of HR works from home in Miami. And I think that is easier to make it work and to have everybody in the same office. It's also easier even when you have multiple offices. The blend that is really hard to make work is when you have some people working in an office in some offices and some people working from home. Because that automatically creates a two class system. You have first class citizens who go to an office, participate in water cooler conversations, go out to lunch with some people, go for beers, and there's all of that information dissemination in informal channels that they have access to their first class citizens they are in the office and second class citizens who are alone at home. I think that's really, really hard to manage. And I wouldn't advise that. I think it's a lot easier to be one or the other. But the hybrid seems very, very hard to make it work.

You originally were kind of a little hybrid.

Yep.

And now you've gone totally remote. What are some of the lessons you've learned from how to do remote? Well, where are remote strengths, where its weaknesses? What do you do in terms of organization?

Well, first of all, we are still trying to figure it out. And it has advantages and disadvantages. We are all for the advantages, but I don't want to minimize the disadvantages. The main advantage is that if you and I, we're gonna play soccer, football match to the death and you are not gonna play and I'm not gonna play, we are much better off that we don't have to play. But you're given $10 million and you can hire any players you want. And I am given $10 million and our teams are gonna play and whoever loses dies. Right. And then there's a little catch which is I can only hire in Buenos Aires or in Sao Paulo or in some places and you can hire all over the world, you will kill me no matter what. Right? And this is no different when it comes to a startup. I think that's the biggest advantage. It's just that when you have no geographical fencing, you will find better people, period. Those people will be more motivated and more loyal. We have almost zero unwanted churn. That is a huge advantage. The big disadvantage is, I would say that the number one is that if you don't manage it well, people tend to get burned out more than if they had to go to an office and even I would say depressed. I would say that's the number one disadvantage and maybe somewhat connected to that is the dissemination of Informal information, things that don't necessarily have to do with work and creating the equivalent of water cooler conversations and lunches and going for a beer and things like that. Right. Just running into someone at the cafeteria, you don't have that. How do you recreate that on the first point of being burned out? The difference between going to work at an office and working remote is exactly the same difference between living with your parents and moving out and living alone. And people don't realize this. If you're not very conscious about this, it can very easily lead to burnout and maybe even depression and just feeling sort of disconnected and disengaged from the world. When you have to go to an office, you don't realize that that dictates what time you wake up, that dictates that you probably take a shower, you get dress more or less decently, you probably have breakfast before you go there or on the way. There are a number of things that your parents, in this case the office, are deciding for you. If I removed having to be in the office by 9am all of a sudden you may or may not wake up at a given time. You may or may not take a shower, you may or may not have a healthy meal, you may have that meal sitting in your laptop anyway. There are a number of things that seem trivial, but putting some effort into how do you work? Setting a routine, setting your work. When you go to an office, someone else did that for you, someone else set up your cubicle or your office and well, when no one does that for you, you have to put more effort than you thought into thinking, how is my space going to be and how is my routine and my day going to look like?

Do you help your employees? Like do you have a kit saying, here's some things you should consider, here's some things we're going to send to your home.

Yes, it's a work in progress. We are doing some of those things. We want to do more and we want to package it more, you know, make it more embedded in our onboarding program. Because as I said, we're learning as we go and we're constantly adding things to that kit.

And then how do you do recruiting? It's a little bit more practiced to have recruiting within an office. Bring them to an office, have a group of people interview them. You know, generally speaking, you're pre qualifying people based on whether or not they already live in the area or willing to move to the area. It strikes me that it's a different search pattern and a different interview Process, Yes.

So recruiting is very interesting when you're hiring remote. The first one is something that I have told you because of LinkedIn, which is that it's hard to find tools to do global searches. Right. Most recruiting tools, you start by saying, where are you looking? Are you looking in Bangalore? Are you looking in San Francisco Bay area? Are you looking? And if you remove that, it's very hard. So we end up tweaking, hacking existing tools and sort of saying, we think that because of this profile, these are the geos what we are looking for. But there's not really a way to do sort of a global blanket search. There's some progress, but it's very nascent there. And then in regards to the interview process, we tend to get a lot of applicants for each search, so we have to do a little bit of sifting through before we get to interviews. We do interviews through zoom and that tends to work very well. We have done some experimenting where for some positions we don't do any voice or video interviewing. It's all chat.

Right.

And it has surprised me of my own unconscious biases. Right. I think that by doing that we've hired some people that maybe if I had seen them or heard them, we would have not for silly reasons. Right. Some people who are very, very intelligent tend to speak in a certain way or English is not their first language. And I am judgin the wrong things. And for someone who's going to be working remote, this is going to be most of their communication. Despite us doing a lot of hours of video calls, most communications for most positions happen on chat and on email. So judging how people communicate there makes a lot of sense for some of these positions and also leads you to hire people that otherwise you would never hire. Sometimes being some of the best people we may have.

So back to the kind of the depression and burnout. How do you amplify those elements of the team connectivity?

So where we are right now is saying if you think you know how to work remotely, go ahead and do it. We really don't care which way you make it work. Right now, if you are struggling, if you are burned out, if you are. If you feel depressed, disconnected. We do have some guidelines we think work a lot. And we say it this way because some people get attracted to the remote model or working from home for the wrong reason. So they think all about the upside, they don't really think about the downside or the response, the burden. Right. So when we give the guidelines, they may seem like a big burden and the guidelines have all to do with setting up your routine, putting a lot more effort into your routine than you would have to if you were going to an office. Some people think, well, but that's the reason why I want to work remote. Well, yeah, if it works for you, fine, but if it's not working out, we've learned that this really helps. And also your workspace, number one, having a workspace that is distinct from the rest of your life. It's important because if you are working from the kitchen and then from the living room, then from your bedroom, your mind associates all of those spaces with work, and you won't disconnect. Whereas if you have a space that you can close the door, and that's your office, and when you're there, you're working, and when you're out, you're not working, it's a lot healthier way of separating work and not work. And same thing with the routine, right? Having a routine that makes sense, that it's healthy, that lets you work well when you're working, but also enjoy life when you're not working.

Well, one of the things I remember from when you were down here in Patagonia for a year working is you not only kind of set up an office, but you were, like, there all the time. Like, if someone wanted to reach you, they could essentially knock on the door through Zoom. Because you were there during work hours.

Yeah, I do that. When I'm in my office, my Zoom is running, and especially the people that I work with, they don't even need to knock. They come in. If I am going to have a meeting where I need privacy because it's an outside, I'm doing an interview with a candidate, or I'm talking with a regulator or a vendor or something, I do a separate meeting, but my personal meeting is always open, and you come in, and when you come in, you may see that I'm talking with someone else, and you can hang. Just like if it was my office, you may walk into my office, and if someone else, you may decide to leave because you want to talk with me alone, or you may hang around. Well, that seems to work quite well. If I'm in my office, that zoom is on, and people can just come in and out. And sometimes I find it very interesting that you will come in to talk to me and there's someone else, and you end up discussing something obviously impromptu, because you didn't come to see that person. They just happened to be there. But that's the kind of thing that I'M talking about that happens in an office that we have to find ways to replicate remotely and it's hard.

So what tools do you specifically use and what tools, if any, have you built?

We use Slack and Zoom a lot. I don't think this is doable without those tools. I don't know how people did before. I can't wait for other tools that will make a similar leap in the future. Cannot think of what they will be. But I'm sure they are coming and make it easier for all of us. I was very reluctant to use Zoom. We used Google Hangouts for a while and I started using it that year that I lived in Patagonia. Now I understand why so many people told me that if we were remote we needed to use Zoom. It's just better. There's no way we could use something else right now. Just the quality of the sound, the quality of the video, the functionality. It's very robust for our specific business. We have built some tools. All of our tools are built so people work. Assuming everybody's working remotely. We are making a very good use of Amazon workspaces. We give people who work with us an Amazon workspace that has the vpn, the security we need to make sure they have. And it's a better way to do security. We do not own any hardware of our employees. So we give our employees a stipend from them to buy their own computer, cell phone, et cetera. We don't own any of that. Which forces us to put all the security in the cloud and to not create that false sense of security because everybody's in an office. Something is somehow more secure. And in that effort, these Amazon workspaces are very, very helpful.

And then how does management work? Is it all the same patterns that you have you as CEO and then some executives and kind of groups, and then groups get together for team and then there's one on ones and there's performance views. Is that the same or does that mod as you get remote?

First of all, I would say we are working on it. I'm not sure that we know how it works. So I think we have some things that work. We're working with some that don't work and we keep improving on it. Most looks like the normal management. When I read Blitzscaling, it's easy to relate to. It's modeled after that. There are some things that are different. We do two important trips every year. One is a global off site where we get the whole company somewhere in the world, somewhere different every year. And the most important thing that happens there is you spend time in person with people you already know, but you don't get to see in person. And you get to meet people you didn't know because you work remote. You don't run into people that you don't work with. And both of those things are important. Spending time with the people that you're working with that you know and meeting people you don't really know from other parts of the company. That's one trip a year. And another one, it's the team meeting. So each team does their own off site also wherever they want to do it. That's more work. That's where they do a review of the last year, they do the budget goals, plan for the following year, etc. So if you are working with us, these are two trips that you do every year, more or less six months apart.

What's the most unusual location for you? Either the whole company or from one of the groups?

We did a trip to Kenya two years ago. We were 150 people then and it was sort of borderline possible. I don't think we could do it now. So I'm glad we did when we could. It was really fun. We were in Nairobi. We have everybody using M? Pesa in downtown Nairobi. And we told everybody that they could only use M? Pesa for the whole week we were there. And then we finished in Mombasa at the beach. But in between we went and did a safari. And it's really fun to do a safari with 150 people. We had like 40 Land Cruisers and everybody looking at that beautiful wildlife. It was very, very special.

Any lessons from everyone using M? Pesa went, ah, this is something we need to think about, do differently, et cetera, from that everyone using M? Pesa experience.

You know, I think that if you are in payment and in Bitcoin, you cannot ignore what's going on in Kenya with M? Pesa, but also what's going on in China with WeChat and Alipay, where it's really worth it to go and see it firsthand and use it and spend some time using it like the locals do to understand. It was interesting that we did this exercise where we asked our people why they thought that people were using M? Pesa and then we had them wait at the places where people recharge and top up their M? Pesa accounts asking why they used it. And there were a lot of interesting surprises. M? Pesa is interesting in that it was really bottoms up, meaning the underbank Started using it first. The people with less money used it first because it was grounds up. It was super interesting to learn why people were using, why they preferred it to cash. For example, the answer from a woman who explained to us that when she receives their salary, if she has it in cash, her husband may spend it and may misspend it. Right. And it was very, very hard for him to do that if she kept it in her M? Pesa account. Never thought about that, but it makes a lot of sense and it's more valuable than I thought. A young man explaining, look, when I pay with M? Pesa, nobody can see my wallet, nobody can see how much I have in it, and nobody can see what I get as change. I just pay and I'm done. And yes, he was referring to the act of reaching for your wallet, getting all the cash out, paying, getting the change, what that exposes. And again, I never thought about that.

So you and I have not actually had a detailed discussion of Blitzscaling. We've talked about it some because I obviously look for your feedback, but also from a more global perspective. What would your first reactions to Blitzscaling be? Is it just the Silicon Valley thing or is it useful down here?

No, I think it's useful everywhere. There's something that may be invisible to you, which is that that moment that you separate where the company is focusing on finding something that the market wants. And once that flips, it's all about scaling. And I think that's not obvious outside of the Valley. Right. And it's hard to change modes. And sometimes we've seen some companies come up with really interesting use cases, really interesting products outside of the Valley be beaten by Valley companies. When I look at the postmortem of why that happened, very often it seems to me like that company couldn't change modes. That non Valley company got stuck on that focus on product as opposed to scaling mode. And even though it's implicit or everywhere present in Blitzscaling, I think it's a super important lesson or meta lesson. Before you get into how do you scale? It's like understand that there's a moment in which it's all about something different than what made you successful at the beginning.

What are some of the things you'd say? Here are some things you should add in to the Blitzscaling playbook to make it more useful as you're South America or other areas of the world.

I think that people who are not from Silicon Valley who read Blitzscaling get this impression that raising money in The Valley is easy. And of all people, you should know it's not right. And it's a very simplistic equation. They say there's, I don't know right now, $30 billion of venture capital waiting to be invested just in Sandhill Road alone. And there's only, say, $1.5 billion in Brazil. So it should be easier in Silicon Valley than in Brazil. But that's not true. Meaning for those 30 billion people, you have more people competing per each dollar than per each dollar in Brazil. And those people happen to come from. They're the best people from Brazil, the best people from Indonesia, people from all over the world come to compete for that. So the competition for those dollars is ferocious. And I've sat with you and with others through those Monday meetings, and I'm amazed at the things you guys decide to not invest on. That's not intuitive outside of the Valley, right? Like, oh my God, this is really, really, really hard. I say that because I think that very often entrepreneurs outside of the Valley disregard their local sources of funding because it's always easier because you tend to not like your local investors. They are terrible, they don't want to invest, they have terrible terms, et cetera. Well, you know what? Actually the best shot in many of these cases is the local capital, because they have more capital than opportunity. Sort of the opposite problem that you have here. And to a lesser degree, I think that's also true for talent, meaning that there's a lot of talent that has already done a tour of duty in Silicon Valley and has left and they go back to their home countries. Very hard for those people to go back to consumer packaged goods or to banking or telecom. So if you have an interesting proposal to be Silicon Valley like, but you can work there, it's quite an edge, right, in recruiting. So in both cases, I think something is somewhat counterintuitive is don't disregard the local capital. It's probably easier to raise there than coming to Silicon Valley to raise. And don't disregard the talent who already has Silicon Valley, know how, but wants, for whatever reason, to live there.

Well, one of the things your answer is already shading to is the notion of don't try to compete with Silicon Valley on its strengths, compete on its weaknesses, and so generally take the things that look like weaknesses and try to convert them into advantages. So it's one of the reasons I was asking about the remoteness, because actually, in fact, it's like, well, if you're here in Silicon Valley and have a whole bunch of talent. Everywhere else, a pure remote strategy happens. Happens with GitLab, happens with WordPress, but it's rare.

Right.

Because there's an intense amount of value in actually creating a headquarters in a station, given the amount of talent and learning and all the rest. Whereas remote actually, in fact, is one of those things you can do other places or you can do like Shopify and say, we're going to be the top tech company in Ottawa and we're going to have a different way of running our company, of recruiting and everything else, because we can run experiments and do things that are different because we're not part of the Silicon Valley network. Right. And so those are kinds of things that I think is part of developing the Blitzscaling playbook, which is to think about. All right, what areas can I say, look, here is an area where I have a strength that's in the shadow of a Silicon Valley weakness that then allows me to potentially create a globally competitive business. And I think some of that's the stuff you're thinking is like, don't try to just be Silicon Valley Lite, play your game.

Yeah, right.

Is part of what you're saying.

Absolutely.

Are there any things from your first startups through xappo that turn strengths into weaknesses? And I'll prompt you with one specific example, hopefully not taking the one you're thinking of, which is Marcos and MercadoLibre, because, well, if you don't have as much delivery infrastructure and payments infrastructure, build it.

Yeah, that will be counterintuitive here, right? Yes. That's a great example. I first came to Silicon Valley in 1994. I was blown away with what I saw. Kids who were not from any fancy family or went to a school were getting 3 million dollar checks and people were not worried that they may steal it. That was very different than where I was coming from. Everybody would ask me, who's your father? Which private school did you go to? And that was the end of the meeting. And just what they were playing with back then, the beginning of the Internet, it was just fascinating. So I forced myself to come every six months, twice a year, to learn, to get inspired, really. And those trips changed my life. Very often I would come without agenda or meetings. I would just knock on companies that I've seen online. And sometimes it was awkward, sometimes people were very kind and I ended up having pizzas with them at night. And that was very inspiring and taught me a lot about how things were done. Slowly helped me develop a little bit of Silicon Valley connectivity. But where I'm going with this is that you can use that connectivity as a way to arbitrage it. To me, what I have that is more unique is not my Silicon Valley connectivity, but understanding emerging markets. So I value that network even more because it's more rare. Sometimes I may be able to arbitrage it with fundraising or with know how or with talent. But most new Internet users today are mobile users. Most of them are coming from the emerging world. And what you gave us an example of Marcos and Mercado Libre building their own infrastructure for delivery because it wasn't there, would not be intuitive. There are a lot of other things like that. When you look at it at a user who just got their first smartphone, a $40 Android, last week in Jakarta. And if you were to follow that person around, you'll see that the needs and the aspirations and the fears of that person are very different. I actually would be surprised if in the next few years, we don't see a first big sort of Instagram, WhatsApp kind of consumer Internet company come not from Silicon Valley. See, the first big consumer Internet company comes from an emerging market as opposed to Silicon Valley.

Yep. And so I think that's a good moment to call this particular podcast episode. So, Wences, as always, great to see you. And we will continue our tour of South America.

Thank you, Reed, for having me, and thank you for coming to visit Patagonia, South America.