Greymatter Blitzscaling | People with Reid Hoffman & Chris Yeh

Hi everyone. I'm Reid Hoffman, a partner at Greylock and host of another scale essential podcast, Masters of Scale. Welcome to our new Blitzscaling series, a part of the Gray Matter podcast, elaborating on the book that Chris Yeh and I published, Blitzscaling. Chris and I have been fielding a number of great questions from entrepreneurs and others on Blitzscaling. So we decided to answer some of them here on Greylock's Gray Matter podcast. Today we will focus on people. So let's get started.

So Reid, one of the things that is most important when you're blitzscaling is the people. A lot of times people focus on stuff like the capital requirements, they focus on the product, the go to market. But people is one of the things that you consider the most important. And in fact I think you've said that it's likely that human capital is is the constraint on growth rather than financial capital. Can you talk a little bit about why you hold those beliefs?

So generally speaking, if you have a great market, you have an interesting idea and you're in a place that investors think that interesting companies come out of most centrally Silicon Valley. But frankly, there's lots of places all around the world. Getting financial capital is, generally speaking, not necessarily easy, but straightforward. Now sometimes you have to say can you get to the VCs usually need a reference or the sources of capital, will it be enough? Will the timeframe in which it takes you to get the capital, is that enough? Right. There's a whole stack of things by which not to underplay the difficulties of financial capital. However, part of what financial capital preconditions on is, do we believe that you can make something out of nothing? Like if you're in the seed or the Series A, that you know how to do this unique thing that you don't learn in big companies, you don't really learn how to launch. Even if you've launched a new fresh product in a big company, it's not under the startup entrepreneurial thing where all of the other companies around you think that you're actually in fact the walking dead. There's nothing to do there. How do you have to recruit the team in? How are you simultaneously building like an HR practice and kind of talent management and location management and dealing with the vagaries of establishing a new business all simultaneously. So one of the foundational decisions that investors, especially early stage venture capitalists will be looking at is what does the human capital look like and does this human capital build the foundation that you can build the rest of the House, the rest of the castle, the rest of the edifice. And part of how to kind of look at this is not only is it this initial group, but how does it get to the later talent? Because part of the reason why people tend to prefer Silicon Valley investments over other areas, whether in the US or Europe or others, to doing this is they kind of go, well, all right, you got the first three people, you got the first five people, and those are pretty good. Can you get the next 50 and the next hundred, the next 200? In doing that, will you have the right people making the senior executive decisions, hiring the right people, making those key capital allocation decisions, sequencing the right way, triaging the risk the right way, dealing with the coordination hassle that happens as you move from five people. This is the levels that we have in blitzscaling. But order magnitude, ones and tens and hundreds, as you're going through that, do you have the right people to do that? And then of course, can you hire them in the right time frame? Can you get them up to speed? Can you get them deployed enough? Are they going to be capable in entrepreneurial environments? And that's part of the reason why the human capital question tends to be a really central one for how do you get any entrepreneurial progress, any scaling progress and any blitzscaling progress.

Now, speaking of blitzscaling, one of the counterintuitive rules of blitzscaling we included in the book is the notion of hire miss right now, not miss right. This is one of those core human capital people management strategies in blitzscaling. Can you talk a little bit about how you discovered the importance of this?

So when I did My first startup, SocialNet, I was doing that as a theorist and as my friends, like, you know, one of my favorite quotations is in theory, there is no difference between theory and practice. And I had all these, I thought it through, I had all these theories. And one of the things that I informed at early PayPal is I said, look, one of the mistakes I made was I went, okay, well for any job, I want 10 plus years of experience of having done that previous job before. And actually, in fact that means that there aren't unique elements to the job. The job doesn't change dramatically in, you know, one month, three months, six months, 12 months, which it does in these entrepreneurial journeys and especially in scale ups and blitz scale ups. This company and this approach and go to market is different. And so what you really try not to do is try to overthink. Oh well, you should hire for who you need in two years or who you need in three years. And matter of fact, one of the things that I found within Silicon Valley is it was kind of from the startups of the 1990s, there was this kind of received wisdom of oh no, you're trying to get that senior person in there early so they can rebuild their team and replicate what they'd had at wherever company they came from, Apple or Cisco or HP or IBM or whatever, as a way of making this happen. And actually, in fact, as these timeframes got compressed, as the ability to predict what the future org or the future go to market or the future strategy will be, then it gets to the no, no, no, no. Get people who are very quick learners and learning emphasis and the person who can get in and do the job now and hopefully not, certainly, hopefully they will learn appropriately. And then of course, how do you manage that hiring miss right now? How do you hire miss right now without the promise of, oh, you're doing this job for the next X years when while you're here. And to be navigating that as you're kind of running and multi threading and encountering all of the slings and arrows of what an entrepreneurial journey and a blitzscale entrepreneurial journey look like.

Well, the good news on that front is that we, along with our friend Ben Kaznoca, have actually written an entire book about how to do this kind of people management, a book called the Alliance. And in the alliance we describe how you can use something called the Tour of Duty Framework to really hire these kinds of people who have the right talents for right now and help them accelerate their career at your company, even if they're not going to stay at the company for the rest of their career. Can you talk a little bit about how you see the ideas of the alliance and blitzscaling coming together?

So part of how we got to writing the alliance with Ben Kasnoca, we'd written this earlier book, the Start of a View we which was kind of how everyone should think of themselves as being the entrepreneur of their own life. It isn't everyone should go start a company. Some people should start companies, other people shouldn't. But it's everyone will need to think about their career management as entrepreneurial as opposed to a career ladder. It's a jungle gym as opposed to the one career, it's multiple careers. So you need to think through, that's how you operate and that's being the entrepreneur of your own life. Then the thought was, well, for companies, if you're going to be adaptive, you're going to need to have adaptive people. You'll have smart people working there, they'll be committed to your mission. But if you say the world's changing and I need people who are flexible to change, you'll need people who are being the startup of themselves, the startup of you. And so how do you recruit those people? How do you manage them? How does that work out in terms of what you're doing? And, and that's what we were describing in the alliance, as you know, and the basic thought was, well, look, we already know the data from all around the world, even including Japan, is switching from this, oh, I work in one place my entire life to I work here for a while, then I work here for a while, then I work there for a while. And that's the evolution of how this plays. And you say, okay, well how do you do that in a way that's highest performance, that really makes it work? And the answer is to say, well, stop doing this illusion that hey, you're kind of come work here. And even though like I'm hired you and you've worked at two previous companies in this and I'm now hiring you here and here is where you're going to work forever, stop that illusion or delusion and actually go, okay, look, what we want is this transformative effect on our company, on our project, on the thing we're doing. And we're going to have this transformative effect on what you're doing. And there are groups at LinkedIn that have taken this logical conclusion, that part of their interview questions are, well, you're going to come work at LinkedIn and what's the job you want after LinkedIn? And of course this is, hey, you're going to work at LinkedIn your entire time. That's great. You know, like multiple tours of duty. There's nothing that stops you from saying, hey, look, I do my first tour of duty 2 years, 3 years, 4 years, 5 years, 8 years at this company and I might set up for another tour of duty at this company. But that framework allows you to iterate through and says, look, the important thing is what amazing adaptive and transformational work you're doing at the company. Not the important thing is, oh, you're here forever.

One of the things that people think when they hear us talk about the alliance is they say, wait a minute, are you telling people to switch jobs? Is this a job hopping strategy? But I think that one of the things they don't realize is the alliance also Talks about people who are going to be staying at the company but for longer periods of time. So can you talk a little bit about the value of continuity and having people at a company over time as it grows?

So in the alliance, one thing we talk about is these transformational tours which are generally speaking kind of like, here's what we achieve together, here's a rough time frame by which we commit and reopen the question and then we do that as a cycle. Now, one of the things that was really important as this discussion is that both sides make kind of a bounded time commitment. Oh, it's three or four years, or it's three to five years, or it's at least two, or it's at least four, or it's at least five, or it's at least eight. And this is kind of a mutual expectation. So it's part of building trust. And there are times where you have performance outs. Well, the company business isn't doing well and we're not going to do that division or I'm not really delivering what the real impact on your career is going to be. And that's not going to work out that way. And so there's outs. But even in that framework, even in the transformational tour of duty, there's still a time commitment. It's not like, well, here I joined, but hey, next week, what's good for me, it's a mutual commitment of time in that range. And so that's one really important thing. Because job hoppers are like, oh, I just move on to the next thing when the next thing's good for me. Well, it's like you're abandoning your responsibilities, your loyalty, your commitments to the tour of duty, to the company you signed up with. And that's a very bad thing. And that negative reputation should follow you around. Other companies should think about that. You should commit to something minus performance outs. Now, that being said, of course, one of the things that intelligent company builders, culture builders go. But actually, in fact, there still is a group of people, not just the CEO, not just the executives who, to whom they are long termers, maybe even lifetimers at the company. And they go, this mission really approximates my mission in terms of what I want to accomplish. And that should again be a mutual discussion. So if I'm an employee and I'm thinking I'm a lifetime here, well, it's good to have that as a joint thing because among other things, as the company says, you are lifetime here, that's great. Then the company says, well, but then you're a culture standard bearer. You should help us be evolving our culture. You should be speaking up about which risks we should be taking, which impact we should be having in the world. What are the important things for how we operate, for what we do. And you're an important voice on that because you're going to hold that for the decades that you're going to be here. We call that a foundational tour of duty. In some cases founders, other cases, maybe even early employees, you may be signed up for a foundational tour of duty from the very beginning. It's kind of a default. And in other cases you may work your way into it. In other cases, it may come about just as how things play. But it is very valuable to have long term people not just as executives, not just as group managers, not just as owners of projects. Those roles of course, are extremely important over long term, but also long term people in the company. And that's something that a company should value. Something should be part of kind of performance standards and reviews and recognition and rewards.

So Reid, we've talked now about the benefits of long term employees, but I think it's also important to talk about the benefits of bringing in new people with new skills and new perspectives. Can you comment on that?

So one of the things that people who get too internally focused in building these companies forget because there's so many great things about, well, we got them when they were young, we trained them, they understand our culture, they understand our network within our company about how to get things done. They understand which risks we take and we don't take. They have the development muscles to play well within our sports team, our business team. All of those things are tremendously important. And so the, the great students of building these long term businesses, these scaling businesses, tend to value keeping a lot of people in the company. But this is actually one of the things that leaves a critical error, which is it is very valuable to bring in new people, people who question, well, maybe things have changed, maybe we should do this differently, maybe our competition, we need to pay more attention to the outside market, maybe we need to learn from how other companies are doing this. And that new blood really helps us stay adaptive. And so any organization that says, hey, no, no, we're just good, it's all the people who are inculcated only in the way we do things, that's probably on some path to the dinosaurs, some path to death. Because as great as your inside process is, if we get too focused on the inside and not enough still paying attention to the outside you ultimately get way off path and then you have a real extinction possibility, a real death possibility. And so part of what I think all businesses strategy should be, and this is part of the reason why the startup view is important, part of the reason why the alliance is important is let's make sure we're bringing in some new talent. And that new talent isn't just, oh, the new 21 year old college grad. The new talent could be the executive from another company, the project leader from another company, the project leader from a company that's in a different industry and doing at least some of that selectively and thinking this is how it adds to our culture, this is how it evolves and adds to how we're getting things done, can be key for being adaptive and successful.

Excellent Reid. Thank you so much for taking time today to share some of your thoughts about the importance of people management and human capital. This is a topic we're going to be returning to again and again over the next few weeks and as we really dive deep into a lot of these topics around people. So I know we're gonna be looking forward to hearing a lot more depth from you in the future.

And Chris, as always, it's awesome to be working on these things with you.

My pleasure.

Thanks for listening. This is Reid Hoffman, partner, Greylock, Host, the podcast Master the Scale, and co host of this series on the Gray Matter Podcast. To get this podcast and every week subscribe to the Gray Matter Podcast on itunes or wherever you prefer to listen to podcasts. If you have any feedback on any topics we discussed today or any questions you'd like to ask in the future, Tweet us at greylockvc and reidhoffman with AskRead or of course post on LinkedIn. Chris, Shay and I go through the questions to select questions we will answer on future versions of this podcast. Thanks to the team that produces Masters of Scale and the team that produces this Blitzscaling series, and most of all to you, our subscribers.