Reid Hoffman | Blitzscaling During Covid

Hi, everyone, and welcome back to the Gray Matter podcast. Today I am sitting down with Reid Hoffman to talk about how blitzscaling has been affected by the COVID 19 pandemic. Now, as you may recall, blitzscaling is the pursuit of rapid growth by prioritizing speed over efficiency in the face of uncertainty. And it's what's built iconic companies like Facebook, Google, and Amazon. But during these tough times, people have questioned whether or not blitzscaling is still a relevant technique. So, Reid, we're experiencing this unprecedented economic slowdown. We've got unemployment at levels we haven't seen since the Great Depression. Can entrepreneurs still pursue growth in this environment?

The obvious answer is yes. All entrepreneurs know that it's possible. You know it's possible. Kind of rhetorical basis. Obviously, the hows and the whens and the ifs are the really relevant question, because when you're confronted by this kind of turbulence, which makes everything very unpredictable, you tend to first say, okay, I gotta check the defensive game first. I gotta check the ability that I can go the long distance, that I have the time to test out the kind of entrepreneurial hypotheses that entrepreneurial companies are focused on, which is, does this product work for this? Does this service work for this? Do I have product market fit? Do I have scale product market fit? What's the dynamic of it? Which customer groups to really work for? How do you reach those customer groups? All of these things are part of the pragmatic anthropology that is part of the entrepreneurial, the pioneer journey of that discovery. And your very first question, when you hit crises, even a normal recession or depression, let alone the uneven shockwaves from the tsunami of the pandemic, you first go, okay, check the defensive game, which is, all right, how do I shore up the balance sheets, make sure that I have enough capital, be really focused on expenses? Unfortunately, of course, sometimes that's reduction in salaries or reductions in force, but, like, how do I do that? And you make sure you have that. Now, when you have that, though, you can then look at it. And it isn't just sometimes the tsunami creates natural opportunities. It creates natural opportunities, obviously, for every service that is delivered through the Internet as a natural part of how it operates. Everything from entertainment with Netflix and Roblox and all of these kind of entertaining sides. But also work with Zoom, which is how you and I are talking right now, because we are being Pandemic responsible, and we're recording this Gray Matter podcast remotely, kind of looking at each other through Zoom. And so Zooms and teams and slack and all of those things get huge rises. All cloud services, because the delivery of these services through cloud make that e commerce services delivery kind of instacart and doordash, they all naturally get amplified by the tsunami. But however, part of what of course happens is you begin to get the kind of recognition of, well, maybe there's ways that I can test opportunities here where I wouldn't have tested that before. So for example, I know of some restaurants that are being innovative saying, look, okay, we know that we are months away from being able to do anything like our previous in dining experience. So what are the ways that we can innovate in takeout and innovate in delivery and innovate in being the front end or wholesale suppliers to deliver that and then become something of a broader spectrum and a different spectrum of food delivery as a service to our local neighborhoods and to make that play. And that's an instance of the kind of thing you can do on a restaurant delivery. And obviously that scales all the way up to when you're looking at product plans for a technology company. Say, well, is there something either in the way that we operate now or in the product service, we deliver that now because we are in these remote circumstances, we are in these distributed circumstances where we may not have been planned to be there before now there's something that we can test. And obviously the way that you look at that is you say, okay, there's some X month period where we're just in the pure shockwaves. But when the shockwave settles, what will be a persistent part of future behavior, and so, for example, like a very light one within the conference industry is I actually think now the COVID shockwave will have set off the fact that there will now be a set of virtual events. They may be tied to even real events, and the real events actually will continue. We prognosticators of the future are always going to go, oh, real events are going away. It's all going to be virtual. And you're like, no, no, no, there's still some real use for real events. They will continue. Maybe there'll be fewer of them, maybe they'll be shorter, maybe they'll be tied to virtual events. But now that we've all gone through and experienced these virtual events, having virtual conferences and so forth, both the people doing it will realize, oh, there's some advantages. Advantages is sometimes the talent for a speaker or someone else may be available for an hour, not flying to your location doing something, but you could set something up specific around that, and. And actually, in fact, that specific thing in a focused way may mean that you could do a virtual event, let's call it an hour a week. Our event is almost like now a media podcast itself, and we're doing an hour a week for a while or something like that as a way of actually participating in it. And that those lines at least blur and expand. And I think that all of that kind of gives you a range for thinking about growth. Now, the last point before we move on or follow up on the question is to say that the question in blitzscaling and business is always kind of with speed, is always a relative speed one. So, like, for example, you say, well, there's opportunities for growth. It may be still smaller than you may have been hoping for, 100% annual growth, and now you're looking at 30% annual growth. But there's always that relative growth differentials, like, where can you find the opportunities to grow and occupy and provide products and services within your market that creates a broader footprint of love and connection with your company, with your products and services relative to the other market offerings? And those, to some degree, are always there even in the time of a pandemic, because everyone's shocked. And so even in playing the defensive game, even in shoring it up, you're doing something there to now go back and provide a product and service that might not otherwise in some of your competitors or some of your alternatives now have been disrupted.

And one of the things that came to mind for me as you were talking about the level of disruption and the shock that's occurring is the fact that blitzscaling itself, the model we laid out, does involve an initial shock to the system. Usually it's technological innovation to open up new markets and new possibilities. In this case, we have the pandemic as an exogenous event that's coming in and. And overturning the established order. And that is absolutely an opportunity for blitzscaling.

Yep. And for example, it generates a ton of entrepreneurial opportunity because basically, typically entrepreneurial opportunities open up because an industry has gotten moribund and the companies don't need to innovate. And so their products and services are years to decades out of date in technological development, in. In market awareness and consumer adoption and that kind of thing. Or there's a new technology and the new technology opens up a new sphere for product services. New technology could be, hey, now we have mobile. New technology could be, now we have cloud. New technology could be, now we have AI. New technology can be, now we have servers you know, like the Web, that's typically what opens it up. But sometimes it's also just the industry and its competition, or like a new invention sometimes is amazing to itself. And so those all are the things that usually entrepreneurs are waiting for. The thing that a pandemic brings is because it's a shockwave that causes a bunch of dislocution. There's a much broader range of opportunity, that broader range of opportunities because, like, okay, well, now how are these needs or interests going to be met? Like, okay, so I suspect that actually, in fact, we are in a rational society. Not to say that all societies are all places the US can ask rationally, but I think we're basically not going to be doing, call it stadium events for at least a year, if not longer. And stadium events, obviously, like sporting events, but also like theaters. All of those things you say, okay, well, so say all stadium events, all theater events. All of them, as they were, go away. Well, there was a demand, there was an interest. What are the new products and services that could now fill in? That could be that. That could potentially now, because you can experiment, could be so good that when the stadium events come back, because they will. That. That's like, oh, that's a valuable thing that continues. That's a new market addition, and that's the kind of things where things open up to entrepreneurs that simply weren't there before.

Now, let's talk about something a bit more specific. We've talked about and written about the company Airbnb many times. It's one of your investments. It's a classic blitzscaling company, but it's also operating in an industry that's really been decimated by this pandemic. Hotels, airlines, cruise ships, they've all seen their revenues decline 70, 80, or even 90%. So from your perspective, how does the pandemic affect Airbnb and its future?

So, obviously, on one level, it creates a huge challenge. And that challenge is because Airbnb is, you know, has built an amazing business that's very tied to the travel industry. You know, you want to get an apartment on the Seine for a price that's lower than you would pay for a nice hotel that gives you a great location, a feeling of belonging in the center, a connection with whoever the owner of the apartment is who can give you a guidance to the local cafe or, you know, where they would get a nightcap or what they might do for, you know, a stroll in the evening, like, where they might go. You know, all these things that lead to that kind of cultural connection. And obviously, one of the last things that's going to end up coming back in the pandemic is essentially international travel, right? Because the first countries will get on their own feet and then they'll go, okay, we have a good control. And then we'll selectively, you know, kind of enable the border and then selectively open the border more and more. International travel will be the slowest. And there was a whole bunch of things within international travel which were part of the surprise and delight of the Airbnb experience. And they're, they're very similar to other travel industry things. However, the benefit that Airbnb has by being a network and having essentially a network of entrepreneurs, because the people who are host and offering kind of accommodations were doing so because the market demand was, you know, if you were that apartment owner in Paris, you go, oh, actually, in fact, there's a bunch of people from around the world who want to come to Paris and they want to be here and they want to rent an apartment and they want to be able to walk down the Seine and see Notre Dame and dine at some of the amazing restaurants and so forth. And that's why Paris is a tourist destination, just like many others, of course, in the world. And now that demand will shift because, for example, domestic travel will come back much sooner than international travel. And she's like, well, how are you appealing in the right way to domestic travel? And then, what's more, other kinds of things will show up. Like, for example, people will say, well, you know, I'd like to be able to have a little event where my family and friends come and visit me. And we do that. And it's not like a party or something. That's because Airbnb is very restrictive of things that could damage the host property and so forth, as they should be. But say, hey, now we have new kinds of things that these hosts can then say, hey, look, I can offer my space in a way that allows this thing to happen, which is appropriate for the pandemic recovery phase and the ongoing thing that are things that people will have a need for that space. Obviously, what you're seeing right now is like, well, we offer space for first responders and we offer space for, like, say you're sheltering in place and one of your family members gets Covid and there's an empty Airbnb. You can go to the Airbnb and do the two week quarantine there and then, you know, clean it down. You know, that kind of stuff is all like, Right now, but that will immediately start growing, and then the use cases will be entrepreneurial, they'll be new. And the benefit. The advantage the Airbnb has is it has the network and has a network of creative people. And the hosts are communities themselves. Those who communicate, they'll say, hey, I found this really great way of saying, hey, here's how you do a, you know, call it City X vacation. It's like, you know, you're going off to the beach and you're spending a little bit of time there, and it's all within the area that now has gotten out of lockdown. They no longer have r naught above one in that area. You don't want to travel past it because there may, you know, you don't know it's uneven across other areas, but you could still do kind of interesting events and escapes. Like, if you're here in the Bay Area, you might go to Tahoe. You know, there are other things that could generate that, and Airbnb is potentially the right way to do that. And part of that's because obviously there's going to be. Have to be new cleaning protocols for how you clean and what the phase of emptiness is to. To make sure that there's less room in the pandemic. But, for example, unlike a hotel, which is the most efficient to, say, put 400 people in, it's to put a whole bunch of people in the same space. Whereas Airbnb is naturally distributed, like Airbnbs are naturally kind of social distancing in various ways. And so that may be another thing where the hosts can innovate and create something which is both good for the host, good for society, and good for the traveler as a way of doing it. So, ultimately, I think the ability to adapt to the future, the network and entrepreneurial basis of Airbnb will show some extremely interesting things.

Now, that's really interesting because I hadn't really thought of it that way. I hadn't thought about the fact that Airbnb, because it is largely individual apartments and homes, would provide better social distancing than hotels. But absolutely, that is. And it's going to be the case that when Airbnb starts to come back and the hosts start to come back, they don't have to do something like, say, oh, going to leave every other room unoccupied for the purposes of distancing. So that's pretty remarkable. The other thing that I think is so important about what you said is that this is the network, so it doesn't have to be Brian Chesky and Joe Gebbi and Nathan Bliss Chartsic Coming up with all the ideas for what to do, all the individual hosts are unleashed, and they can come up with ideas that will then bubble up throughout the community. But it is still important to have good leadership during these times. And. And Brian Chesky and the team there have been acting very quickly. They've done things like make sure there was a fund set up for the hosts. They allowed people to get refunds very quickly. They actually raised more money. And unfortunately, as you referred to before, they did have to lay off a significant number of their people. But they did it in a way that, at least from my perspective, was well handled and really focused on honoring the alliance. And we'll talk more about that in another podcast. So what kinds of lessons do you think we should draw from how Brian and the team over at Airbnb have responded to this challenge?

Well, you've given a quick, pricey overview, a bunch of the good things. I'll go in a little bit more depth in those and add some. So, obviously one is they said, okay, a crisis has hit. We have both guests and hosts who are getting affected by this because their previously booked travel, the travel policies around that. If we just said, hey, okay, we allow all the guests to cancel and keep their money and we don't give anything to hosts, then of course that'll have a huge impact on the hosts. And if we don't allow them do it, that'll have a huge impact on the travelers. So what do you do? Well, you know, kind of, in classic kind of wisdom, share the pain. They said, okay, look, we'll refund all the money to the travelers. We'll do a host recovery program. We'll take some of that pain ourselves within a narrow window. We'll will change what our policies are during this, and then we'll obviously go to the market and shore up our balance sheet intensely, not just for this kind of recovery period, but for knowing that we're going into these turbulent times. And the part of what happens in these turbulences is you may have to reestablish both for the current turbulent times, for the recovery time, and for the new normal, what product market fit means at each of these instances, because it isn't necessarily exactly the same. Obviously, you want something that's as close to each other as possible and work through it because it's expensive for companies changing their product market fit. Now, it's easier when you have a network product that's like a marketplace like Airbnb. And a community product where they're sharing information with each other, but still hard, like, easier doesn't mean not hard. And so that kind of thing is all really good, but they recognize, oh, my God, we have that problem. Then they said, okay, well, you know, part of, you know, we've grown this whole business expecting what we've been getting, which is this year by year, travel growth, and we don't know, we're resetting kind of some product market fit. We're undoubtedly going to get back to the travel growth, but we're all geared up for that. So now we're, unfortunately, we're overstaffed for that. And like all good business leaders know, and. And Brian is a great business leader, is to say, well, actually, in fact, you take the hits now. We have to do our reduction in force now. But as opposed to doing that, he said, okay, what's the way that we can do that is belonging and being human are really central Airbnb values. He's like, what's the way we can do that? He said, well, let's go through the normal process, figure that out. But then what we're going to do is we're going to turn, as opposed to the normal recruiting function being the how do we recruit more people, the next generation, or into Airbnb for a while. We're going to turn the recruiting function into how do we help place all this really great talent that we regretfully won't work for us because we're cutting that initiative or, you know, one person has to go out of this team and so forth. But these are all people that we hire. These are all people who are functioning well with us. And so we're going to have our recruiting help them. We're also going to publish the whole list. So to make it really easy for everyone else who wants to do recruiting, we're going to facilitate the publication of that list in the interesting alternative formats. Like, for example, Coda created its own Airbnb list to show out of Coda IO, kind of how you can actually use it for recruiting and sorting through and searching and making an applicant recruiting and tracking process through it in your own customizable way with Coda, and to facilitate all of that. And that was actually, in fact, I think, part of the thing of showing, because not only do, of course, the employees who are leaving say, okay, great, I may not have chosen this, but I feel like you are doing what you can for me. But that also shows customers that you care about your employees. It shows your existing employees that you care about that. It isn't just like, yeah, yeah, it's all about us in the future. And who cares about anyone else? You care about their colleagues, their brethren who are going on to other things, and you could do that in a very human way. So those are some of the things that Airbnb has done well. I also think that they have retrenched in all the ways of making this transparent. Brian's letters and communication to the public show him as the kind of leader that I am, you know, proud and honored to be sharing the journey with with him, like that was essentially good. I think that their internal communications about, look, it's tough times, but we're in it together and we care about the people who have helped us thus far but are getting off the ship here. All of that, I think, is part of how Brian even takes the company entirely. Not just Brian, but Brian, you know, is the CEO, says, look, we have this crisis moment that could deal a massive blow of trust to our culture, to the belief in. And we try to take that crisis moment and show that actually, in fact, we even earn more trust. We are trying to be good partners and good stewards and be there intelligently with you. And, you know, as you had mentioned earlier, we're going to be doing another alliance podcast. But this is a great way of showing the alliance with your current employees, with your former employees, you know, the layoffs, and with your new employees who will be coming later.

And I think that one of the things that impressed me the most about the response is that it was both economic and emotional. On the economic side, there were key things like waving the usual cliff on vesting so that all those employees who were laid off, even if they were laid off before their one year anniversary, could be owners in Airbnb and participate in that IPO that will come someday. But on the emotional side, and this is something I didn't see any other company do, they made the last day for those employees, not the Friday of the week that they made the announcement on, but on the Monday of the subsequent week, so that that day could be dedicated just to allowing the different people, those who are leaving, those who were staying, to say their farewells and really, you know, tie up that sense of belonging and community. And I was just so impressed when I saw that.

Yep. And obviously all of the stuff is even totally strange because you're doing it in the era of video conferencing because everyone's already in a shelter in place order while you're navigating through all of this.

Now, obviously we've talked a lot about the travel industry, but even outside that industry, this pandemic has just created lots and lots of uncertainty. So how should companies think about the volatility, unpredictability of the future and how should that affect their plans going forward?

So a little bit like we mentioned earlier, is first, you know, obviously, think defensive. Think now. Think defensive doesn't mean presume you have no revenue for a year, right? Or sometimes it can be like you're in the travel industry. That may be a good, that may be the right presumption, but it doesn't necessarily mean everyone goes to that. Because what you roughly do is you want to say, look, what if I think about it as a serious depression or a serious recession, the drop off of customers, there's a slow cycle of customers, the contracts are smaller. What would all that mean in terms of planning? And then plan roughly around that? And then as part of planning, you also figure out, like, how do I try to get as much intelligence as possible? Like, do I call certain customers and find out what's going on in order to guess and build a model for what's going on? Because you have this uncertainty, how do you do the monitoring to know whether or not you've calibrated at the right level? Obviously, part of the reason why you calibrate low is to guarantee as much as you can endurance and persistence and survivability. But by the way, if you calibrate way too low, you may be missing huge opportunity and actually maybe delaying even your, the quality of product and service and your R and D development for the folks you have. Because if your revenue only really went down 10% and your growth went down from 40% to 20%, that may just be the, okay, that's fine cost of business. Just keep going and keep building your product and all the rest that's important to kind of calibrate to. So part of it is to think about that part of volatility. Now, there's one thing that, that is an unfortunate aspect of all planning is that people try to say, okay, all right, I now have predicted the next quarter, the next year. Like, this is the whole thing. These are the budgets, this is the revenue, and I got my plan right. And then variations are fine if they're small within it. But everything else, one of the problems we're in right now is that saying I now have my plan is a bit of a fool's errand because there's a lot of things we don't know about what's going on? So like a little bit of a society partially of course led because we have a completely incompetent White House is thinking that, oh, in August we'll be back to normal. Right? You know, or some month x we're back to normal. And almost for sure the old normal's gone and the new normal is going to be different than the old normal. That doesn't mean that it's always like we'll get back to economic growth and prosperity and so forth at some point, length of recession, depression, et cetera, is way doing this. But the old normal is gone. And as part of that, you don't know what fully is going to happen. So like for example, here we are, we're recording this in May. Some states are still in lockdown managing it. Other states are undoing lockdown. There's a significant probability that there's a recurrence of COVID going above R01. Possibly in those states that are doing unlock, you know, the unlocking now or not exhibiting social distancing. And then you have another kind of wave that happens, the hope for a vaccine. I think we'll have an unprecedented network of the world of companies and universities and individuals looking for a vaccine. That's awesome. That's the bull case for there'll be a vaccine next year. The bear case is, I think the average vaccine time is four years, right over time. So you're like, okay, maybe there will be, maybe there won't be. But either way, what we know was going to happen is essentially volatility. And so you have to be measuring constantly, you have to be replanning constantly. And that doesn't mean, oh, no plans. That means you kind of set a reasonable baseline. Now part of the baseline we say, well, how do you know not to be too pessimistic? Is if you kind of say, look, I'm an average industry and I presume 0% revenue or I presume something catastrophic and like all of my ilk are in the same bucket. Like for example, if we go to a. Like, for example, like the whole society is kind of shut down, stay in place. You gotta presume all the society is gonna be working to try to get us back on your feet. It's not just the stimulus packages and everything else. You go, that's beyond me as an individual, me as a company. So I don't plan for that. It's like, I don't like, for example, no companies or very few include a possibility of war or nuclear war in their company projections. They Go, well, look, if we get there, everything is like, everything's different. So you got a similarity of. You got this ongoing crisis where you need to be saying, I need to replan, I need to replan, I need to replan. That's great, by the way. It's tiring, it's stressful, it's concerning. But that's the nature of it. And that's what you essentially start doing about that unpredictability. So it's a, you know, hey, here's what I think a year plan will be. The most relevant thing is what the next quarter is, right? And here's the things I'm doing the quarter and here's how I'm going to a better monitoring state about is it working? And by the way, I recognize that even when I establish, I go, oh, well, here is the new truth of the pandemic. You say, well, in this kind of volatility, what counts as product market fit, what counts as a reliable lesson to now plan on? You now have to discount to a certain percentage. It's not 100% anymore. It's like, well, I'm pretty sure that works enough so maybe I won't even measure it, but I'll pay attention to if other things don't start working again. And that's part of the planning process for how to look at it.

So let's say companies have figured out their planning, they're planning, they're replanning, but in order to carry out those plans, they still need money. So what is the state of the venture capital market right now and what things should an entrepreneur keep in mind if she's going out there to raise venture capital?

To blitzscale, one is there's a macro thing of saying that, look, there's a crisis and a pandemic right now, and it will change over time. Next couple months, months, couple months after that, couple months out of that. And there's a possibility that it'll change back to some price resetting of venture capital and capital available. But remember, there's ongoing volatility. So the question about how, what is the evolving landscape of venture money is actually in fact one of the things that this will change over time. So I will say now and I'll give some signposts of the future, but the signposts have variability in them. So the now is think of basically funds that have a large existing portfolio and funds that don't. Funds that have a large existing portfolio, roughly speaking, they aren't adverse to new investments. I'll get to what the new investment landscape I think looks like for them. But what they've been doing for the last couple months has been making sure that their existing portfolio is kind of well covered. And so that's been their top focus. Now they have been doing new investments. The new investments that I've roughly seen are it's a Series A or seed or something equivalent that's substantial enough that you say, well, when you're doing your next fundraise, your next fundraise will be far enough out that whatever the current massive volatility is, it'll at least have gotten back to an understanding of what regular course of business looks like then, even if it's a depression or recession, et cetera, and what the opportunity is. So I think Series A's are still happening. I also think that the hey, we know this entrepreneur, we know this company. Those investments are happening. The easiest version of those investments are take for example, most recently, like Figma is one of the companies that's getting a good kind of tail wind and tide from cloud productivity program from work, is that the investors have been talking to them for a while, knew the company wanted to make it happen and so led an investment in Figma. And so you have those happen and those can happen whether it's a growth round or a B round or anything else because like, oh, we know them and this is a chance of how to invest. And then a little bit of what I think it'll immediately get into is investors that can qualify you with other investors that they trust. Right. So they say, hey, I'm a new investor, I'm investor X, but I know investor. Yeah. Who is an investor in the company or who knows the company well for that. And I trust them and I understand this and I, even though I may never, may not meet them in person initially because it may be all through video conferencing that that will happen as well. Those are the easy investment cycles. And that doesn't mean again, they're easy, but they're the ones that are on the easy side of it. So then you go, okay, what happens when it isn't a Series A, when it isn't a seed, it's a more substantial amount of capital. And how do those play out? Well, when you begin to get further away from these initial cases, the Series A's, the known, either directly or known by network, the clearly rockstar companies that have a lot of traction with them, then that financing process will reassert. But it will reassert in kind of a volatile and uneven way. And so that kind of volatile and uneven way means that you have to work extra hard as an entrepreneur. You will need to kind of work your networking connections, have much more referral, spend more time briefing investors up front, having them get to know the company over time as a way of knowing what is kind of predictable around it to try to get as much momentum behind your company on low dollar amounts. Of course, that's motherhood and apple pie, but you know, like extra work on that too as a way of happening. So I think as you move out from this, you know, central more easy financings, that will get more challenging and it will be something you'll need to work more as an entrepreneur in order to make happen.

Now, looking back over history, we've had periods like after the dot com bust, when the amount of money going into venture capital decline precipitously. And then we have things like the Great Recession of 2008, 2009, where we saw declines, but they weren't nearly as substantial. What are you thinking is going to happen in the future? Are we going to look at a nuclear winter scenario or is it going to be something where in a couple of years we'll look at it as a blip?

So again, volatility, uncertainty. I think we are certainly going to be worse off than the 2008 crisis because I think the current administration is mishandling it so badly that when you can kind of compare the Trump administration, the Obama administration, the Obama administration really got on top of it, dealt with the credit default swaps, it was less big of a problem, but still could have been a tip over the financial system problem. So it was a big problem and got on top of that enough and got enough injected liquidity that within about three to four months it was back to business as usual. I mean, the clocks had been kind of reset, the market had been kind of reset, but it was like the, okay, we now have predictability, we know how to invest in the future, and here's where we go. And the unevenness about the public health response, the unevenness about how do you actually help and support businesses, how do you help and support the workers? You know, unemployment rates are now at kind of, you know, approaching Great Depression rates, et cetera, all of that stuff and incompetence by the current administration will mean that it is significantly worse than 2008. Now, is it the Internet winner? I think probably not in that way because I actually think one of the lessons that modern economies and especially Western democracies, but you know, also China and Everyone else has learned is to say, look, don't just kind of let it fall over and then say, well, you know, you have to get back on your own feet. There's not. It's like, no, no, we're invested in having the economy work. So they will be trying to, trying to apply as much stimulus to getting the economy back to work as possible. I mean, this is, I think one of the lessons from the Great Depression is to say, look, don't just allow the kind of unemployment to be rampant. Go figure out how to get the engine going. Like, do not rest until the engine's going. And then after that, ease back up as much as possible to letting the market make all the determinations. As the market will efficiently allocate distributed resources through its network intelligence about which things need the resources, which things produce, customer demand, which things, et cetera, et cetera, et cetera. Part of the reasons why capitalism is a strong technology, that's I think, kind of where the future will be going. Now, that being said, because of the just catastrophic mishandling of this. I think the rule for the next year or two is turbulence. And that's turbulence before you get back to, well, now in recovery and kind of rephrasing the growth. And even with a continued high stimulus application for doing that, I think that volatility will be playing out. And so that's the thing I think that people should be paying attention to now. The natural question occurs there of, you know, well, like, where does blitzscaling fall in all this? And the natural, you know, it's like to say, well, actually, in fact, lots of landscapes are opening up. Turbulence opens up a ton of landscapes, make it hard to be fully predictable. So you have to be more of like as opposed to like, oh, I just determine where the rocket is and then I pour as much into the rocket as possible. I actually have to have something that's kind of, that's more dog fighting and adaptive as it scales and grows, but can still scale and grow at speed. And at speed is again, a relative measure relative to other measures. And so I think the blitzscaling opportunities will be there. They'll just look somewhat different than what the last two decades of blitzscaling opportunities will look like.

And I think that's such an important point that you made, which is that the damage to the economy, the damage to the ecosystem doesn't necessarily come just from the reduction in the markets or the reset, as you put it. In fact, it comes from the uncertainty and turbulence, which causes a greater discount rate in everyone's minds encourages people to not invest, not spend. And so what we really should be happening is we really should focus on getting to a point where even if we've had to reset at a lower level, we feel like things have returned to a more stable situation. And. And instead we have an administration that's focused purely on the level of the stock market, which is not the right way to go.

Right? Because the stock market is frequently wrong, either down or up. It's a group of people with their allocation of capital trying to predict the future, but they're trying to predict the future concatenated into a day. And so they tend to momentum down and momentum up when in fact, actually, in fact, you're kind of like, okay, there's a set of things that lead to. That's part of the reason why the stock market's frequently wrong, right. And has suddenly big corrections around. So it's like is it leads to kind of like a local minimum of prediction. Not actually in fact big dislocations, which can be down, of course, but it also will be up.

Now, one of the things you said caught my attention, which was that the disruption that the pandemic has brought is going to create these new opportunities. So what are some of the big opportunities that COVID 19 has presented to us?

I think it's hard to fully count them, but I'll just throw out a few. One is, for example, how companies work. I think a bunch of companies are now kind of realizing, look, we already established our core business. We may not need to be in a super expensive area like Silicon Valley or New York. We can actually move to a more distributed team. We can actually make our company work with a distributed team. Obviously there are early pioneers in this, Matt Mullenweg and Automattic who closed their office here because no one was using it, and a variety of others. I think actually the CODA folks with Shashir's distributed work guidelines is another really good instance here. And so there's a stack of folks who will now have had the opportunity to look at, should we move more intensely this direction. And some number of companies, some number of nonprofits, some number of other organizations will go, yes, we had been started like everyone else. Like we rented a space in the building and we aggregated people there and da, da, da. And now actually, in fact, we would be much better served in our next phase by being distributed. We may still have an office, but for example, our office may be. People come in like it's a much smaller office and people Come in, kind of call it somewhere between two and four days a week into that office. And we have a much wider range of people who work, could be around the country, could be around the world, and who come in once a quarter into the office and so forth as a way of doing it. And that will all, I think, be a stack of new things. And by the way, there'll be a stack of new products and services to enable that, to make that powerful. And obviously some of them exist today. A whole bunch of tools from Microsoft. You've got Slack, you've got Zoom, you've got Coda, you've got tons of these tools for making this happen. Some are better than others and blah, blah, blah, and then they will be made more that way. So I think there'll be a whole stack of opportunities there. There's the other obvious point, which is I think I heard Satya make this from Microsoft. He said, look, this is a gale force win heading towards digital transformation. So companies that were already had kind of hoisted their sales and were heading towards the digital transformation of their business are making a year of progress in every month and they're capitalizing the benefit of it, of using the cloud and the Microsoft case, Azure, using tools to make this kind of work happen, deliver the product and service, whether they're refactoring their supply chain, reinventing their product, reinstrumenting how they measure their product, working effectively and having that loop in a product R and D, all that stuff moving fast. Now the ones that weren't doing that have had a gale force wind behind them when their sails were not set up. And so all they're hitting is the waves and the choppiness and all the rest. And so they're having much more problems. And so you have a set of things that go along that kind of digital transformation ethos. Then I think what becomes interesting is that, I think that the. Because in a sense, when you lock down the market and say everyone experienced this this way, and we do have a large, even if we don't have as much broadband distribution as well, we have a lot of Internet participation, I think this kind of opens up a development of the market. Like people start saying, well, I'll now use these online tools, use these mobile tools, get a better sense of how this can fit into my life, whether it's how I'm looking for a job, how I'm getting reskilled to take a little microcosm. I think that one of the small things that'll play out is I think previously, if you had gone to people and said, hey, we're going to deliver training or physical therapy through video conferencing. They'd say, ah, no way. That's so much better in person than it is in virtual. And now that they've said, okay, I had to be at home and I've had to do this at home, what they're realizing is to say, well, actually, in fact, having it delivered at home at 7am Before I head in the office, that actually works pretty well. I get a mat set up, I could set up the phone the right way. I could do that, I could take the shower afterwards. You know, that works pretty well for me. And so then a group of the market demand, and I think this goes across many other things. Work and looking for jobs and entertainment, all the rest, but that works for me. Then on the supply side, you have someone who says, well, look, I used to be a physical trainer or I am a physical trainer or a physical therapist. And I used to have this ebbs and lulls through my day because of how it plays to people's work schedules. And so I was really intense from six to nine, but then kind of went super casual until three or four. And then I had another period of intensity and then it was over. It was like, okay. And you know, you slotted some people in. There were retirees and people who'd step out from work and so forth, but it was uneven. Now they go, well, actually, in fact, what I'm going to do is have a normal workday. I'll do my 6am to 9pm in person with those people who want it. And then if I'm in, you know, say in a different time zone, then I will go and start doing virtual to the people who are in that time zone who want that, who want the 7:00am slot. Like, say, for example, I'm 7:00am in California and it's 10:10am in Florida. I'll offer that hour slot in Florida. And you might say, oh wow, I can find this really great trainer who would normally have like a fully booked day, but who does it this way, right? And I can use that. And that's, I think, the kind of thing that you will see as the kind of shifts in this. And one of the things that is so essential is that entrepreneurship is going to be the thing that rebuilds our industries. Like it's always been important to focus on entrepreneurship and now it's more critical because what are the new products and services? What are the new jobs? What are the new companies in this Disruption, that's what is going to build it out. It doesn't mean that existing big companies won't continue to be flagship providing their products and services. I think all the tech companies like Microsoft and Facebook and Amazon are all doing, and Google and Apple are all doing their product inventions. Great, that'll continue to happen. But there's this whole range of other things that are going to be super important and I think that entrepreneurship is going to be the way to do that. And by the way, to some degree, all SMB entrepreneurs are in fact also like going to be critical here because you know, like we're going to have to have a complete reinvention of the whole restaurant industry as we're going through this because you know, a huge percent of restaurants are going to not reopen or they're going to reopen as kind of the bankruptcy and then reopen and that that's the way they're going to operate.

I think that's so important because you've used this analogy before. You talked about the asteroid hitting the earth and the extinction of the dinosaurs. What happened afterwards is the earth didn't recover by saying, hey, let's bring back dinosaurs.

Yep, right.

They had a new group. The mammals that came in that were smaller, nimbler, had different characteristics. And it really is the case that in an environment where there has been so much disruption, entrepreneurship, the ability to adapt, the ability to build something new is so important.

Exactly.

And that ties in with your work as well because you are also, in addition to being an intellectual, a book writer and an entrepreneur who helped come co found LinkedIn, you're also a legendary investor at Greylock Partners. So as an investor looking at this landscape, what are you excited about right now? What are you looking forward to in the months to come both for the industry and Silicon Valley and the startup world as a whole and for you in particular?

Well, there's one part that's kind of like hey, it's steady on and I'll explain why that is. And then there's one part which is, oh, I'm curious about what the new will be. The steady on is that the way that I do investing, the way that Greylock does investing, is we tend to invest in things that we hope are multi decade and hopefully longer industry transforming businesses that are the stalwarts of the next generation. And so even when we were doing an investment three years ago, we were looking at what does it look like in 10 years, what does it look like in 20 years? That's the plan that Part of it tends to be very similar because you go, look, there is this turbulence around financing and hiring and all the rest. That's the difficulty of a pandemic pre whatever year we get a vaccine and what culture changes we need to make in masks and hand washing and other kinds of things and social distancing in order to make all this work. But we're still focused on, okay, what are the digital transformation of industries and the industries that open up because of AI, the industries that open up because of cryptocurrency, the industries that open up because of the move to the cloud. We still essentially are doing all those things and that's broadly business as usual with of course, the, well, do you have enough money to get the next financing? And given that we're going to be sailing through a recession depression, will this plan work in that way? And how much capital will require and a stack of other things that will make that kind of play out. Now the new is to say, well, actually, in fact, there's a set of things that you say, well, now actually, in fact, new things will be possible. So for example, I've been one of the people, even though one of my earliest jobs was for Fujitsu Software Corporation doing this virtual worlds product called Worlds Way. So I had very early exposure to the thinking and the creation around virtual world and VR, paid attention to ar. And in my partnership I'm one of the people who is a skeptic about the time is now for these kinds of transformations. Because I tend to say, well, look, it's a cool new technological thing, but you also have to have a market that's ready for it, a use case that's worth the expense, the delight. I actually think one of the things that Microsoft's smart on is with its mixed reality and HoloLens is like actually, in fact, yes, we have AR with Pokeman, Go and niantec. But I think AR for the workplace is going to be just a steady drumbeat of improvement. Like when you have essentially the hollow lens glasses that help you work better, people are going to be very comfortable with that as part of the uniform. And actually, in fact, you just have a knowledgeable, well, I pay this expense for equipment and a service and I get this increase in productivity and I work this much better as a business. It becomes a predictable event. And then you have a learning cycle of investment that works that way. And I think we will see a bunch more of that anyway. But now I think, well, what are things that previously were nuts that may actually, in fact the time is right. Maybe it's going to be virtual reality, maybe it's going to be in entertainment because like, okay, theaters aren't happening. And the whole attempt to turn theaters into 3D things, maybe that won't work, the 3D glasses and other kinds of things. But maybe actually now 3D entertainment done at home is going to be the thing. I'm not saying that is the thing. But you have to re evaluate your old lessons and say, okay, now what's happening? And then of course, there's the questions around, like, all right, well, actually, maybe we'll see a massive increase in precision health. And we'll see a massive increase. We'll say, look, we got to cut through all of the, like, we have this mammoth amount of security around health records which prevent provision health, prevent that kind of stuff. We say, well, but actually for a pandemic, we need to cut through 40% of it. Like, we need to say, no, not everything, but just 40% of it in order now. And now all of a sudden we start delivering real precision health. And so, for example, imagine a very specific Covid thing and say, hey, we now know how to do genetic tests to say, well, for you and this disease, COVID 19, the new flu, whatever, you're really at risk, but other people aren't. You go, okay, so great, what do we do for the people at risk? Maybe it's preventive therapeutics. Maybe it's for you in COVID 19, you should be wearing a mask all the time and you should be doing social distancing and I'll make you feel really weird for the next two to three years. Whereas this other person, hey, actually, you're fine for COVID 19. It'll be like a modestly bad flu. Wouldn't really take you out if we got a vaccine for you. Great. And I think those kinds of transformations will start happening. And I think you will not just see them within the medical sphere, but within what happens within AI and data and all the things in order to make that work. And I think this is part of when people are like, for example, what you've seen is a, a natural populous surge from a nervousness around the use of data to say, well, actually, in fact, there's opportunities here too. And these opportunities may be actually really key for your future health, happiness, productivity, work, career, and so forth. And so you have to shape it not just for avoiding downsides, but also for maximizing upsides. And this has been my primary concern with most of the privacy evangelists and governments and other People look, you have to look at upside and downside, right? If you say protect all downside, that also means slaughtering your upside. So you always trade some downside. You want to have a little bit of downside for a lot of upside. That's the essential equation you want to be doing here as a society. And yes, you should of course have some privacy regulation and maybe even a lot, depending, but the trade off for downside to upside, and that's the kind of things that I think will now open up as opportunities because people say, oh my God, it's really important. Now I see why that's important. And now we gotta make sure that we're getting precision medicine, vaccines, all the rest as part of how this happens. And that's just one of n things where the opportunities open up because of the pandemic.

I think it's great that after nearly an hour's worth of this conversation, you've still got this incredible level of energy and enthusiasm and excitement and about the possibilities for the future. Obviously, this pandemic has impacted everyone and that covers blitzscalers as well as everyone else. And of course we covered a lot of specific techniques and things that people can do in order to respond to the immediate needs of the pandemic. But I also think it's really important for people to understand this is not going to last forever and that now is a time to start looking towards the future, to start getting excited about the possibilities that are out there. So, Reid, thank you so much for taking time out of your busy schedule for this conversation.

Chris, it's an honor and delight and just to say something that every listeners podcast knows, because it's mostly the entrepreneurial set. One of the things I love about entrepreneurs is the optimism. And frankly, if everyone's a pessimist, then you get the future you deserve. Because without the optimist, without the risk, without the play for that, it never happens. So it's super important to retain optimism, retain a growth mindset, retain that. And it's one of the things that is why entrepreneurship and entrepreneurs are so important for the progress of society overall and of course, the economic progress. So again, thanks Chris, for the Gray.

Matter podcast and Reid Hoffman. I'm Chris Yeh and thank you for listening.