Reid Hoffman | Leadership and CEO Succession

Hi, I'm Chris Yeh, the co author of Blitzscaling and I'm here with my co author and old friend Reid Hoffman, the co founder of LinkedIn and investor at Greylock Partners. Today we're going to discuss Jeff Bezos recent announcement that he will step down as CEO of Amazon. Andy Jassy will take over as CEO and Jeff will stay involved as Executive Chairman. There's a lot to talk about here so let's just go ahead and dive in, starting with Jeff who is one of the iconic, most successful CEOs of all time. I think he belongs to that Mount Rushmore of American CEOs along with Rockefeller, Ford and Jobs. What do you think Jeff has done to be so successful and what have you learned from and admire about his career?

Well, Jeff serves as a polestar as a guiding light to entrepreneurs and CEOs is a super long term focus. A willingness to invest in the future and to trade current profits or circumstances for the future and ability to expand. Obviously there are others like this too. Elon Musk most naturally comes to mind. But Jeff is one of those folks who does it within an almost Warren Buffett kind of common sense business framework where he goes, okay, the key things are, you know, that people like are cheap and fast and reliable and how do we build new technologies, new infrastructures, new supply chains, new customer engagement vehicles in order to deliver them. And so to some degree he is a quintessential side of the business innovator within things that are well known and well understood to be very good in business. Now that of course doesn't describe all of it because of course you also have the AWS story where it's kind of the oh look, we have to build up for all of this server capacity for dealing with the holidays. And we have all of it. And it was like well you know, should we see that we can sell some of it during the rest of the year since we had to have that capacity anyway, it's like okay, that's a good idea and is willing to take the gamble on products and product areas where no market existed previously that that product, the completely virtual cloud hosted. There were server companies and so forth that you could rent a server, but they just kind of the I just rent time across the entire cloud hadn't existed before. And so it's like okay, well we can go do that. And obviously it's folks like Andy Jassy who made that superstar intrapreneur drive part of what led to the transition. We'll be talking about A little bit later. But the things that Jeff did was guide all of it. Now let's talk a little bit about some of the things of why I call him a business investor or business innovator as highlighting that versus obviously is great at managing and being executive and being an entrepreneur, and even as per aws, participating in fundamental technology innovations. Part of it is that what Jeff does is Jeff doesn't take, well, here's the way that everyone else does it, let's do it that way, and how he operates on anything. So, for example, you know, one of the things that I think of all the major tech companies, Jeff established Amazon as a writing culture. And so the pattern by which you would write down kind of a case six pages is a canonical one, sometimes it's longer, etc. Sometimes there's an appendix about why this is the thing to do, this is what the components of IT are. And then at the beginning of the meeting, everyone would just sit down and read, right? And the very first thing in reading that's unique within the tech ecosystem of scale in terms of what Jeff does. He also, for example, has OKRs for his board. And his OKR is that each board member and board meeting should have an actionable idea that comes out of it. It doesn't assume we will action. It doesn't assume it's the exact right level of priority, but that's the standard by which we're operating. Or to say, hey, there is a way of managing, which is there's intuitions and gut instincts and there's data. And if you are bringing to me your intuition, then my intuition is what works. But if you bring to me data that overrules my intuition, right? So if you have something that you want to change my mind, figure out how to get some data that will go, okay, that's arguing in favor of your idea and against my intuition. So let's go with it. And the canonical case of that that I think we wrote about somewhere was the question and answer product, you know, on Amazon, which is they did a little dry run of a mini site emailing people, saying, hey, would you answer this question? And got a percentage of people answering it. And that overruled Jeff's intuition that people wouldn't answer those questions. And then that ended the Q and A thing, the entire Amazon site. And then, you know, there's other things like, okay, you know, how do you have a sense of keeping teams small and nimble enough? You know, the, the aphorism that Jeff is known for, which is a two Pizza team, right? Which is if the team has grown above what you can feed them in a meal with two pizzas, then you are beginning to get unwieldy and you should be very choiceful about that. And I guess maybe a last final thing is a classic kind of business wisdom about CEOs is like, well, you go have intrapreneurs and they go try their project and if they fail, they have that same fear of failure of entrepreneurs. And so they have to scramble for it and they may lose their job if it doesn't work. Well, that's actually not how Jeff does his entrepreneurship, which is one of the things that has led to a lot of success. So they try the fire phone. Fire phone doesn't go anywhere. They theories behind the phone literally don't deliver. And what does he do? You know, classic would be, is like, oh, just keep trying on the phone. Nope, drops the phone. And the other one is, well, you let go of the whole team. Nope, he goes to the team and he goes, okay, we got a great group of people here. What should we try next? And that's where the Alexa Echo and home devices came from. And the only people left were the people who just really wanted to work on phones versus the people who wanted to work on, you know, kind of like what is a new platform for voice interface to the web and to Amazon services and to commerce and so forth, of which obviously, you know, Amazon has now got a leading footprint for the microphone and speaker into the home for this. And like that quick list is just the beginnings of, as you say, his qualifications for the Mount Rushmore for American business.

And I think you hit upon something very important which is it's not just about the accumulation of accomplishments of which there are so many, but the fact that he took a different approach to doing this than so many other business leaders. He was willing to ignore conventional wisdom and do things his way, or rather in a way that he thought was going to be more effective than the conventional approach.

Yes, and that's part of the reason why saying business innovator and people too often think that the primary innovation is in the product service to technology, which are by the way, great areas for innovations. And obviously there's various ways to done that. But a lot of Amazon's, you know, many of Amazon's original sterling achievements are in these business innovations. You know, like for example, size of catalog, that's not necessarily new, speed of delivery, that's not necessarily new, cheapest price, that's certainly not new. But it's like how you put those together and how you deliver them and how you stay with the marketing of that and how you're willing to go into it. Like another Jeff Bezos aphorism, which is your margin is my opportunity in order to play this out. And by the way, that your margin is my opportunity is a statement of business innovation, not necessarily technological innovation or others. And so those set of things are among the things that Jeff is deservedly the grand master that people write about and study for insight.

Now another one of these innovations, or rather surprises, is his announcement itself. It was certainly a surprise to me. He seems to be at the pinnacle achievement. He's 57 years old, still relatively young to be running a company. He could easily have stayed on as CEO for at least another decade. Were you surprised by this move and why do you think he made this move at this particular time?

I was surprised. I know Jeff, but I have no inside information on this topic. I have not, you know, COVID lockdown, et cetera. I've had no particular interaction, so anything specific is broadly speculative. Now that being said, you know, I think part of what happens in being CEOs of these things is you say okay, just like our book the alliance, even as a founder you sign up for kind of tours of duty. Now the tours of duty aren't necessarily like the hey, I'm out of here, but also like what's the next five to ten years look like? And am I the right person for the next five to 10 years have having done, you know, five to 10 years or 10 years, you know, or 10 years, then five years. And that kind of thing is I think a good question for all CEOs and even founder CEOs to ask themselves. And so you know, for example, in my case that you know, kind of the path that led to Jeff Wiener is I said, well, I've helped establish product market fit, I've helped establish the network, I've helped establish the raw business model with the enterprise case, the parts for individuals and for advertising. I've established some of the baseline for the network as platform. But there's a ton of work to do here and the scaling and the multi threading and scaling into a large organization. And you know, someone who is a grand master at that would be better at that if they had also the natural instincts for being a later stage co founder of the product. That's one of the things that I tend to think is a important thing about these transitions is the right kind of co founder to fit with what the strategy of the company will be. And that's part of the reason I did that. When I did it, which was, you know, with Jeff Weiner was 400 people, you know, kind of going to an earlier with Dan I, when it was 80 people, you know, going to substantially over 10,000 today. And that was my judgment on. Now I don't know what was going on in Jeff's head. But you know, you look at this and go, okay, we've had a pandemic that's changing things. We've had a bunch of tech lash stuff within not just the US but also kind of tech nationalism, you know, across the different countries. And there's probably a new like retooling and set of things that goes into that. That would be one consideration that we go into this. Another one is, well, we have this enormously successful E commerce business both as direct and as third party of which there will be presumably some conflicts as people start out as part of the tech lash between first party and third party. That's the first thing. But then we also have these other areas that are really growing like AWS and so forth and what's their next phase of that? And how do you rank these businesses internally in terms of how you're focused on them and, and what does that look like? And you know, you could easily say, well that's going to be another new five to ten year thing. And so you could say any combination of these and maybe other things, you know, growing fascination with space or any number of things. But you could say, okay for me when I look at it, because this is part of, I think, looking at succession like any CEO, any founder CEO say look, I'm signed up for a, for these very long tour of duties and if I begin to go well, you know, I'm probably not going to sign up for the next one. That's when you really begin to do not just the normal yearly succession of okay, who would be my emergency successor, who would be my ready in a couple years successor and who would be my ideal successor? Which is the kind of the classic succession path that kind of plays into this and doing that with diligence because by the way, to create companies and products and services that survive for centuries, you have to be part of that process of changeover. Whether your company is independent or whether your company joins forces like LinkedIn did with Microsoft with another one. That's got to be how you're thinking about that longevity and part of making that longevity work. So that's, you know, some set of considerations. Maybe those Maybe others were almost certainly kind of what was going through Jeff's head. And you know, Jeff made the conclusion because of, I think, his depth of Andy Jassy, that Andy has been an innovator in some of the ways that Jeff thinks is key. I'm speculating for the future of Amazon that this is the right way to kind of make the transition. Now he also may be doing what I was doing as a founder when bringing in Jeff, which is staying close as executive chairman, working closely with him to try to make Jeff as in my case, to make Jeff as successful as possible. In Jeff Bezos, with Andy's case, to make Andy as successful as possible. And so all of those things may be considerations as well, but within the normal thing. Now let me add one thing about the key thing about this, which is the normal pattern is to think about like hiring internally. It's like they know our culture, they've been groomed as an executive, and that's to some degree the inside baseball, you know, kind of part of this. And I think that one thing that's an interesting question about, about whether or not Jeff did is I actually almost never think that it's the right thing to only look internally, no matter how amazing you may think that the person is. Because part of what you want to be clear on is what the job is and not just necessarily handed to the heir apparent. I do think that a lot of very intelligent, succession oriented CEOs, you know, such as Jeff Bezos, have a tendency to do that because like, oh, I know Andy, I've seen him do all these really amazing things. And Andy may very well be the best person in the world for the job. But one of the things I think is always at these jobs is to consider both internally and externally. That doesn't necessarily mean you need to run a scour the earth process, but you need to be thinking about it a little bit as the. Just like for an individual, what's the right next tour of duty? You want to be thinking about what is the organization's next need on the next tour of duty.

And I think it's interesting you can see that in the case of LinkedIn, the decision actually went both ways. You have Jeff Weiner, who comes into LinkedIn, is enormously successful CEO. Jeff was an outside candidate, not an inside candidate. But now that Jeff has actually stepped back, Jeff Wiener, that is, and handed the reins to Ryan Ruslanski. Ryan was an internal candidate. So it seems like you've looked at both of them and there are some circumstances under which one makes sense in some circumstances under which the other makes sense? So one of the big questions would be what are those circumstances under which an internal candidate makes the most sense versus an external candidate?

Well, generally, structurally, you want to look at what the business needs. Like one of the things I came to learn, like one of the ways that I generally model businesses is say we have this matrix of functionality. Matrix functionality might be sales, might be marketing, might be product, might be engineering, might be finance, might be operations, might be general management. And so you go, okay, if I had to pick one of these as primary for success in the business, which one would it be? And actually, in fact it's not obvious. Most people who are within an industry, oh yeah, it's obvious, it's sales because sales is really key. And you're like, well actually in some businesses sales is key, but not always, right? And then other people say, oh no, it's product because what is your product? So product is really key. It's like, well, okay, yep, sometimes that cross disciplinary, assemble everything, you know, product fit is a good one. But by the way, sometimes it's engineering or sometimes it's finance or sometimes because, because the real edge, the real secret sauce goes through that area. And so you go, and by the way, historically it tends to be a specific thing within a business, but that may change too. Now by default it tends to say the same for once you've built a scale business and that scale business is focused on product, then you tend to be a product culture. If your scale business is built based on engineering, say like Alphabet, then it tends to be an engineering culture. And so that's the kind of, kind of iterative side of things. And so one question on the internal external is to say, all right, do we need more of the same and the same matrix function? Is that what our internal looks like? Right. And we have the right kind of successor, then in those kinds of circumstances you might tend to go internal. And that may be one of the reasons why, you know, Jeff may very well have looked around, said, look, I really know Andy, I've got a match on all that stuff. Any other spending of time is a waste of time and an indication of a lack of confidence in Andy. Where I really want to show Andy how much confidence I have in him. And so I'm, we're simply going to do it this way. And plus I also know how to work with Andy. So if I'm, as per the announcement, I'm sticking around focusing on product and other kinds of things. As executive chairman I'm still there. And so, you know, all of that may have led to that's the answer. Now that being said, part of my earlier question was to say, well, it's worth going through in some depth in each of those questions because just because someone has bled the business and is actually in fact co founder doesn't necessarily mean that they're the right fit for the next set of challenges for what the business is encountering. Are they the fit for which of the matrix things most need to happen? Right. So for example, I think part of the reason why Satya Nadella has been a amazing later stage co founder, CEO and is actually coming in as a product person and re earning Microsoft rights across all of the different product silos has been one of the things that has been kind of a spectacular revivification. Re earning the right to be one of the platforms of the future in technology. And so, you know, is that kind of thing the right thing here? And then also to think a little bit about like you never want to company to be just ultimately, if you're too inward all the time, then you ultimately become like Rome and you decay wherever you are. And you know, one of the things that I, I frequently see happening in these companies is even you know, folks who are like super intensely like protective of their own thing like Steve Jobs and does amazing job. Jobs was endlessly curious. He was meeting with entrepreneurs all the time, he was asking questions, he was trying to learn kind of what was going on. Even if he thought, well, like who would want to play game on a mobile phone, you know, etc. That's not really fundamental, that's not as important part of utility and those kinds of things. He was still like, you know, the number of people I know who, who Steve Jobs reached out to and said come over to my house, I want to talk to you about this thing that that's doing was very large. And Jeff Bezos has that as well, right. He's like, I'm always asking questions, learning and being externally focused. And one problem about just a succession of internal, internal, internal, internal is that you tend to lose that. And sometimes you might lose it one big jump or you might lose it in small pieces. And ultimately that puts you on a path towards decay, dysfunction and death. And so anyway, that's part of the reason why having that external vision when you're thinking about succession and it isn't just the CEO positions, also executives and all the rest of the is I think a good cross check almost always in a succession plan.

Now let's think about what Jeff Bezos role is going to be. He's going to be executive chairperson. And that certainly sounds like a cool combination. Chocolate and peanut butter Executive sounds cool. Chairperson sounds cool. What does it actually mean? That's a role that you filled at LinkedIn. How involved should an executive chairperson be in the day to day? How should he or she work with the new CEO?

Executive chair is one of those things that means many things. The fundamental thing it means is more operationally active than a typical chairperson. Because your typical chairperson is fundamentally one of the more active board members, more active in corralling and setting the agenda for the board meetings, more active in coordinating with the CEO in if they're not the same person, obviously on what should be the agenda in the board meetings and what needs to happen. The feedback and management of the board between the board and the CEO and a bunch of those things is the normal chairperson function. Now what executive chairperson then means or in Jeff Piso's case, executive chairman or I don't know in actually his case. But what it means is I'm going to spend more time internally like I'm going to spend more time working with executives, product teams, innovation groups, you know, like for example, you know, in my case my office was immediately next door to Jeff Wieners. So he could stop in at any time, I could stop in at any time, you know, depending on things we were doing. When we were focused on China, I took lead on China. But I was essentially the whole thing was essentially with a lot of information with Jeff about what was going on in China so he could coordinate the rest of the org. But what it specifically means in that operational intensity, it just means that there is more, more connectivity in depth within the organization is different on a case by case basis. And that's, you know, what does the company need? How does the CEO and the exec chairman work together? You know, what is the divide up of distinct responsibilities, what are the coordinator responsibilities, you know, that kind of thing. I mean almost always the CEO is still the CEO basically fundamentally in charge of making all the macro decisions. But you know, in the executive chair case there may be some like, okay, you're running that project and you're syncing with me and how you do them and so that I, it doesn't upset the rest of my organization. So that's what, generally speaking an impression of a range of things an executive chairperson could be. But it also means something. What it means specifically for Bezos and Andy Jassy don't know. And it tends to be organic and specific and not typical in each case of an executive chairperson.

Well, as we leave this particular topic, are there any final words of advice that you have for Jeff and Andy as they embark on this new phase in their relationship? Any lessons that you learned from your own experiences with Jeff that you think Jeff Weiner, that is, that you think would be helpful to share with them?

One of the things that I had learned from first hiring Dan, I and Jeff Weiner, and Dan, you know, had, you know, was great to partner with for the couple years he was the CEO, but was one of the things that I thought that I did that I did not empower Dan appropriately, that I then did to empower Jeff appropriately, which is the CEO is ultimately the brain of the organization. And one of the challenges about a CEO transition is its brain surgery. And part of that brain surgery is the neural pathways have to be rerouted, and people have to learn to, as opposed to going to Jeff, go to Andy for the problems and solutions. And, you know, the kind of Andy being the. The new brain in this thing doesn't mean with executive chairman, that there isn't a hippocampus or, you know, some, you know, cybernetic enhancement that's going on with the executive chairman. But they, you know, to probably brutalize the metaphor, but that needs to happen. And what I did, having realized my earlier failures with Dan, was that I then, for the next six to eight weeks after I put Jeff in place, was constantly out of the office so that people would go to Jeff with the challenges, so that that would cause the neural rewiring. The natural thing was coming to me. It's like, oh, I know Reid knows how to solve this, or Reed know how to do, so I'm going to Reed. And like, no, no, no. But that's acting like I am still in the CEO direct chain of command. So that changeover would be something that I would recommend. Now, that being said, during obviously, this super difficult time of the pandemic and how things are operating in various ways that may already be naturally part of it may have even. May have even figured into Jeff Bezos's decision for how to, like, why now? And how to do it, because that rewiring is already happening through zoom and teams and other kinds of video conference and remote work and work from home and all the rest of that stuff. And so you may have said, okay, this is a good time for that rewiring to naturally rehappen anyway. And so now is the time.

Well, I'm sure you'll join me in wishing both Jeff Bezos and Andy Jassy the best of luck in this transition and many great things. And thanks as always, Reid, for taking time out of your busy schedule to share your thoughts.

Yep, I loved your praise of Bezos as a candidate for Mount Rushmore of American CEOs. And so, as always, a pleasure.

Chris well, that concludes this episode of Gray Matter. You can subscribe to gray matter on soundcloud.com greylock partners. You can also find new episodes and blog posts on greylock.com and of course you can follow Greylock on Twitter at greylockvc. I'm Chris Yeh, and on behalf of Reid Hoffman, thank you for listening.