#176 Keith Rabois - Spotting Undiscovered Talent, Discovering Your Comparative Advantage and More!

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Keitra Boyle is a Silicon Valley legend known for discovering and cultivating talent that has gone on to create companies such as YouTube, Lyft, Airbnb, Quora, and many more. Keith is a general partner at Founders Fund and has also founded Opendoor, which transforms the process of buying and selling a home. Keith has a unique and unparalleled track record as an entrepreneur, executive and investor. He began his career in the industry as a senior executive at PayPal and subsequently served in influential roles at LinkedIn and as chief operating officer of Square. On this episode, Keith discusses working with greats such as Peter Thiel and Reid Hoffman find discovered talent and the mental frameworks that he uses.

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Great. Thanks for having me.

So let's get the momentum in this conversation going here a bit. And I'm always curious about how people get the momentum going in their day. So what's the start to the day look like? Here we are Monday morning. Anything in particular you like to start with?

Yeah, I start usually with a workout, high intensity training at typically 7:00 AM. So I roll out of bed, rush to my workout, and then relax, read Twitter, shower, and that you guys start focusing.

I'm assuming you say roll out of bed. So is short or sleep a huge indicator of overall success for you?

Yeah, I've been obsessive about eight hours of sleep, the importance of sleep all of my life, actually. There's a book I highly recommend people reading called why We Sleep by Matthew Walker that will literally transform your life. Once you read the book, you will change all behaviors in your life to focus and obsess on sleep. So I sort of reverse engineer eight hours sleep. So I go to bed whatever time is necessary to get the eight hours so that I can wake up refreshed and focused. It doesn't work, nobody sleeps perfectly all the time, but if you can get 90% days starting with full energy and the ability to focus, it really does change your life. Plus, it increases your health, which is in some ways more important. It's very difficult to do anything successfully if you're not healthy. and the correlation and causation between high quality sleep and high quality lifespan is really just becoming validated empirically, but it's almost surely true. I think we will later discover in the next 10, 20, 30 years when we have more longitudinal data that most maladies are a function of poor sleep. Poor sleep, like six hours of sleep, shortens your telomeres. If your telomeres are short, you're gonna live less long. You can't really rebound from a night of poor sleep. There's a whole myth around this. so I think that's the most important thing for me is getting high quality sleep. Then I wake up, then I work out, which tends to focus me, give me energy for the day, allows me to concentrate without stressing about when I'm gonna fit in my workout. Um, and then I'm off to the races.

So you mentioned sleep, you mentioned health. What are some of those other major.

Life categories that you put considerable effort into? Reading. I've been a voracious reader since I was probably call it eight years old. Uh, there's nothing. more valuable than reading high quality materials. It's basically you can tap into the best thinking of all time and really become an expert in many, many dimensions and forge connections from different fields. And the best way to do that is just by reading and reading constantly. My friends sometimes joke that my whole life revolves around basically Barry's Bootcamp and reading books. So it's like the two B's. And there's, fortunately, there's a bookstore close to one of the studios here. So sometimes I'll actually arrive from my workout with a handful of new books I just purchased. and people almost want to snap a photo of me and say, this is your life, you know, distilled.

How much time are you actually putting into reading each day then?

It has varied over my life. The latest kind of instantiation of this is I would like to read an hour a day. I think that kind of discipline really does yield results where you can finish almost a book a week at that pace. In practice though, I tend to spike a little bit more than I would like. My workouts are very consistent. I work out every day, you know, barring catastrophic illness or something. But, I tend to spend more hours reading on a weekend than I do during the day. There's only, I like to read during natural light hours versus art using artificial light. And there's only so many hours in the day, but on a weekend I may, you know, make up, sort of compensate every three or four hours in a row. Um, but on average, I would like it to be an hour a day.

I've gotten some unbelievable book recommendations from you in the past, but I'm really intrigued about what's your actual reading process like? You mentioned trying to hit that hour. Is there anything you're doing highlighting, taking.

Notes, anything like that throughout the process? I do highlight. I have a sort of hieroglyphics special custom Keith note-taking with a pen. So I read all my books. I should start with, I read all books like physical copies still. And some of my friends who are younger entrepreneurs, when they come over my house and they see a library of physical books kind of laugh and they think I'm like, you know, instead of using Spotify, it's like I playing phonographic records or something, and they're kind of amused. But part of the reason why is I can take handwritten notes, you know, in the margins, and I think that's quite valuable. I think there's also studies that your attention is superior when reading a physical copy. So I really almost always read a physical copy. The only exception would be maybe if I'm traveling for a long extended period of time, or reading fiction, I will read fiction, you know, sort of digitally. But that's basically it. The notes are really hard for other people to understand. There's not, unfortunately, not an easy way to explain my note-taking system to other people. So, you know, basically no one else can take advantage of my notes. If it works for you with the.

Keith Hieroglyphics, then you'll roll with that. I want to pivot here a little bit because I could go down the book rabbit hole with you all day. But a recurring theme actually on this show had been people who were lawyers that end up pivoting. So I'm wondering how the law track helps you out later in your career.

That's a great question. That doesn't surprise me. I think a lot of people go to law school for like option value, basically smart, talented people, often ambitious, sometimes a little bit too credential seeking, but typically go to law school often right out of college. And then they discover that either they don't want to be a lawyer or that law, the practice of law is different than their expectations, et cetera, and they go on, you know, and evolved into other things. That was certainly true for me. I actually wanted to be a lawyer, you know, from the time I was very young, certainly by sixth grade, and was on the classic law school track, political science, joining all these interesting clubs, debate clubs, et cetera, optimizing my GPA. And then I went to law school, did the classic post-law school thing of clerking for an appellate court judge, worked at the canonical Wall Street law firm of Sullivan & Cromwell. And then after three and a half years of practice and a year of clerking, I realized that there might be better things for me to do with my life. So I basically wasted all my 20s practicing law or studying law. So basically anybody who's under 30 listening to this is they're almost surely off to a better start than I was. But there are some things about law that are actually quite useful in any field. Now, the problem with law school is it's a three-year commitment and the opportunity cost plus the financial cost of three years is quite high. So it's hard to recommend going to law school to somebody who's ambitious but doesn't quite know what you have to do. But the law school does do a few things that are very valuable. One, it structures your thinking. I think people notice this when they're in a relationship with a significant other before law school and they start going to law school, almost always the person you're dating will see a difference in how you think in the clarity of your thoughts. So law school is really good at imposing sort of a coherent, clear set of principles in how you approach problems, and that can be applied to basically anything. Second thing is the world is more infused with law and regulation in every field, every decision now in the United States is affected to some extent by law and regulation. The more knowledge you have, the easier it is to sort of triangulate to interesting answers. So it's a little bit to me like a black box. Most people approach law like a black box where they don't really know how to probe and there's much more art than science in the practice of law. And so when you encounter a lawyer who tells you you can't do this or you can do this, you don't really know how to frame follow-up questions. It says a little bit analogous to going to a doctor where you don't have much context about medicine and the doctor says, this is what's wrong with you and this is what you should do. if you don't have a lot of background in medicine or biology, you don't even know how to ask the next question. And the more you can ask the next question, the better care you get, the better insight you get. And so I think being exposed to the law, perhaps even only for a year of law school, allows you to ask your counsel a lot of interesting and arresting follow-up questions that lead to epiphanies. And so for an investor, someone like me, something that I've done for the last, let's call it 20 years, I actually prefer to invest in areas that have a dose of legal or regulatory risk because I believe I have a comparative advantage viS-A-Vis other investors in assessing and calibrating the risk because I can actually do the analysis in my brain. And most investors, almost all other investors, have to actually outsource some of that analysis to a lawyer. And once you start outsourcing things in it becomes you sort of revert to the middle of the bell curve because you don't really know where the lines are yourself. You're deferring to other people who have a somewhat different risk profile, are not incentivized the same, and really aren't motivated to probe at the edges. And so it's not accidental, for example, that a lot of my career success has actually come from in financial services, which are heavily regulated. These days, I invest a lot in healthcare, which obviously is infused with law and regulation. And so I'm looking for opportunities where I think other people will have to call out, call outside counsel and defer to their judgment, and I won't need to.

I'm wondering how we can combine all these things, structured thinking, analysis, ability to assess a risk properly for your own story. And how did you decide then to pivot with this new thinking? to join PayPal?

Great question. So, you know, I was actually pretty happy as a lawyer. I worked really hard. So, for example, my last month as a lawyer in January of 2000, I billed 365 hours, which is, you know, a pretty impressive amount of hours. If you do some math, you can see, like, how much, you know, how a normal day would go, which is basically wake up, It would still be dark, go to the office, stay at the office until about 10, 11, maybe midnight, including all meals, go home, go to sleep, wake up, repeat like six days of the week, and maybe Sunday I'd only work four hours and read the New York Times or something for an hour and have a bagel. So, you know, there's definitely handicaps to that life. And also, you compete on the dimension to some extent of the number of hours you can build because that's one of the ways you're measured. And so I did realize that I didn't want to, given the prioritization of my life of sleep, for example, and the ability of sleep to affect my performance, I realized that competing at the high end of law on the basis of the unique number of hours I could bill was not something I wanted to do necessarily. And so I also was fortunate that a fair number of people I went to college with at Stanford actually had really pioneered the first generation of the internet. in the late 90s and many of those people, as the internet bubble was sort of exploding, were looking for talented people to recruit because basically there's a shortage, a famine really, well, a shortage basically of talented people because everybody was chasing after talented people. So they sort of had a look in strange places and several of my friends from Stanford, you know, were looking in strange places like law firms. And they're like, you seem smart and interesting and, you know, can we convince you to do this? and for a few years, I actually rejected sort of their sales pitches, but I would come out and visit Silicon Valley area like once or twice a year, partially socially, partially professionally. And eventually one of them, one of my friends was talented enough, you know, sort of persuaded me that this is really what I should be doing with my life. And so I sort of just decided one day to really roll the dice and said, this looks interesting. I'm kind of interested in a new challenge. I like the basis of competing on the basis of merit and not ours. I also liked law is kind of regimented, has a lock-step progression on compensation. So you're like a first-year associate or second-year associate or third-year associate. That's your full identity. And those people who believe in merit and differentiation and compensation usually struggle with this. So some people opt out. transactional attorneys often go to investment banking because they have more differentiated compensation. But for litigators like me, there wasn't an easy path to do something like that. So I decided, you know, kind of quick cold turkey and do things incredibly different and, you know, learn this business stuff. I also remember kind of watching a lot of colleagues, sorry, classmates of mine from Stanford doing quite well on the internet and thinking, wow, you know, they didn't seem that impressive in college. You know, I should be able to do that. So a little bit the grass is greener, like that looked easy, which it truly is not. But when you're a lawyer, you know, sitting on top of like the 80th floor of some tower, it looks really easy. And so there's a bit of naiveness to my jump as well.

What's that mindset shift like going from competing on merit and then all of a sudden to no longer competing on hours build? How do you assess your overall value.

It's a great question. So for the first two years, I honestly, in the back, I had this little notebook on the side of my computer and I would still track like what I was working on and how long. It literally took me two years to get rid of that habit. So it's that deeply ingrained. So that was a big problem. Second thing is I actually knew I would be successful when I would finish some meetings with external folks, 'cause I mostly did business development, which is meeting with partners and potential partners. And there was this transformation when everybody went from guessing that I had been a lawyer to being shocked when they found out I was a lawyer. And once the shock part hit in, I was like, wow, I had this true epiphany that I will actually, I'm not actually making it. Because back then there wasn't like a LinkedIn profile. You could just look up somebody easily unless you were super senior or super famous. There wasn't really a way to figure out someone's bio. And so when people would find out that I had went to law school and they'd look up and say, no way, then I realized I was on the right journey. But the first year or two, everybody could guess I had been a lawyer. Part of the reason why is you're so well trained in law school to identify problems and risks. So the classic, in fact, exam technique that almost all law school students suffer through is what's called issue spotting. So you're given a fact pattern, like a real world pseudo real world situation, and your goal in the essay in the exam is to identify all the potential legal risks and then resolve them, you know, basically meaning explain like what would happen if this was litigated. And so your mind is trained to identify everything that can go wrong. Of course, that's not really that useful for building a business. There are parts of that process that are useful for building a business, but the real art in building a business is figuring out how to solve the problems, not identify them. So that mental transformation, I think a lot of law students slash lawyers struggle with if they transition into sort of a risk seeking career, because it's a very different mental mindset.

I want to hit on that mental mindset of you for a second that you mentioned a minute ago about knowing you'd be successful after about two years. What was the narrative like in your head when you were a lawyer? Did you think you'd become one of the best lawyers in the world?

Yeah, I was doing very well as a lawyer. I mean, I worked I clerked for extremely well-known federal appellate court judge, which is the classic like career path for a high-end lawyer. Then I worked for, you know, what anybody would rank as the top two or three law firms in the planet. And I was doing well, I was like a fifth year associate. So that's about two or three years away from becoming a partner. You know, I'd been, I actually had been honored as one of the top four lawyers under 30 in the US by like this kind of cool organization. So I would, that's one of the reasons why it took me almost four years to quit. My friend Peter Thiel makes fun of me all the time because he actually was a lawyer. He went to law school and practiced law at the same law firm I did. And he quit after three months and five days. It took me three years and five, three years and five months. He still introduces me as like, this is the greatest character flaw. It took Keith like 10x longer than me to figure out law was not the right future. So yeah, literally today he to be able to still introduce me that way. So in any event, I was pretty happy and was doing well. In fact, the biggest hesitation I had in jumping into the business world and the startup world particularly was, would I be able to be good enough to be very successful? Not that could I get a job and not would someone pay me? That was pretty obvious. But more that could I be like, you know, the top X percent, 1%, 10%, whatever it is. And so to try to figure this out. I fortunately had a very close friend of mine from Stanford who had been very successful in the first generation of the internet. She was a 22nd employee at Yahoo and done phenomenally well. So I called her up and basically said, Do you think I should do this? And she said, Absolutely, you'll be happier, blah, blah, blah. Walk me through all the reasons. And then the final question, I remember actually looking out from my office in New York City over the World Trade Center at the time and asking her the final question says, Do you think I can be like the best at this? Like, do you think I could be the best in the world of this? And she responded quickly, immediately and said, Absolutely. So I hung up the phone, said, Thank you very much. Hung up the phone, called my friend Jeff up and said, I'll do it. And if she'd give it truthfully to this day, if she'd give me any.

Other answer, I never would have done it. That's absolutely fascinating. I'm curious today then, after 20 years.

In this business, how are you assessing your you know, you, you look at it different ways. I mean, the good news about it's a, well, as a venture capitalist, good news about is, is there's a very clear metric they're gauged on. It's like dollars invest and the returns you create. The problem is, of course, that lags and it lags by, like, a decade. So, you know, when I'm retired in whatever, you know, 10, 20, 30 years, whatever it is, there'll be some number and it'll, it'll be a factual statement of how well I did. But that doesn't help you every day make decisions. But there isn't one empirical metric. It's the only metric that you're really gauged on as a VC. So I use other metrics in the short term. One is the number of people because it allows me to fuse this next director allows me to fuse my operating history, which is really 13 years of my career was running as an executive, entrepreneurial high-growth startups, and my venture capital career and my angel investing career, which is the number of undiscovered talent people that I was able to help mentor, be a consigliere to that turned out to be incredibly important to the world. Meaning like I was able to propel them, to enable them, to give them fuel to create something that changed the world. And so I tracked the number of people that I've been able to help, you know, materially transition themselves. That's the most important thing. It's the most important driver. The second thing is ultimately measuring companies, companies that matter. How many companies can I help in one way or the other that actually transform an industry or the world? And so, I track that, and you can usually tell that before the 10 years or 20 years or 30-year horizon. I can tell you which of the companies I funded in the last five years are going to be transformative, maybe not perfectly, but plus or minus already. And so that's how I measure myself today is the number of unique people I can find that are undiscovered, that I can help, and then be the number of transformative companies that I can be an influential component in their success. Yeah.

I mean, finding unusual advantages in people is one of the things you're known for. What about the unusual advantages in yourself? If someone else was assessing your talents, what would they be saying?

Well, the number one one, is being able to find people who are, call it 19 to 28 years old that other people don't know about yet that haven't had success yet and be able to project their rate of growth and their future potential and help them along the way. That's by far been the most important thing is my executive career is be able to identify, recruit and mentor people like that, be able to invest in them as angels or now as venture capitalists and join their board and be play officially the consigliere role. Number two is as an operating executive, I think the ability to understand what I call a business equation. And sometimes people use the jargonistic term of strategic as a substitute, but basically it's being able to understand how the levers of a company all relate to each other. And so there's variables A, B, and C, and how there's an equation that yields success, but the weighting and the connection between the variables, being able to diagnose that are articulate it and teach it is pretty fundamental and allows you to scale an organization, allows you to diagnose what's working, what's not, allows you to see when you're hitting a barrier, potential solutions that other people miss. So I think that's been a massive ingredient in my sort of success as an executive, and hopefully I've been able to sort of communicate that somewhat through osmosis and somewhat intentionally. to entrepreneurs I work with.

Abstract question here, when you're assessing this talent, you're understanding those certain levers you pull. How are you viewing this in your head? Are you creating almost an actual video sequence in your head to assess how all this is going to interact together?

Not really. I'm sort of projecting what I believe, drawing a line sort of of like what I think the potential of someone is. So point X. where are they, and then where can they get to? And obviously the more data points you have, the more time you have to observe, the easier it is to draw that line. Sometimes as an investor, you have a very short amount of compressed period of time and a very small amount of data, and that's extremely difficult to do. So the more exposure you'd have someone over time, then it's a much easier task to triangulate that. So for example, people who've previously worked for me, often for years, I should be able to assess that almost perfectly and calibrated almost perfectly versus some random person who walks into my office tomorrow and let's say I have an initial meeting of 45 minutes. That's an extremely difficult task.

Is this pattern recognition for you?

It is. Well, I think pattern recognition is a little misleading, actually. I think there are spikes that you're looking for. So, extraordinary ability, but the spikes can be very different among successful people. And so you're looking for something that transcends the average, because by definition, the average person does not start a company that changes the planet. So you need to see a spike, but the spikes per person are not always the same. The pattern recognition comes more from sometimes when you're looking, you know, everybody these days would love to fund the next Elon Musk or the next, you know, Jack Dorsey or whatever the case. But of course, Elon didn't look like he looks today, or Jack didn't act like he did to does today when they were 21. So you have to remember how to adjust the expectations of what you're looking for to what the very successful people looked like when they were 21. As I said, when we were talking about drafting sort of athletes out of college or high school, even nobody looks like, you know, You're not trying to find the LeBron James at 30 when you're drafting a high school LeBron James. And if you're trying to find the next LeBron, you kind of have to remember what LeBron actually looked like when he was in high school, not what he looked like when he was 28. And so I think that's where the pattern recognition kicks in. There will be times when I meet someone and says, God, God, this person reminds me of Max, but Max when.

He was 21 or 22, not Max when he's 40. That's a great point. And you mentioned Osmosis a minute ago. And I'm wondering what you picked up through osmosis that is most stuck with you still today.

That is a very good question. I have learned a lot from working with, you know, I've been fortunate that the leaders I've worked for in my career are really, you know, extraordinary by any dimension. You know, basically my entire career in Silicon Valley is working for Peter Thiel, Reid Hoffman, Max Levchin, Jack Dorsey, Vinod Khosla and Peter Thiel again. so you can learn a lot from all those people. They're all different. They're different lessons to learn. And then I've worked with very talented up and coming people that really teach you in some ways even more. And so I'm always watching and taking notes sort of of things I find interesting and arresting and trying to figure out which pieces of a puzzle I use for my own custom brew. I don't think you want to replicate someone else's strategy or unique insights. You have to figure out which pieces of their success sort of formula apply to your comparative advantages and which ones can you leverage and which ones can you maybe even do better than them. And that's where the art is. And so I'm borrowing lessons I've learned from a bunch of different people, from a bunch of different experiences, from a bunch of different companies and packaging them together and sort of my own Keith custom brew.

Oh, that's fascinating. I'm thinking about the whole art perspective here. And then whose opinions that you disagree.

With the most, do you think you've learned the most from? That's a good question. So I, well, I disagree with Peter a lot. Actually, we probably agree violently 50% of the time and disagree violently the other 50% of the time, which may be, you know, surprising to people. So I've had incredibly vigorous debates with Peter for 20, well, actually probably 30 years. But professionally for 20. And so I learned a lot even from the disagreements. And then obviously the things he says that are fascinating and resonate with me, obviously I take immediately action on. That's probably true for all the people I've worked with. There are things I learned a lot. I agree a lot with Vinod's philosophy of startups building companies. entrepreneurial journeys, there's things that we would debate quite vigorously. And I, you know, learn from his counterpoints as well. I mean, debating with someone who's very good at what they do, who's very insightful, who's very sharp, is always a useful exercise. And so I find that to be very constructive is find people that I really respect that are super talented, you know, extremely talented at what they do and figure out which pieces I disagree with them and will actively, consciously debate them, and that'll help shape or reshape my thinking. This one's going to be a little.

Bit different, but I'm just thinking about all the people you just mentioned that you worked with, also the lawyer background, executive, entrepreneur, investor. If you're looking at all those as individual ingredients, which ones do you think.

Were the most important just for who you are today? Well, I think the 13 years of being an executive, entrepreneurial executive was by far the most important. First of all, that's what enabled me and empowered me to do these other things like angel investing or be a venture capitalist, just having success in that field. Secondly, the network of people that I've often been able to back or people that I originally worked with as an executive. So I've funded everything from former interns to former executives to former individual contributors that have worked with me at PayPal, LinkedIn, Square, Opendoor. So, you know, that's the power, that's the network, that's the credential sort of that's opened up a lot of new opportunities. So there's, and then this often allows me to be a better advisor once I invest in a company. 80% of the value I can probably add is a function of my experience is 13 years in the field building actual companies. So I've basically seen most mistakes before, well partially because I've probably committed them all. And so if I can help a founder avoid them, that's great. And then I've occasionally seen a conceptual framework for resolving very sharp trade-offs that it can be useful to a very talented founder. And that's all a function of my 13 years of experience really running things.

I mean, push back on me if you don't agree with this, but I think it's really important to understand what your unique skills are. And it seems like you've done a ton of self-reflection to really understand this. So I'm wondering if there's anything that you've done to understand what you are best at?

Great question because one of the most important things I read growing up is actually either junior or senior, maybe sophomore year in high school actually, was this book, Speaking of Sports by Pat Riley called the Winner Within. And in the book, he quotes, of all things, Jerry Garcia of the Grateful Dead saying, you don't want to be the best at what you do. You want to be the only one who does what you do. And that's that definition of how to define yourself, that instruction of how to define yourself to be unique, really resonated with me. And so I've spent a lot of time over my life, you know, I've read this many, many years ago, unfortunately decades ago. And I've always wanted to figure out how to define myself, not just being the best, but being unique. And so I always sought to be able to communicate that with clarity. And so that leads to a fair amount of reflection. Similarly, venture capital is a very competitive industry. I compete with a lot of talented people in the US. It's an incredibly efficient market, actually. And so to be successful in an efficient market, you need to figure out what your comparative advantage is and you need to magnify it. if you want to have disproportionate success. So I spent a lot of time trying to figure out both for me and for our fund, how do we have a comparative advantage viS-A-Vis a lot of other talented folks.

Do you have a clear, concise breakdown of what your comparative advantage is?

Well, yeah, it's changed a little bit over time in different roles, arguably. For example, the last X years of my life as an executive. I think one of the things that, well, maybe I'll give you a global one that's probably fairer to state across 20 years, which is what I've been able to do very well is pair with very opinionated, strong-willed visionary founders and be their compliment. And that's a fairly difficult skill or fairly rare skill, actually. And there's reasons why. as I mentioned, all these people from Peter to Reed to Max to Jack to Vinod to Peter are all very different with very different strengths and, you know, different needs. And being able to be a compliment to them in a way that they appreciate is a kind of unique skill. And, you know, I often thought about doing it again and, you know, finding another one of those people because actually is really challenging and very forwarding when it works. So that's one that's probably been consistent. But let's say as an example, the last four or five years in my executive career, I was able to blend what might be called design thinking with empirical analysis in a quite interesting way. So the way I would describe this is, even though as a business person, most of the designers I worked with to really appreciate my feedback. And being able to work with first rate designers as a quantitative empirical thinker with a business and marketing mindset was pretty rare actually. It was a significant compliment when a designer would come up to me and ask for feedback. And especially, you know, once in a while, designer would say, you know, you're like the only business person I like. So I tried to be able to marry those two things. And that's not that common.

Let's talk about the marriage of that then. I'm thinking about just your overall idea generation process. You hear about a business, you're vetting it through. What does that look like for you then, the marriage of those two?

I don't actually do a lot of top-down thinking of interesting ideas that would be great businesses. I'd say that happens for me once every four or five years, which is a very slow pace. I have friends and colleagues who seem to have good ideas every week or every month or certainly every year. That's not me. I'm a better filter of other people's ideas than I am a generator of my own. So a lot of what I do is I listen to ideas and riff on them or critique them and help other people refine them by my critiques or by my riffs versus like generating them.

Yeah, I should have reworded that. I meant more about those riffs and I'm wondering Are you going out on your own, rethinking those ideas through so you can push back even harder? Or is it just kind of right there in the moment you're thinking it through?

It's usually pretty spontaneously and pretty quickly. I have an immediate reaction very fast to a lot of ideas. And then that may start a very deep and long, prolonged dialogue about the merits or demerits of an idea. Over 20 years, you do develop simple distillations that are short, you know, shorthand principles. So for example, I tend to like vertically integrated companies. I don't tend to like components. You develop these pseudo biases, pseudo principles based upon a lot of very detailed and specific thinking that you sort of use as an immediate filter, and then you engage from the immediate filter.

So, let's stick with finding that undiscovered talent. And I know one of your goals is to monopolize that and how close are you to that?

Unfortunately, I am very far away. I have yet to come up with the perfect answer to how to become a monopolist on undiscovered talent. One day, hopefully, once I finally achieve it, maybe then I'll quit.

I mean, one of the important things is taking that talent and being able to structure that culture around it. So, what are first principles around designing a culture?

Well, the first principles to that are if you're going to attract people with extremely high potential, the first thing you have to do is let them thrive, which is giving them degrees of freedom to do both what they can do very well, and to some extent, concomitantly allow them to make mistakes. if you try to constrain very talented people, you're only going to create a mirror of yourself with your same strengths and same weaknesses. So you have to let people do stuff that you disagree with or because you can't really tell how good they are if they're just replicating what you would have them do. So that's the first thing. Second thing is you need to let them, you need to give them enough for basically giving them enough rope. that they can prove what they're awesome at and get close enough to failing that they feel the consequences, but with enough of a sort of a safety valve that if there's catastrophic potential, especially for a company, an operating company, that you have enough time and attention to intercept that. So that alone is a major challenge. Second, I think you need a process for where Nobody's perfect where whoever the set of people are can learn. And that can be through osmosis or it can be through top-down instruction. But you basically want to be able to mentor people. And there's different ways to do that, but you want people to increase their proficiency, improve their craft, and you want to create a process and culture where that's possible, encouraged. So for example, one of the most important lessons I learned when I was a law clerk, so right out of law school, when I was 25 years old, was the judge I clerked for sat us all down and she basically explained that my job and our job said to co-clerks was to not allow her to make a mistake. And that is something I, that lesson is something I demand and instruct all the people come to work for me is your number one job is don't let me allow, don't ever let me make mistake. And I don't care what you have to do to stop me from making a mistake. And so versus you'll meet a lot of people in life that, you know, will complain and whine, you know, oh, my boss did this or he decided that or he ignored me. And I sort of transform that and invert that and say, no, it's always your obligation to convince whoever you report to that they're wrong. And, you know, most of the time, the people that I've ever worked with take this instruction very seriously. and are very good at pointing out to me when I'm about to make a mistake.

No, I love that framework. I love the pushback. I want to dive back for a second and then just giving that overall freedom to make the mistakes and any memories where you had someone you worked with really gave you that leeway to make those mistakes and learn?

Maybe not actually. Most of the people I worked for are very opinionated, very strong views. Maybe, yeah, I'm not sure I got that much of a license, but that's okay. As long as I give other people a license, it's probably more important.

Yeah, no, exactly. So you mentioned that moment when you were clerking, any other defining moments in your career? I know when you pivoted, you joined PayPal. Any other things that really just come to mind for you?

Yeah, I mean, one of the most important moments of my career was when My first week at PayPal, actually, believe it or not, the Saturday afternoon of the first week, Peter and I went for a jog around the Stanford campus, and we had this prolonged, elaborate conversation about how to discover, the importance of discovering undiscovered talent. He basically had this point in observation that you couldn't scale a startup by competing for the same talent that all the large incumbents wanted at the time. It'd be someone like Yahoo, Microsoft, or AOL, believe it or not. or eBay, you had to be able to find people that they didn't know how to process because otherwise they would just outbid you in terms of compensation, et cetera. And so I didn't understand the logic of that. And that was certainly the power behind the PayPal recruiting machine. But I didn't really grok how to accomplish it. So it took me multiple years of trial and error, truthfully. , figuring out how to scale a company, by only hiring people that were undiscovered. Um, so, but then the, the, the benefit or the value and the importance of it was really taught to me November of 2000. And it's been the driving force of my career. So clearly, you know, a very indispensable conversation.

Who would win in a race, you or Peter?

Oh, back then he was a much better runner than me. Uh, I probably could outrun him now, but, Yeah, he is much, much more proficient runner than I ever was.

So sticking with the discovering undiscovered talent, what are some unmeasurable things that you believe just provide the best benefit?

I'm not sure I'm totally following the question.

Are there any unique traits that someone might do that you can't measure? you just think provides tremendous benefit?

Yeah, I mean, certainly things like whether you describe it, Paul Graham has this great essay called Relentlessly Resourceful. It's the title and I think it sort of gives away the conclusion. Whether you describe it as being relentlessly resourceful or tenacious or grit, they're somewhat similar concepts. I think relentlessly resourceful is probably the most apt description, but there are Fairly similar traits. I still believe in the benefits of intelligence and IQ. I think you do need to see things other people don't see. You have to do things other people won't do, which is the relentlessness. But being able to see things and solutions and ideas other people don't see is partially a function of IQ. And then third, probably something to be able to scale yourself, which is around being a magnet for talent. So either be able to assess other people, sell a vision to other people that's compelling because you really can't change the world, at least through startups by yourself.

What do you do if you discover one of these people and they're just working on the wrong thing?

Well, that's rare, truthfully, partially because they're better filters of their own time. They value their own time systematically, you know, as well as I would. So they'll, they'll know if they're working on the wrong thing more than I will. in many ways, they have asymmetric information. I may highlight that for them or may give them some clarification about the value of their time, but they really already know that in their heart and they just may need sort of reinforcement. I mean, that's a lot of my role in many ways is very similar to a psychologist in some ways of giving people feedback by asking questions. And at the end of the questioning, they kind of get to the right or sometimes I think of my role as being a haunted house mirror, like a cartoonish mirror that sort of exaggerates the strengths and weaknesses and really just play back what I'm hearing and saying, is this what you want? And that usually leads to the right conclusion.

That's a great visual display right there. I mean, I'm just thinking about all these different talents, all these different skills you possess. What happens if you lost your memory today? What's the next year look like?

Oh, have I lost my memory?

Yeah, in terms of just narrowing down the most important skills you use today.

It's still really just developing a spidey sense for who might be an extraordinary founder. At the end of the day, that's what it comes down to. And then how can I magnify the strengths and weaknesses of what they're working on so that they can see in stark contrast and make sure that their decisions are conscious. So that's the benefit of exaggerating the strengths and weaknesses. It kind of puts things in stark relief. And then sometimes you realize, oh, that's not exactly what I want. Or sometimes you realize, oh, you know what? That's actually really good. I actually want more of that. So by not, but that's why I use the cartoonish mirror from a haunted house, is you're basically exaggerating the strengths and weaknesses. And that allows sometimes someone to consciously say, you know what? I want much more fat and I should really be tripling down on that. Or, you know what? I didn't really mean for this negative thing. Maybe I should edit that.

So, along the lines of tripling down on something, what do you wish you focused on a bit more when you were younger?

Well, I have a weird arc here. So, I actually did a lot of programming when I was young. I sort of self-taught computer programming and then a a little bit structural, classic coursework in high school. And then I completely dropped any sort of computer science, any programming, completely cold turkey after senior year of high school, did absolutely nothing programmatically or computer science based while I was at Stanford, which is insane if you think about it, given my career trajectory. So obviously that was a massive miscalibration. I probably should have been staying, you know, technically competent and literate and in many ways throughout my college years, but I was so obsessed with my damn GPA and getting ready, you know, prepared to apply to law school that I was afraid of taking courses that were not, you know, sort of in my sweet spot. But that was obviously, you know, catastrophic miscalculation. And, you know, I probably would have been much better off in my own life had I, you know, taken an invested four years of my life in more technology based, you know, education.

You mentioned not in your sweet spot. I'm always trying to find different ideas, different ways of thinking that are not in my sweet spot. Any books that most likely 99% of the listeners have never heard of, but you think just really stretch your mind?

Oh, absolutely. One good thing is if you go to my Twitter feed and you click on the media link, I have way too many tweets for anybody to read, so don't try that. But if you go to my media link, almost 99% of my media link are just photos, images of either the COVID or interesting pages from books. So you get a good reading list just by looking at my Twitter feed and click on the media link. The most influential that are off central casting, meaning not well known. My favorite is called the Upside of Stress by Kelly McGonigal. She's a professor at Stanford. That really will change your world in every possible way. Almost everybody's taught the stress is bad for them, you know, causes health issues, happiness issues, all that stuff. It's completely false. You want more stress in your life with the right mental attitude and you will live longer, happier, be more successful. So that by far, from a management perspective, there's still only one book. It's called High Output Management by Andy Grove written in 1982. It's still pretty obscure. It's had a Renaissance. It was out of print for a while. No one read it versus some of his other books which are best sellers. But highly, highly recommended. It's still the Bible. Still reread it. I still find the story of Apple very inspiring. So I go back and read the Little Kingdom or the Return to Little Kingdom, this revised version by Mike Moritz. That inspires me and I always find new lessons in reading about the creation of Apple. I love, as I mentioned, why We Sleep, which for some people will be revolutionary. So there's a bunch. There's different fields where I find the contrarian things I think there's some great books written about immunology in cancer, which really a radical set of principles that for the longest time we really suppressed the right way to treat and address cancer. And almost for political reasons, we're too engaged in chemo, radiation, and other biological pharmaceutical approaches where there's a much more natural way to cure and are going to prevent cancer as well. And that's starting to becoming the mainstream thought now, but there's a couple of good books. You'll see in my feed about that. It's a fascinating topic.

Yeah, I'm definitely going to have to dive deep on that, something I haven't done yet. What about is there a person or a topic that you've never read a book on that you wish there was a book around?

Hmm. yeah. I mean, there's, there's, there's a couple, I guess, where there's decent books, but not, not as many or not as insightful as you'd hope. So, for example, on Amazon, there's the everything store by Bradstone, which is good, but I wish there was more attention paid to Jeff and the leadership principles at Amazon. I think people could borrow a lot more from Amazon and apply it. Amazon really runs their company very differently than the proverbial Silicon Valley companies, particularly Facebook and Google. And I think the lessons for Amazon are arguably more scalable and more interesting. And I wish there was more written about it. There may be over time. So that'd be great. And I think people don't get as much exposure to Jeff Bezos is thinking. He doesn't to speak that much publicly. He does in private forums, but he's not on stage all the time, so you don't get a feel for what's made them so successful. And it's fair, a lot of, a lot of their philosophy is fairly counterintuitive. So that's probably the number one area for me.

Yeah. No, I love reading those annual letters. So we just got two more quick hit ones before you let you get going here. If you were going to do this, if you were going to be on this end of the microphone, anyone dead.

Or alive, who would you be interviewing for an hour? Wow. Well, Dead or Alive, Margaret Thatcher, she was always the most inspiring person for me growing up. I've read her biography, well, two biographies or autobiographies, and I just find her to be the most impressive person. Fortunately, I got to meet her once, and it felt like meeting God. It really did. There was just like, around her that I've never met with any other person in my life. I've never replicated with any other person in my life. So by far, that would be my number one choice.

All right. And I lied. Is there one other person who would even be a 1B to Margaret in terms of just having that aura?

No. Off by an order of magnitude. I've never had anybody else walk into a room and think I was in the presence of some divine intervention. So maybe I haven't had enough exposure to different people, but no, it was surreal actually. This is about 1989 or so and just magical.

No, I think that answer even speaks higher to that. So final one right here. When was the last time you were truly shocked by a this performance you've seen? This could be a creation of art, this could be a sport, this could be a theatrical performance, this could be someone in business just doing something incredible?

That's a great question. Well, in sports recently, this would be a mundane example, but it's like sometimes the details matter and they're really small performances are what's most impressive. So I love this book. Another book I'd highly recommend is by Bill Walsh, which is the Score Takes Care of Itself. And the basic philosophy is that you don't look at the output. So winning a football game, you look at the inputs. And the inputs, you try to do everything perfectly, precisely. And if you do all the inputs better and better, better and optimize all of them and are always doing them relentlessly perfectly, eventually you're going to win football games. So the score takes care of itself because you've done everything else perfectly. So an example of this, and I highly recommend to entrepreneurs, I think it's an excellent instruction manual on how to build a company and how to build certainly an Apple-esque style company. So we had everybody, for example, read it at Square, is I've been just obsessed this season watching the footwork of this receiver for the Dallas Cowboys on the sideline, Amari Cooper, and it's just unbelievably off the charts what he can consistently can do. Like, you will watch wide receivers play football for 10 years, and they may have one to three catches in their career that are comparable in terms of footwork, meaning State, keeping their feet in bounds to what he does per game. And it's, it's just orders of magnitude better than anything I've ever seen. And the amount of effort practice, precision that goes into that must be incredible. And so that has been striking to me this year, really just watching it and noticing the frequency and consistency. It really reminds me of the book, the Score Takes Care of Itself. It's like a micro example of a macro point that is a scalable way to build organizations in a philosophy of life in some ways.

I love these conversations so much because there's little takeaways like that that I would have never thought of. So I cannot thank you enough for joining us on what got you there. We've got a lot to link up. Where else do you want the listeners staying connected with you?

Well, Twitter is the easiest. I tweet interesting things that I find, some interesting or provocative ideas. That's probably by far the easiest way to stay connected.

Fantastic. Well, thanks again for joining us on what got you there.

It's been a pleasure.

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