Keith Rabois explains why startups must recruit unconventional talent to compete with big tech. He learned this at PayPal in 2002, where Peter Thiel hired misfits and Stanford students instead of mainstream candidates. Rabois later shifted to pulling underlevered employees from within PayPal, which improved performance and earned him a promotion to EVP.
Chapters
One of the most important skills in building a company from scratch is the ability to diagnose, recruit, and assess undiscovered talent. It's very difficult as a proverbial startup where you're really an underdog, basically chasing a heroic vision that nobody really believes in, to recruit people that have tons of experience that are desirable to Facebook, Google, Apple, Amazon, partially because those companies are going to offer the talented people that have already proven they can do X, Y, or Z more money. It's going to be very challenging to compete with that on the basis of cash compensation. You have to compete on the basis of vision, impact, and also the ability to find people that these other large companies don't know how to assess. Typically, by the time you're about 30, all companies can assess you approximately the same way. They're going to look at a LinkedIn profile or a GitHub account and they're going to conduct reference checks and come to a pretty similar perspective on someone's strengths and weaknesses. However, if you can find people that don't have the data points that large companies are looking for, the experience, the LinkedIn profile, the GitHub accounts, these large companies don't know how to act. Because they hire typically through committees and they're reduced to a consensus decision-making process in one way or another, there's sort of a homogenization function. You can find people that are off central casting that have incredible talent and that's really how you have to build a company. Peter Thiel taught me this lesson originally in November of 2002. my first week at PayPal, we went for a jog around the Stanford campus, and Peter was explaining his philosophy of company building. And he basically mentioned that there was no way to compete with at the time Yahoo, AOL, Microsoft on the basis of compensation so that we had to go find people that they didn't watch or they didn't know about. And basically that's what we did. So Peter hired from basically a pool of people that he knew from Stanford and Max Levchin hired people and engineers that he knew from either high school or from the University of Illinois. And we put the two together. and created a fairly strong critical density of talent. But it was all through hiring people that nobody else, you know, everybody else thought as either misfits or unassessable. It's much more challenging to do this out of network. So the first thing I did after Peter sort of explained his philosophy to me was try to implement it. And truthfully, I was not very good at it. My initial hiring at PayPal was, I'll call it charitably random, meaning some mistakes and some successes, but certainly not consistently good. And then I realized, and it was actually becoming a sort of a career frustration for me because as an executive, certainly a payball, you got evaluated by the quality of your team and the performance of your team as a whole. And so it became an issue in me, in my promotion. David Sachs, our COO, was sort of frustrated that I wasn't getting non-linear results out of my team. And he gave me the feedback pretty clearly. So I realized that I had to try a different strategy in building out my team. And so what I stopped doing was hiring externally and basically recruited internally. So I found undiscovered talent within sort of the organization of PayPal, people that I felt that were being under leveraged that had abilities and convinced them and persuaded them to move to my team, which was sometimes easy, sometimes a little painful internally, but eventually was able to rebuild my team with mostly internal recruits. And then we started actually really delivering in a way that David really noticed. And I, you know, I was promoted to executive VP based upon my ability to recruit people internally and get, you know, one plus one equaling three from the performance of the organization as a whole. And so what that led me to conclude was that it wasn't my inability completely to identify undiscovered talent. It was my inability to do it in an interview context with strangers. So I was able to do it with people that I was working with that I could see every day successfully, but I wasn't able to do it, you know, kind of at a random interval. So it took me another two to three years of practice, really, to learn how to do that with people I met off the street. And then eventually, you know, became more proficient at that. And that's actually more important because it's very hard to scale internally. You run into a lot of constraints. Not all the other executives in the company love when you're recruiting from their team all the time. I mean, there's definitely, you know, some people who are a little bit lost souls that you can recruit gracefully, but when you go after their best talent, obviously there's a little bit of internal friction on that. So you have to learn how to recruit people from the rest of the world.
