Keith Rabois - How to Hire Amazing People

Welcome to World of DaaS, a show for data enthusiasts. I'm your host, Oren Hoffman, CEO of SafeGraph and GP of Flex Capital. For more conversations, videos, and transcripts, visit safegraph.com/podcast. Hello, fellow data nerds. My guest today is Keith Rabois. Keith has an amazing career as a founder and senior operator at some of the most innovative companies in the last 20 years, including PayPal, Square, Open Door, LinkedIn, He's also the CEO of Open Store and a general partner at Founders Fund. Keith, welcome to World of DAS.

It's a pleasure to be with you.

I'm excited. All right. Now, one of the things that I know that you are kind of a well-known talent spotter. What do you think are some of like, if you're looking at someone with not a lot of experience, what are some of the non-obvious signs that that person could become a superstar?

Yeah, I think everybody becomes a superstar indexes extremely strongly and spikes on at least one dimension. So basically people who change the world are incredible on one dimension and there can be very different dimensions. One person might be the greatest salesperson ever, reality distortion, narrative storytelling. Some people may be the great, most tenacious person. Occasionally you find the smartest person ever. You find someone who just has a trait. and they're in the top 10 basis points on that dimension. And then they learn how to channel that into irrational success. So that's basically what you're looking for. I was just debating this with the founder this afternoon, and she and I were brainstorming on what the other traits you're looking for. And I think it's to some extent something to prove as well. So they just will walk through walls because it's indispensable to their personality and their mission in life. to be successful and they're just not going to there's just no excuse and nothing that's going to deter.

And how do you how do you figure that out? How do you suss that out? It might be relatively easy to know someone's smart or super hardworking or tenacious, but how do you suss out that drive?

You can usually suss out the drive because it manifests itself fairly early in life. So even, you know, in a high school, high school level age, you see characteristics that manifest it. College, et cetera. You don't have to have a lot of professional experience. It tends to be something baked into your personality pretty damn early, or you go through a tumultuous, difficult experience that unlocks it. And so it's usually also very top of mind. If you're in an interview, sort of assessment, even coffee chat, you can pick up on, there's this drive and often what the cause and driver was, but there's something to prove, basically. Something actually Solly Krotchoch taught me, in 1999, when I interviewed with her and I asked her what a common ingredient for successful people I worked with her was, she said, they have something to prove. I just need to figure out what it is for each person.

And is there, like, if you're interviewing young, talented people and maybe another super successful venture capitalist is interviewing some of these same people, like, how do you spot them over them? Like, you seem to be very, very successful. I think what you're saying right now isn't necessarily like that unknown.

So why are you Right.

That sounds why do you, why can you find this where other people can't?

You're right. You're calling me out. This is a banal answer. Okay. So partially it's paying attention. So some of these people, some of the most interesting people that I've found, you know, over the 20 some odd years of doing this are from unusual places and unusual sources. They don't have pedigree. They went to schools like UC Davis or UCSF or University of Santa Cruz. So like very non-standard backgrounds. You have to be open to that. B, where you intercept them can be very different. Two of the best people I've ever hired were two and maybe three best people I've ever hired were off of our soccer team. So you have to be looking for people in strange places and noticing their potential. And not everybody does that. So even if you apply the same formula, you have to be open to looking for non-pedigreed experiences and meeting people in random environments and noticing that there might be a spark there. So if you just wait for people to show up on your doorstep, ask for meetings, that is only a very narrow pool compared to the set of people on the planet. So you want to find these interactions. I've met people during my workout program at Barry's that have turned out to be some of the most tenacious people on the planet, et cetera. So several of the people I now work with, I met through Barry's in a kind of random way, not very intentional. soccer, et cetera. So not the most standard central casting for recruiting. Secondly, the formula on the spike does take actually a lot more art. Peter, you know, this is all Peter Thiel's and Peter taught me this 21 years ago when he was running PayPal. He basically said the only way you can scale a startup is you have to find undiscovered talent because by definition, all the large successful companies are going to try to recruit and be willing to pay more for proven talent. So unless you have a black box, anybody who's going to easily pass the Google, Facebook, Apple, whatever black box algorithm, you can't really recruit from. You have to recruit from people who are going to be deficient either in data, quality data, or be outliers on the black box algorithm the large tech companies are going to employ. So kind of have to find data points that other companies don't know how to assess or assess based upon lack of data. And that is also challenging for VCs or other CEOs. Market data can be sort of like a blinding problem for anybody. It's a little bit like actually early stage investing to make the comparison is if you invest in a startup when it's just a keynote deck and a team, there's no data to look at. So you can't use data. You have to be able to make a judgment based on other things. And there's an art to that. So making judgments on people Assessing people's potential with a lot less data than is historically required by larger institutions is basically the goal.

Are there traits in people that where like the average venture capitalist or the average interviewer might think this is a bug, but that trait is actually a feature? I don't know. Maybe they went to prison or something like that. Maybe that's actually- well, yeah, I wouldn't.

Go to that one. But in front of me, yes, though I think the turning a bug into a feature is a very common formulation. So for example, I think on the founder traits, for example, I think I have this expression, only disruptive people create disruptive companies. So you have to have a screw loose somewhere to create an iconic company. You have to see things that other people don't see, or you have to ignore things that other people think are laws of physics. And so that tends to be people who have a bit of a sort of disruptive personality for hiring. I think you need to have traits that sometimes are disruptive. So some companies just won't deal with that, for example. They just don't want to deal with the drag coefficient of, let's say, a quirky personality. There's actually a great book called Quirky, which summarizes the research about why quirky people are more likely to succeed. I'll just use the euphemistic term quirky. Another way is I tend to like, I don't mind people who have ego. I know lots of people write about, you're supposed to hire all these humble people and all this stuff. I've never found humility to be correlated with success. In fact, I think it's inversely correlated in every field I've ever been involved in, law, venture, entrepreneurship, and fields that I watch from afar with interest, let's say music and sports. Every successful person I've ever met has an ego.

Yeah. Do you think what makes a good founder today is the same that made a good founder and the year 2000 or even the year 1950, or do you think it's changed significantly?

Peter and I were recently debating this, and I think we both come to the conclusion that it's changed certainly in age. I think, you know, a lot of my career investing and building companies was, let's say, from 2000 to 2010. And the proverbial, you know, the college dropout 22 year old in our first startup was very successful that era. and I think what I've noticed recently is that a lot of the better Founders, I mean, you're always talking about distributions here because we're in the outline business. So. And a ones are what drives, but if you just plotted various dimensions of very successful Founders, I suspect the median age of very successful Founders has gone up by almost a decade. And it may be the world's more complicated and maybe the kinds of companies that are being built require a different skill set. The guy that debate Peter and I were actually having over lunch was what's the drivers, what's the root cause. But I think the factual observation is more of the better founders are about a decade older than they were earlier in Peter and my careers.

Is that also because like certain times might be more likely to be a B2C where you're a younger founder might be more successful, certain times might be more to B2B or how do you think about yeah, that's why the Red.

Cause question was really interesting. It's like, which, which one's driving which? Is it a shift from consumer products? And maybe those were more suited to write a school, you know, dropouts to write a school Founders, and maybe B2B requires a little bit more sophistication on some dimensions. For example, I think B2B sales absolutely can be challenging for some early younger Founders. They've never been in a large organization like professionally. And so the concept of selling to a large organization when you've never actually been in an organization can be challenging. Just like the logic of that, right? Understanding like how organizations work, how they make decisions, how to create a sales motion can be very, it's almost like a foreign language to somebody who's actually never been in any organization. So I think there's some of that is a driver. I think there may be other things in society that are drivers too. but fundamentally, just observationally, that has changed. I think the traits that make one successful as a founder are company specific and market specific. So one of the things I like to do as a discipline is write down on a paper or on a whiteboard, what are the three biggest challenges, three core risks to any startup? And then the team, the founding team, founder and team, do they have an unfair advantage in solving those specific problems? so Peter once said, you know, he wouldn't fund Elon to runs to Airbnb and definitely wouldn't want Brian Chesky running SpaceX. So I think that gives an illustration of, you know, depending on what you're trying to do, there is a different set of skills that leads to an increased probability of success. So you're trying to map the three core risks against the, the skills and talents and traits of the founder and the founding team. Delian, my colleague here at Founders Fund, started a company called BARTA, which basically is doing manufacturing in space. And he took this explicitly to the extreme in his seed deck, basically slide one. Here's what slide one is the vision, what are we trying to do and why? Then it's like, here's the three risks. And then there's three people that are the single best person on the planet, people to address these risks. And it's like, as soon as I saw the slides, it's like, of course, it's a no-brainer. It was absolutely invested. So I think that discipline is kind of the way Vinod actually taught me to think about all startups. We know Coasla, when I was at Coasla Ventures was like, There's always two or three key things that if you get them right, you have a shot of really making it. If you get it wrong, it's not gonna work. And then the team should be calibrated to increase the odds on those two or three things. So that's why the founder traits aren't necessarily consistent across all types of companies, but there are some common denominators like being able to recruit a team, assess a team, motivate a team. Those are common across all verticals.

Now the is young versus old is kind of interesting. Like, you know, older people have more wisdom, more guile, more experience, more connections, younger people have more raw processing power, they have more energy. Do you think the advent of technology, the internet, et cetera, like in some ways, like could help older people more than younger people? Because like the processing power that a young person has if you harness it right with a computer, now an older person could be maybe not as equal as a younger person, but they are more at parity than they were before.

Let's start with saying I'm not going to concede that 30 is old. But let's backtrack from there. Fundamentally, I think about this all the time in venture specifically, there are things that you improve on as a VC with time and therefore correlated with age. And there are things that you get worse at. And then you're looking at the net effect. How do you maximize the net effect? So being consciously aware of where am I getting better and how do I amplify that and take advantage of that? And then how do I offset things that I'm going to decay out and decline at, I think can allow you to succeed and thrive. Similarly, in operating, it's not as clear to me that you decay is fast on some functions and that those functions are as indispensable to success. For example, raw processing power, there is evidence that your pure IQ, you know, ability to deploy IQ in a fast processing way does decay with age. Now, unless you're doing a highly technical sort of startup where the founder, him or herself, is doing those calculations, I'm not sure that matters. Usually have the luxury of time. I mean, time is infinite, but you certainly have minutes to an hour to make a decision in a startup. You never have to make a decision less than an hour. So I'm not sure that processing, raw processing power at the founder CEO level is absolutely critical because you do have time to study things. Now, I don't mean you should like 70 confidence, you should be shipping 70 conviction, you should be deciding Yep. Most of the time, but that can all fit within a day.

Now, if you think of like the collection of people, like the culture, it's almost impossible to change a company's culture once it's formed. So it's kind of, it's very important to get it right from the start. Like, what are you looking for in a culture that maybe some other VCs might overlook?

So I think you're right. It's one of the reasons why I prefer to be an investor as early as humanly possible in a company, because once the culture is formed, that dye is cast. The metaphor I like to use is concrete. Concrete in a liquefied form is very malleable. Once it solidifies, you know, changing anything is expensive, painful, noisy. Yeah, that's like a company. When it's in liquid form, you can modify a lot of things. It's pretty flexible. Once it solidifies, all holes breaking loose when you make changes. So the earlier I can get involved, I can try to help founders avoid unnecessary errors. just by the benefits of experience and pointing out the grass is often not greener and that there are real trade-offs that make your trade-offs very consciously, very intentionally. So that's one of the reasons why I prefer to invest in seed over anything, A, over the next best. The more you inherit, the less you're gonna change, the less you're gonna change successfully, certainly. From a cultural standpoint, I believe very strongly that with very limited exceptions, the only way to build a startup from scratch is in person. You need to learn by osmosis. If you're going to hire undiscovered talent, they need to learn their craft through osmosis. No one has proven a model to learn by osmosis in a remote environment. Unstructured learning is the hardest thing to translate to remote. So I would only build a company in person. It can be distributed, meaning there can be multiple offices per se, potentially, but it has to be in person. So I won't fund companies now. that are being built remotely. It would take an extraordinary set of exceptions before that is the case. So that's a cultural that I tend to believe company building is hard. My partner here, Founder, Scott Trey Stevens has expression, startups are fucking hard, which I think is true. And they take heroic effort to get to the accumulating advantages stage when momentum kicks in. Inertia is your enemy at first in a startup, and you have to convert it into momentum when it becomes your friend. But that conversion process is extremely painful, takes heroic effort and sacrifice. And so I look for that in the DNA of an early stage company.

I found that the most correlated thing I've seen to people's success is just simply the number of hours that they work. Would you agree with that or is there something even more correlated that one can measure?

Velocity of execution, I think, is a more accurate way to measure it.

Velocity of execution, yeah. Okay, got it. If you can measure it, yeah.

But yes, assuming you can measure it, the velocity of execution, but that's going to be highly correlated with hours worked. It's not 100% correlated, but one way you get velocity is like you just use all the time that's available and you turn it into traction. But the velocity can apply to non-shipping things too. For example, there's a company I've been involved in since approximately 2015 called Fair, which is a very, very, it's going to be a very, very successful company. And it was a fairly counterintuitive investment at the seed stage. But I remember taking my then chief of staff, Delian again, with me to the first Fair board meeting, post our seed investment. and he immediately figured out at the first board meeting that this company was going to work. And the reason why I was, it was actually the second board meeting the company ever had is the first one he attended. The reason he could discern this was everything that had been isolated as a potential problem the meeting before had already had solu, had it already identified the root causes, deployed potential solutions and had evidence on whether they were tracking within a board meeting.

Roll off, that's amazing.

My friend Roll off, who runs Sequoia, pointed this out to me at Square when he was on our board at Square. He said, you can tell the company's velocity is baked right away. And he was giving me a compliment that Square's velocity at the time was equal to ours back in our PayPal days. And he said, it's amazing that velocity occasionally decays, but it never improves. And I think that's the best predictor of success for a company. work ethic is a key ingredient to that because there's only so many ways to create velocity. And one of the fundamental drivers is just pure effort.

Now, you, you, you read a lot of books. I've actually met a recently a lot of super successful people that haven't even read a book in years. Like, how do you, how correlated do you think reading is to success?

I think it's highly correlated, like anything else. You know, what's the correlation coefficient? It's probably not 0.99. Yeah. But actually this drives from, I read one of Richard Nixon's books back in the day when I was in high school on leadership and he said every successful person in politics is a voracious reader. Even when he was president of the United States, he used to carve out at least an hour a day for reading. So I actually took this with me. I was like, if the president of the United States can carve out an hour for reading every single day, I can do it. Yeah. Yeah.

You recently recommended a book, it's called the Upside of Stress.

Like, why'd you like that book? so this is my favorite book ever. The reason why is, well, it reflects, truthfully, is reflecting my views on life. Like, I already believe this, that the more stress you have in your life, the more challenges you Embrace, the healthier you're going to be, the more successful you're going to be, and the happier.

And there's this idea of, like, acute stress versus chronic stress. Are you kind of talking about more the acute or the, or how do you think about it?

Well, chronic stress is bad. and does have health implications. But the biggest inside the book is it's a mentality, meaning how you react to stress. Do you embrace it as a challenge or do you kind of blame the world and blame others and blame external forces? And she proves this. The author is a professor at Stanford, proves this with incredibly deep research in each chapter, actually at the biochemical level. that if you tell somebody stress is good for them and they take a quiz or do an interview, for example, they will, you can do three cohorts of people, paired on demographics, backgrounds, et cetera, and tell one group, hey, stress is good for you, another group, nothing, no guidance either way, another group that stress is bad for you. The group that you tell stress is good for you will always outperform on every interview and on every standardized test. and then you can actually take blood tests and you can actually see biochemical differences in those three groups, cortisol versus other, you know, sort of hormones and stuff. And so it's magic. So I just give this book to people, and I no longer have to proselytize about why they should ignore all the stupid advice they get, because I just give them the book and all the research there. Actually, I literally have a young engineer at open store, just finished reading it, and, you know, he's like, this is totally a transform of my life. this happens all the time when I recommend the book to people.

And do you, why do you think all the, there's this, all this talk and chatter about, you know, the distressed side and all this other stuff and, you know, all these other things that, that, that people do. Is it, is it just a way of, like, leveling or why do you, why do you think all this has become so prominent?

Well, Kelly, the author, argues in the book that It's all flawed research from 1950 when they actually literally tortured people and tortured mice. And there's a big difference between stress and torture. And she's like, they sort of forgot that there's a line there, which actually, I used to read her in the original, but, so I think that's drivers, just the research was just all wrong and no one asked basic methodological questions. Secondarily, there's also a 20 minute TED talk she gave before she wrote the book. So for people who want to get an introduction to this topic, the book's better than a TED talk, but TED talk, you watch 20 minutes and you get a pretty strong feel for this. So I think that's fundamental. I think secondly, there is a societal trend towards leveling. That's why people don't like being told to work more because if someone is just smarter than you or has genetic whatever advantages, it's easy to have an excuse why your life isn't as good as you want it to be and somebody else is outperforming you. But when you recalibrate that and say, well, it's under your control, you can work more or less, then people don't have excuses and people want to have excuses. Like American society for the last 40 years is embracing excuses. And so that people find more comfort in saying someone's smart because then there's nothing you can do about it. But you can always work harder. And so when there's a lot of people who don't like the challenge of, well, this is under your control and stop blaming other people. The.

Now, now you're also widely known as a, as a really good operator. What do you think is like an under rated feature of a well run company?

So I actually think a well run company is partially chaotic. I think innovation and process are inversely correlated. Arguably Netflix expresses this really well in their famous 110 page PowerPoint culture deck of processes designed to prevent errors and mistakes, but it actually handicaps high performers and innovation. So I think a well-run company intentionally should feel fairly messy actually, and you're only going to really processize things that absolutely must be zero defect and where there's asymmetric downside. And then you're only going to productize things once the innovation's locked and loaded, and then you're going to almost like putting down a street with concrete as opposed to as opposed to trailblazing your way through a forest. And so I think people get these things wrong and apply the wrong discipline to the wrong problem. It should feel messy, I think like a hospital emergency room where the art is triaging things and you're triaging downside potential and upside potential constantly and shuffling things around. And I think orchestrating that is a rare skill, which is why managing a high growth company is fairly counterintuitive to people who come from more traditional organizations.

A lot of people, like that freaks them out. Like they don't want to work in a ER and stuff like that.

How do you- There's no blood at least.

Yeah, that's a good point. Like how do you get, like when you're bringing people into a startup, how do you let them know, hey, it's gonna be a little bit more like a ER. Like it's gonna be a lot of, it's gonna be a little messy over here. Well, a lot of people are very like, but they're internally, they want to order it. They want to order everything.

So I think what is on hiring an assessment, like actually it's a trade that predicts success is their ability to thrive under uncertain conditions, uncertain information, Etc. Versus needing certainty, needing predictability. So that's a trade, a pattern matching. I think when we started our career, there's a selection bias for two went into entrepreneurial Endeavors that was positively correlated with being able to thrive in these environments. And then if startups became mainstream and software, you know, mainstream and startups hate the world and the Hollywoodization, social media, you know, et cetera, social network made startups attractive. It became a magnet for more normal people and more normal people do not like uncertainty. Volatility is typically scary to people. It is Darwinistically evolved that way. So I think you either have to counter train that or hire the people who somehow didn't Darwinistically evolve in the most normal ways.

And is it like if someone went to a startup and then like they went for a big company and then went to start, then they went back to a big company. Maybe that's like a good sign they belong at a more orderly place. Whereas like someone just kept dealing with the craziness of a startup. Maybe that, like, how do you, how would you know from an interview or.

Resume or something like that? It's, it's, it's, it's like a kind of a roller coaster ride. Like there's people who like little roller coaster and people hate them. Yeah. And a startup is a roller coaster. The roller coaster ride can even vary by hour, sometimes by day. when it gets predictable, it's like by week or by month or by quarter, but it's always somewhat of a roller coaster ride. And so people who need to go ride roller coasters for fun, and there's people who like are terrified and throw up on roller coasters.

Okay, that's, that's, that's, that, that's, that's really good. What it, in my experience, like it's important that you do the really big things and the very small things, but maybe the medium things don't matter as much. Like, do you agree with that? Or how do you think about those things?

I hadn't really thought about it through that lens exactly before, but it does make a fair amount of logical sense to me. So obviously the most important things, the value creation comes from 10x breakthroughs and startups. But again, by definition, inertia is not your friend. Time is not your friend. So you need some unlocks, some pretty radical change to create momentum. Those are tend to be bigger things. The small things, the reason why you do those and need to obsess on those is they're signals.

Or the cultural things are- Exactly.

And they compound. So I think that those two polls make a lot of sense to me. It's all the small things. You can think of the famous anecdote, you know, of Steve Jobs looking at the circuit boards inside, you know, the Mac that couldn't be opened by the consumer signal, you know, of just like quality and discipline and actually the kinds of things Apple needs to stand for actually do require those signals. So not crazy, but a very small thing, very detail obsessive. It's like crafting everything. I like another book called the Score Takes Care of Itself by Bill Walsh or great under his name. That explains why the small things add up and compound. And so I think the idea of ignoring the mid-range stuff actually does make some sense as they chew on it. Like, look, there's only so much time in the day. There's only so much energy you have. It's kind of fixed. So you have to channel it somewhere. So I think channeling on the asymmetric stuff, upside potential, downside potential, and on the small things that compound does seem like a reasonably good allocation for 80% of your energy.

Now, we're in a much tougher macro environment today than we've been in in a long time. How do you think founders should navigate that? How do you think they should be acting differently?

Well, fortunately, this is one of the areas where I think the benefits of experience does kick in and has enabled maybe me to be a better advisor or consider the area to founders, which is understanding that things are not always up into the right and the cost of capital can change and doesn't always have a marginal cost of zero, isn't always for the available, et cetera, et cetera, et cetera. So I tend to normalize, I'd say most of my advice over the last 23 years is very consistent, which is there are certain ways to do things. There are certain ways to measure the success or efficacy of them, and that doesn't change. So, for example, I happen to be obsessive once you get into product and financial metrics stages of companies about payback. The time on a CAC to pay back to me is an absolute barometer, and my standards haven't changed in 23 years. They're the same they've always been. whether or not other people agree with them, I actually don't care. Like I have a strict set of rules about what's great, what's acceptable, what's bad. And so you just normalize that. So I think if you have like sort of a compass, the compass can work fairly well when things are hot and off, and everybody thinks things are easy. It's kind of what I call the steroid era of startups. Or the compass also works when things are more difficult because in fact the compass is pretty finely tuned. So to me, my advice doesn't usually shift. I think there's things that become more acute challenges for a CEO and there's things that become less acute. So for example, in a hot market, everybody wants to talk about recruiting. How do you break through clutter or talent acquisition? More complicated market publicly and privately. Now everyone wants to talk about retention and employee morale. So it does shift where you're allocating your energies to CEO. But the root formulations are basically the same.

You had a tweet recently that I thought was pretty interesting. You said the biggest mistakes that most solid founders make is to worry about competition. And then you said interesting, the largest IRVCs make is to not obsess enough about differentiation. Can you impact that a bit?

Sure. So I have a general rule about startups. Let's just start with startups first. That 90 to 99% of your success or failure is based upon things you do in your building. Do you hire the right people? Do you prioritize things correctly? Do you avoid unnecessary distractions and mistakes? So look at yourself in the mirror and that's going to drive velocity, execution, all the things we were talking about. That's going to drive success. Almost never does it depend upon external organizations. But so many founders sit around and worry about company X, Y, or Z. And I'm like, the 99% is sitting in their building, get that perfect, get that optimized, Make sure that's as good as it can be. And then you can worry about this other thing over there. So I think that's just a massive mistake. Second, and we've backed that up here at Founders Fund, we funded a company called Ramp, which obviously had competitors large and small, and it's going to be the most successful of all of them. It was a late mover, competitive, but it had the right team with the right DNA and the right velocity. So we're willing to ignore the fact that there's other competitors because as long as Ramp does what it's supposed to do, does it really fast, does it thoroughly and thoughtfully and hires the right people, it's going to outperform all these other companies, hopefully all combined. Second, on the VC side though, I have had lots of friends who become VCs and I think they somehow forget that venture is like a business to business startup, which you have to have a value proposition. The cleaner, the more compelling the value proposition, the better you're going to do. and so I think VCs sometimes forget that you do need a value proposition. And just like a business, the business startup needs a value proposition that cuts to the clutter, has a low CAC, high payback, so to VCs.

So essentially you can't just like sell a product that's money because like that's not differentiated enough. You have to actually sell like a real product that somebody would want to buy that's different than other people could sell.

Like why me or why us? Comes down to the entrepreneur. And if you get that right, then you can do pretty well. But I think surprisingly, people we know, mutually know, who were talented in startups become VCs and totally forget this.

Yeah, yeah. They're not creating a product.

Yep. Or not be able to communicate. Even if you don't create it, you need to be able to communicate in a framework at least. Yeah.

In fact, like, I mean, really very few, most VCs are just a collection of people. They're not actual companies. And many times they're not even teams. Like the people don't even like each other or even work together. They're just like, It's like they kind of separate the money there. It's a little bit, it's very, very different than a typical company.

Yeah. So the closest metaphor upbound for this is a well-run venture firm is a little bit more like baseball, which there is a team aspect to it, a brand like generally the finance, financial success flows through, you know, to the team, et cetera. But every player on a baseball team has very individually specific metrics that absolutely tell you how good a player is. And you can use advanced stats or like basic stats, whatever you prefer. But there are empirical and very statistically sound ways to measure the efficacy of any baseball player. And that's true of a VC too. Whereas an organization, I think a startup is a lot more like a football team than, and there's other teams for it, but football is a really good metaphor because you define there's certain roles that people have to play. and you need like the right profile of the person to thrive in that role. So you need a quarterback, but you need an offensive lineman. Offensive lineman look nothing like a quarterback.

Yeah.

Like you could not confuse an offensive lineman in the NFL with any quarterback or vice versa. And so, and then the team needs to execute. Even if you had the perfect lineman, the perfect quarterback, perfect receiver, unless that team executes in sync, that play is going to be a complete disaster. So I think organizations need to be in sync. They need to have the right people in the right roles. and execute perfectly in sync. That's building a company. A venture capitalist does not really need to be in sync all the time. And you do have individual accountability down to every single person on the team with real statistical significance over time.

Some venture capital firms, I think, are probably much more like baseball, but there are some like maybe some rare ones like Y Combinator that are much more of a team. Like most people can't even name a partner at Y Combinator or something.

That's true. I think Y Combinator is an interesting exception. I think that's right. So there are, let's say in the general industry of venture capital, there probably are outliers. But if you think of the canonical venture capital firm that's existed since 1972, baseball is a pretty damn good metaphor.

And you know, you're a big proponent that, like, companies should go public and should go public relatively quickly. But it's like, there are really no VCS that are public. Even y-combinator, which, like, is a, has a massive moat, like, has never gone public. Why do you think that's the case? Why do you think, like, the VCS in some ways don't take their own advice?

Well, one of the reasons people go public is access to Capital. If anything, Venture, like, say, if I understand, we have too much capital, not too little. Literally, our returns would go down with more capital, not up. So going public to get capital is not a good reason. Transparency is another good reason for companies to go public. Literally, transparency is a good discipline. Typically, venture firms are not publicly transferable for lots of reasons. Founders don't want it and RLPs don't want it. So that's another reason. Another reason why companies should go public is acquisitions. because you have equity that you can use that's priced fairly, we're really probably not going to generally be in the business of acquiring other VCs. I'll put my point about scale is not our friend. So I think a lot of the drivers, if you decompose, like I wrote a chapter in High Growth Handbook about why I go public early and what the criteria is. Predictability is another thing. Startups do develop predictability, predictable revenue, predictable profits. Venture is still going to be a power law business. And so even though I can maybe tell you how venture fund seven at Founders Fund is going to do, or maybe it was, maybe what sixes, but sixes was raised, you know, five years ago, deployed X years ago. There's no, it doesn't tell you how Founders Fund eight, which is our next one, is going to do with arguably with any predictability.

And that, you know, all these things.

Are pretty fundamental differences.

You know, one point, let's say in the 80s and 90s, like, let's say a private Equity firm like a Kki or Blackstone or something kind of did look maybe similar to a Sequoia or Andreessen or Founders Fund or something like that. But today, these are larger public companies. They are, they have more smoothed out revenues. Like, can you imagine a scenario where, like, Venture looks more like that? Or do you think that would just be the death of any Venture firm?

Well, again, I don't think Capital is a positive. More Capital is not a positive. It's not even a positive in my mind for most startups. I don't think capital decides who wins and loses. I think it follows success, not drive success. And so I don't think the world needs more venture capital. And therefore, I don't think any fund or our fund size definitely doesn't need more venture capital. So the benefits of scale, basically, I'm nervous about, and like baseball, I'm going to continue my metaphor, the scarcest thing in baseball is finding pitchers. certainly finding pitchers that can, let's say, be starting pitchers, left-handed starting pitchers. There's only so many of these people on the planet. I think Venture has some of those limiting steps, too. And so if you have a limiting number of people that can drive, like starting pitchers, if you don't have starting pitchers, you can't add new teams to a league.

Yep. Yep. Okay. Interesting. Now, you're, you're speaking about Venture. You're on a lot of boards. How do you think about this? Like, how many boards is too many or. obviously there's some benefit of being a lot. Like, how do you think about it personally?

That's a great question. I want to say is I am on too many boards, but any normal standard. But what I've also noticed is the best VCs almost always, without exception, are on the most boards. Yeah. It's a, you know, positive signal to some extent. Like the people who've been on the most boards in my venture career, like, were the people like Peter Fenton. I think has a time record. Yeah. Yeah. So for a while, like Ben Horwitz was on a lot. He's pulled back to a more normal level, but like the people who generally are doing pretty well may have a lot of board seats.

Like sometimes the only way to win the deal is if like, you know, Ben Horwitz is on your board or something.

Roll off was running hot on boards like more than 12 for a while. And, you know, I think he's a little bit less now, but Fundamentally, I think a lot of people are doing really well. People want to work with them. And so that's positive. So especially for me, when we talk about productizing why me, why us, increase the probabilities of the company's success by mostly serving as a consigliere. And there are other ways to effectively serve as a consigliere. then serving on the board, but it's by far the best way. Because if you lack enough access to information, context, and access to people, it's really hard to dispatch advice wisely. Like any good founder should be able to decide 99.9% of things by him or herself. And so you're only adding value at these very, very, very key moments and key decisions. And if you lock visibility into how the company is really doing at a granular level, people processes or lack thereof and metrics. It's, you shouldn't be able to coach a founder very easily. You shouldn't be able to walk in a door in a random company and provide like advice that's useful unless you have a lot of visibility. And so I think a board is a good forcing function. It is not the only way to do it, but it's a pretty damn good default.

Now, I've heard you talk a lot about how the things in the tech world have been made unnecessarily complicated, and you're kind of particularly good at like zeroing through the noise and finding like one or two signals that are most important. Like what's the secret of doing that?

I was brought up and raised, I guess, that most good things are simple. Like the complexity basically means you don't understand it. Like think physics, you know, equals MC squared, you know, it's like Einstein's like the master of this. It's like the most revolutionary thoughts are typically very simply expressed. And people, when you don't understand the phenomenon, you don't understand the world, you resort to all these complex manifestations. It happens in law, which I used to practice. The more complicated the argument, the almost sure highly correlated with being wrong. Very simple principles tend to work really well. Congress shall make no law, you know, et cetera. So, I think that I'm always craving, like what's the fundamental driver? What is the root cause? What drives everything? And being able to find it allows you to clarify other people's thinking. This actually derives from high output management and it grows, you know, the canonical Bible on how to run a startup is every simplification step makes the team 30% more effective. I'll give you a sports metaphor since we've been going down that direction. sometimes when a new defensive coordinator inherits an underperforming defensive unit in a football team, they will actually simplify the reads of the linebackers and the players start playing faster because they just have less conscious decisions to make. Yeah, they look, you can actually literally watch a film of a, of a defensive team and they will look faster on film. And the only, they haven't changed the players. They haven't learned to run faster. Like, you can't really improve your fourth you know, your 40-yard dash time quickly. And it's just like less mental complexity. It allows the players to read and react and they look faster. Now, there's trade-offs there's a reason why some schemes are more complicated. Jim Harbaugh did this with Alex Smith as well when he took over the Niners, and Alex Smith became a very top tier quarterback, at least for a while, where he'd been massively underperforming out of college in Utah. And basically what Harbaugh did, simplifying was he didn't allow Alex Smith to audible anymore. He basically said, I don't want you thinking too much. I'm just not gonna let you audible so you don't have to think. Just go to live scrimmage and run the play. And all of a sudden he became like a, you know, all pro quarterback and took the Niners, you know, basically the Super Bowl. So, like, I think simple simplification in all fields is a really good thing. There's an art to it, and there's always excuses of why you can't. But when you can do that, you can operate really fast. and you can prioritize really well, which is the art ability of the company. Yeah.

Interesting. Now, okay, you, you were an early Miami acolyte, at least from, like, Silicon Valley. Like, what made you so bullish on Miami early on?

Well, I just set a simple set of criteria, which is I wanted warm weather, International Airport, some version of a cosmopolitan mix of, like, shopping and cuisine and a barriers boot camp. And like in America, coupled out with a reasonable tax rate of, let's say 4.5% or below. Turned out there's only one choice in the entire United States, which is Miami. Let's kind of run up here. And then it's like reverse engineering from my personal happiness and ingredients to what would make a tech ecosystem. What are the raw ingredients to rebuild Silicon Valley somewhere else and make it better. I thought all of the fundamentals I needed were already here. So I just needed to play Noah and build Noah's Ark and take, you know, two designers, two seed investors, two VCs, you know, two entrepreneurs with me, and then we'd be off to the races.

Well, in Miami in some ways like is a really fun place and people are happy there, but there are people who believe like fun and happiness are somewhat antithetical to ambition and drive. Like how do you think about that?

Yeah. So, I mean, I think fundamentally, entrepreneurs are people, too. And certainly they're, you know, like, being happy can be a good thing, and it can be taken to an extreme. And I guess it depends on your definition of happiness. Like, my definition of happiness is achieving ambition, challenging myself, living my full, living to my fullest potential. And so I wouldn't be happy just sitting around. So I think happy connotes things that sometimes mean you know, going out and doing destructive things, but that's not how I would define happiness. It certainly wouldn't make me happy. Secondly, though, if you look at comparable cities that had entrepreneurial success, Tel Aviv is the most entrepreneurial city in the planet on a per capita basis. Very fun. Tel Aviv has definitely, you know, got a lot of beaches and late night activities and pretty cool stuff to do. It doesn't have a berries, unfortunately. Or maybe I would have moved there. New York City has lots of distractions. It's done over the last 10 to 15 years, thrived pretty damn well in the tech ecosystem. So if those kind of cities can work, I don't understand why Miami wouldn't be successful. Even Sydney, which is an interesting, very enjoyable city place to live, has produced Atlassian, Canva, you're talking like very successful companies.

20 years ago, and even less than that, San Francisco was a super optimistic place. It was very focused on the future. And today it just seems a lot like you walk there, it seems a lot less optimistic. People are not focused, they're focused more on the past, in the future, people seem more unhappy. How did that happen?

Well, I think part of the mystery is explained by San Francisco was never the driver of technology. It was only post 2010 that San Francisco was relevant in the technology world.

Yep. Yep.

It was the Bay Area and the South Bay that really drove technology from, call it 1954 to 2010. And so I think San Francisco was kind of an odd fit in the technology landscape anyway. And then the politics and intellectual bankruptcy of the politicians and ideologies in San Francisco just retarded whatever tech could thrive there. And it was pretty obvious as early as 2017, Patrick Hulsin actually of Stripe tweeted this in 2017, said, paraphrasing, but pretty close, unless San Francisco reverses course, it's going to destroy the greatest economic engine ever created in October 2017. So it was pretty obvious that San Francisco was intentionally ruining tech.

Yeah.

But it wasn't really the epicenter of tech anyway in the history of Silicon Valley. So I think a lot of people don't really remember that, that it was kind of an odd duck pairing in the first place.

Okay, interesting. A few personal questions. So I remember 20 years ago, you created this like cool soccer game on like a Wednesday afternoon in the middle of Pal Alto and like the people I remember like coming down to play with you and the people who was like you and Roll Off and all these like super, super successful people like, have you ever tracked like the, the, the net creations of all of these people who were on the same field at one time?

I have not. So that was back when I worked at LinkedIn. So I was laid down Mountain View and Palo Alto. Yeah, it was a good team. It was a good group of people. We had like Lee Howard and I broke Roloff's ankle once playing soccer. Which is on his phone if you ask him. But we had really good people. We had Jamie Templeton back from our PayPal days. Obviously lots of engineers from LinkedIn who produced an immense amount of value. Occasionally, yeah, they're probably forgetting about. I actually got a random email from an Australian guy who used to play with us. we had some cool designers who've done some interesting things. Actually, I should go back and look at that list. There's probably more people I'm forgetting. Maybe it's better than the PayPal Mafia, actually.

Yeah, right. The old soccer Mafia. Now, you're also very well known as, like, for, like, in Fitness Health tracking. Is there a sense, like, people, they're tracking so many metrics nowadays, and they're tracking their V2 Max and this and that, the other thing, is it like. is, is it important to track, like, these hundreds of metrics, or is it like two metrics that are, like, the most important thing that we should be thinking about? Yeah, I, I.

Per my point about Simplicity, I think you need to isolate down to a very small number of metrics. Or if you're trying to optimize everything, you're basically optimizing nothing. It's kind of a simple way to state that, but fundamentally. So what I track is my two-minute heart rate recovery, which I think is the single greatest signal of, like, your general health. and then secondly, I track my sleep, and I, I do care about total sleep, but I also care about the stages. REM sleep, first deep sleep. Everything else is more of a detail. I do look at what, what's called HRV, which is heart rate variability. That's probably for most people too much. It works for me because it, it, it allows me to know how aggressively I should push myself on any one day. So will I do one, two or three workouts sort of is based on my HRV to some extent. But that's way too much nuance. If you just know your two-minute recovery and your improvement or degradation.

How do you track a two-minute recovery? How does it work? Do you have to do something super high interval first and then- Exactly.

So Apple Watch will track it automatically for you if you put it in workout mode. But you basically want to go pretty high, something challenging. So like a sprint and then stop and see how much you recover in two minutes. or you do something like squats or squats to press, like press weights above your head as you're finishing your squat, that'll get you a pretty good two minute recovery calculation as well.

So you, you do something super hard like a sprint and then you just like rest for two minutes and see, see where your heart rate shows up.

You could rest or you could stretch. You don't have to strictly like not move, but just recover. So like a hill sprint, it would be awesome. like if you want to do like back in their soccer days, the best way to train for soccer is probably Hill Sprints.

Yeah.

So you could, you know, do four Hill Sprints or five and then see what your two minute recovery is. Or you can do like a hidden training pro, you know, hit program for like 45 minute class. You can play basketball, but you want to make sure that you start the measurement where you're still finishing up the peak. or it'll be, you know, a little bit artificially distorted. Yeah.

Interesting. All right, last question we ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?

There's obviously a long list. You can start with the stress, you know, avoid stress stuff. I don't have a shortage of that. I may write a book about this. That'll probably be the book. The topic of the book will be something like everything you're told is wrong. Everything is wrong sort of thing. so I have a lot of views that, you know, people are taught that I, I just fundamentally disagree with. But the stress one's probably the most widely distributed belief that is fundamentally at odds with being happy, healthy or successful.

Interesting. Okay. I, I think I, I would, I.

Would agree with that.

All right. Thank you, Keith Roboy, for joining us on world of Das. It's been awesome. I follow you at @ Roboy RAB. I s at Twitter. I encourage our other listeners to engage with you there. You are prolific Twitter. One question, like, is there, is it correlated or anti-cor is Twitter used correlated or anti-correlated to success?

For CEO, I think it's anti-correlated honestly. I don't know if I was not a VC, if I would be tweeting as much. And so I do think it matters what you do for a living and your various like things like that. Back in my square days, for example, I would only tweet about square or sports. Yeah. You know, when as a VC, you have more time, you're doing marketing, there are entrepreneurs on social media, et cetera, blah, blah, blah. But for a CEO who wants advice, I'd be tweeting less and probably much more about the company only.

Yep. Yep.

That makes sense.

All right. Amazing. Great too. This has been awesome.

Thank you so much, Keith. Pleasure to be with you. Thanks for inviting me.