Ravi Gupta - Focus - [Invest Like the Best, EP.289]

Something I speak about frequently on Invest like the Best is the idea of life's work. A more fun way to think about it is that I'm looking for Maniacs on a Mission. This is the basis for our investment firm Positive Sum, and it's the reason why I am so enthusiastic about our presenting sponsor, Ramp. Not only are the founders Karim and Eric Life's work level founders certainly maniacs on a mission, they have created a product that is effectively an unlock for founders and finance team to do more of their life's work. By streamlining financial operations, saving everyone their most precious resource time, Ramp has built a command and control system for corporate cards and expense management. You can issue cards, manage approvals, make vendor payments of all kinds, and even automate closing your books all in one place. Speaking from my own experience using Ramp for my business, the product is wildly intuitive, simplistic and makes life so much easier that you'll feel bad for any company who hasn't yet made the switch. The Ramp team is relentless and the product continues to evolve to save you time that you would never have dreamed of getting back. To me, there is nothing more interesting than technologies that reduce friction for other entrepreneurs to be able to build the thing that they want to so much attention has gone to cloud computing, APIs and other ways of making life easy for founders. What Ramp has done and is doing is build yet another set of tools in this category. To get started, go to ramp.com cards issued by Celtic bank and Sutton bank member FDIC. Terms and conditions apply. As an investor, gaining an edge means having the right tools and one platform leading the way is AlphaSense. Trusted by 75% of the world's top hedge funds, AlphaSense is the market intelligence platform that gives institutional investors access to over 500 million premium sources, from company filings in broker research to news, trade journals and more. And with its recent acquisition of Teagus, it also includes the world's largest library of expert interview transcripts, over 200,000 calls covering more than 24,000 public and private companies all in one platform. So investment teams can move faster, go deeper and make high conviction decisions with confidence. Now AlphaSense is transforming the research process with the launch of its Deep Research tool, part of the next generation of its AI powered platform. Unlike other deep research tools, AlphaSense's version is purpose built for investment research. It runs multi step iterative analysis using AlphaSense's proprietary content, including those 200,000 expert transcripts and in minutes surfaces insights that would take multiple interviews and days of digging to uncover. It's like adding 10 analysts to your team, helping you accelerate analysis, deepen understanding and make sharper decisions. See it in action@alphase sense.com invest this episode is brought to you by Teagus. Over the years of our partnership with Teagus, they have evolved from a pure expert network into a full company intelligence platform. TEGUS streamlines the investment research process so you can get up to speed and find answers to critical questions on companies faster and more efficiently. The TIGUS platform services the hard to get qualitative insights, gives instant access to critical public financial data through BamSec, and helps you set up customized expert calls. It's all done on a single modern SaaS platform that offers 360 degree insight into any public or private company. As a listener, you can take Tigus for a free test drive by visiting Tigus Co Patrick and until 2023, every TIGUS license comes with complimentary access to BAMSEC by TIGUS, which makes it easy to search and analyze public filings and transcripts. Today's episode is sponsored by brex, the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest growing companies. With Brex, you can move money fast for instant impact with high limit corporate cards, payments, venture debt and spend management software all in one place, ready to accelerate your business. Learn more@brex.com Best that's B R E X.com Best hello and welcome everyone. I'm Patrick O' Shaughnessy and this is Invest like the Best. This show is an open ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money. Invest like the Best is part of the Colossus family of podcasts and you can access all our podcasts including edited transcripts, show notes and other resources to keep learning@joincolasis.com Patrick O' Shaughnessy is the.

CEO of O' Shaughnessy Asset Management.

All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of o' Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of o' Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast. My guest today is Ravi Gupta. Ravi spent a decade in private equity at KKR before joining Instacart as their first CFO and coo. He navigated them through a critical moment in their history and returned to investing in 2019 as a partner at Sequoia. Our discussion gets to the heart of what it means to build and invest in great businesses. And we talk a lot about the personal side of the journey, which tends to get overlooked. Please enjoy this great conversation with Ravi Gupta. So, where to begin this conversation? I think our favorite idea that you and I talk about all the time is this beautiful, elegant sense. Keep the main thing. The main thing. People have heard this before. I'm sure that people like the idea at its surface level. I'd love to spend the first part of this conversation really convincing people that this is an idea worth holding dear and taking very seriously. I have personally made this mistake to not keep the main thing the main thing so many times I can't even count, and I've regretted it every time. It seems like one of those lessons you can only learn by firsthand experience.

But we're going to do our best.

To really ram this point home. So give me your opening salvo on this beautiful idea and why you take it so seriously.

I believe it with all of my heart. First thing I'll start with is some quote or something I think I got from Johnny. I've reading it. It's not focus or prioritization until it's painful. And so I think the first thing I'm like, keep the main thing the main thing. People say they believe it, but then they have, well, what's the main thing? And well, there's five of them. It's like, nope, you have already violated it. And so for me, the lesson is learned through pain. It's learned through working at Instacart and us having five goals that we tell the company that we want to work on, and everyone being so happy because we have five goals and everyone has one of the goals appeals to every single person in the organization. And the day that you present the goals that we're going to work on is a great day because everyone's energized. But then three months later, the day that you go and present how you did on those five goals is a terrible day because you make no progress or middling progress on them, or even worse, really good progress on two of them that don't matter and no progress on the one that does. And so the lesson for me is simply this. When you don't do that, you don't get done the most important thing. And as a result, what ends up happening is you value activity over progress on the key thing. And I realize now that it's just simply the pain of actually going through it first and having the hard conversation with someone Of I understand that that is important for you. It is not the most important thing that we need to do for the business. And we will get to that, but we will get to that after we finish this thing that has to be done. I would go so far as to say, Patrick, keeping the main thing, the main thing is the source of what is good in my life, professionally and personally.

When did you first encounter the idea, Like, I know you thought a lot about this, but like, what was your first lesson or exposure to the concept?

The thing that really is like jumping into my brain is reading how will you measure your life by Clay Christensen. Example that really sits with me is this book that I would recommend everyone reads. And his thesis is people don't live the lives they want for the same reason that companies fail, which is that they focus on the short term at the expense of the long term. They don't actually have their long term goal in mind. And as a result, they kind of like just do the thing in front of them instead. And so that book, I would say the first thing that happened was I never asked myself the question of how will you measure your life? And it's like a hokey question, but I don't know, it seems pretty important to think about what will you look back on and say made you successful or happy or whatever? And so it was a reminder. That's probably the main thing. Making sure that you have an idea of how you're going to look back. And what I realized for me was it's going to be like what my family and close friends say about me. At the end of the day, it will be like what they say in their hearts about me and pretty small definition of family and close friends there. And what I realized with that was like, okay, that means a lot more time with a lot fewer people. A lot more time with a lot fewer people. And that was a big thing. And then I thought about, like, where else does this apply to? I think it applies to most everything. So that was the place where it probably came and was most real to me. And I sort of apply it to everything that I'm doing personally or professionally. One of the amazing anecdotes in the book was Clay Christensen sharing that people try to phase their lives and they have this idea, most successful people of, hey, you know what I'll do? I'll work really hard when my kids are young because when they're a little older and they actually know what's going on, then I'll have made enough money and I'll hang out with them then. And he has this very simple observation, but they don't want to hang out with you then for a combination of one, you weren't hanging out with them enough earlier and two, they have other things that they want to do. And he brings up this example. You can stay at work at 6:30 and you can show tangible progress for your next 45 minutes because maybe you close a sale, maybe you have a conversation, you can see some benefit of what you're doing. If you go home, maybe you go do bath time and bath time is chaos and bath time, you don't see any tangible benefit of going. But the sale that you do from 6:30 to 7:15, yes, sure, it's tangible, but 20 years from now, you're not going to give a shit. Whereas if you did bath time every night, your kids are going to remember and you're going to remember and it's going to be the thing that you look back on. And I think about that, I'm like, oh man, there's like a real knowledge of I don't want to do the thing that's right in front of me. I want to do the important thing. And I just try. Now, I don't do it all the time well, but I try to think about that in everything I'm doing.

It's very interesting to me that the thing that pops to mind is definitely a personal thing of how you're measuring your life by your family and your friends. Obviously that will be impacted by what you do in business and in investing in all of these things, but it is profoundly a personal thing. How do you think about the conflict of bridging it into business? The person who's doing a great job of this and the cost of that, you're keeping them, whatever the main thing is in business, extreme focus, extreme energy investment, all those things of that potentially jeopardizing the personal side. This is a cool tale as old as time. The entrepreneur that makes enormous personal sacrifice to do the thing you're recommending, which is keep that one thing with intense focus. How do you think about that conflict?

If the thing ends up being a deep enough conflict, you got to know which one you're going to choose. It becomes a big enough conflict for me. I'm going to choose the family side, I know that. And I'm going to try and manage it where it's not that conflict, but I am going to choose that. I know that, I know that clearly. So maybe to make this real, there have been times where agni my wife has said you are glued to your phone. You are not engaged when you're here, and I'm telling you that now. And today. You'll get a sense of my wife when you hear this. She said, today, I feel bad for you because you seem like you're pretty stressed about work and you're glued to your phone. But I don't know when tomorrow is going to come, but there's going to be a time where I'm not feeling bad for you and I'm just mad that you're, like, not here. And I'm telling you now, you've asked me to tell you this is happening. Okay? You get the feedback. The next day we went for a walk and I told her. I was like, hey, I want to talk to you. What you told me last night, she said, okay. I said, I'm going to try and fix this. Thank you. I do not want to be glued to this phone. I want to spend time with you and our kids and all that stuff. But here's what I'm telling you. If I can't do it over the next six months, if I cannot fix this, I want you to tell me, and you have my word, I'll quit. If I can't manage it, I just want you to tell me it's over. It's not your decision. You're not making me do it. I want to quit. And it was like a really good moment for us. She knows the priority. If I'm not able to manage it, just tell me and I'm going to make the decision that I'm out. And of course, then you have to manage it. But I think that clarity is actually helpful. It's also helpful in helping on the main thing with your family, of them knowing that they're number one anyway. That is one way I try to think about that. What I would tell you, Patrick, is I think the unlock here that's kind of interesting is focus at work actually helps you on being more efficient because there are some times that you're spending time on shit that doesn't matter. You're spending time going through everything rather than actually the one thing that you have to go do to build the business that you want to build. I think this is true particularly for startups. Startups all the time are talking about things that have nothing to do with whether or not they'll be big and successful. Well, how do you think we should worry about scaling this function? I don't know. We don't sell our product very well, right? Now who cares? The only thing that matters is actually fixing go to market. Nothing else matters. Or what am I going to do about this other issue? Well, I don't know, but our retention on our product is bad. We need to fix that. Nothing else matters. Don't spend any time on that. Don't be away from your family doing this other thing. At least if you're going to be away, work on retention. And so I think the clarifying aspect, in my opinion actually helps on time. And so the example I'll give you is you and I have talked about things I've written before. The culture thing I wrote. The whole point there is don't have too many things that you commit to on culture. If you're working late answering people's questions on your engagement survey that are on cultural things that you don't even care about, which by the way is totally a thing, you can solve that by saying, I actually don't care about that. And our company doesn't care about that. Our company only cares about this. And if it's not for you, that's totally fine. But you're super clear, like my experience is pretty simple. People just want to be told the truth. And if you can have the courage to tell them the truth and to know yourself well enough to tell them what you're about and what the company's about, I think you actually can be more efficient on that thing. And truly I believe it will help.

Can you tell from your own experience, maybe it's at Instacart, helping lead that business what the most painful episode of enacting this philosophy was and what it felt like.

Right when I started, we were losing all this money on every order, but we were a high flying company. Our Last valuation was $2 billion. We had been named either Forbes or Fortune's number one most promising startup in 2015. To the outside world, we were crushing. And honestly, to a lot of the team inside the building, we were crushing. When in fact our unit economics, our business wasn't working. We're losing a lot of money on every order. And you don't have to be a CFO to know that you're not going to grow your way out of losing money on every order. And so the answer of realizing that you have an existential risk, but not a lot of people know that internally or externally. Well, it's really hard to like get everyone focused on one thing without scaring people. And also when they don't have that same base of knowledge of like, we have an existential Risk. Because all of a sudden, if you are a high flying company and everything is working in your business, maybe you do have the luxury of working on other things. And so the hardest time was then getting the whole company focused on if we don't fix our union economics, we don't have a business anymore. That was incredibly, incredibly difficult. But it was hugely formative. It was the only reason that we survived was the company's insane focus on one thing and the other thing, that's crazy. What I'll tell you is if you ask people who were at Instacart from 2014 to 2018 or 2015, whatever, I would bet you more people than not would tell you their favorite time at the company was actually probably fixing the unit economics. I'm sure you read it. This article that Bree Wolfson wrote about what she misses working at Stripe. There's this incredible thing that she wrote which is her favorite time was when the API was having a lot of stability issues. I bet you that what they did at that moment was the only thing that matters is the stability of the API. And I think that what it provides for people is shared purpose. And I actually think what's interesting on that is, ironically enough, it's hard to tell someone that only one thing matters because you have to deal with the fact that the thing that somebody else cares about is not the main thing. But everyone working on one thing builds like lifelong relationships. It builds pride. It's extremely clarifying if you do make progress on that thing of like, oh, hell yeah, we like got something done. And so that was really hard. And then another time it was very hard was when we were having weekly or bi weekly executive team meeting, which was our VPs and above. And it was our management team meeting. And it honestly was a pretty crappy meeting. And a lot of times because it was a crappy meeting, a lot of people would skip it, including me in a format. And finally someone's like, why do we have this meeting? And it's so bad. And I realized, and we realized that the reason that it was bad was because we had a massive expectation difference for what the meeting was supposed to be. People that were coming to the meeting were like, it's the management team meeting. This is a decision making forum. All the decisions were oftentimes made beforehand by a smaller group that had a meeting beforehand. Well, it was really hard to go and tell someone. Actually the reason that this meeting is bad is because we have given the wrong expectation for what it is. This meeting is not a decision making Meeting, the decision making meeting happens with these four people beforehand. That is actually the decision making body and it's not called anything. We are going to now call it the stage. I still don't know what ST stands for, but that team makes the decisions. This is the information dissemination body and occasionally we'll make a decision. And it stunk to have that conversation, but it was way better afterwards because everyone knew, okay, cool, I want to be a decision maker. I got to get into that meeting. It's sort of like the thing is true, whether or not you say it. There is a most important thing whether or not you say it.

Oh, interesting.

Whether or not you admit it, there is a thing that is the most important thing that's got to get done. And I think that sometimes people choose to have the conversation as if everything is similarly important and they ignore reality. A huge thing for me is embrace reality. Embrace it. Whatever reality is, just tell people and know it for yourself. This is why I think it's so important. Maybe it's this. If you're not keeping the main thing, the main thing, you're lying to yourself too. Because there is something, there is one thing that is more important than all the rest. You choosing not to admit it doesn't make it not true.

How have you found this so far to translate into a career as an investor where necessarily you're not just working on one company, you've got a portfolio of them, hopefully each of them has a main focus and you can help them with that. So that's one way to apply the idea. But switch this context for us a little bit into the world of investing. Is it in strategy? Is it in. Where does it manifest most so far for you at Sequoia applying this idea.

There one is, as everyone knows, the venture capital business is a power law distribution business. So there will be in the course of a 15 or 20 year career, I don't know, a handful of investments, if you're lucky, that are worth more than every other investment that you make on behalf of your team or partnership. And so I think remembering this idea of, of however many investments you make, the like thing that you will do for the LPs of the fund will largely be driven, if you're working in venture capital by a few companies, the bar for making a great investment is effectively is this company going to be one of the most important companies of the next 10 years? That has nothing to do with the availability of that company for taking money, it has literally nothing to do with it. The only thing it has to do with is whether or not it will be a excellent and important company. So, like, one example to this that I think was pretty helpful for me was when I first got started at Sequoia, I was like, I want to come and demonstrate that I'm useful. And so I told one of the longer tenured partners there, I said, in the first few months, I'm gonna come in, I'm gonna make some good investment, just kind of get this thing going. And he looked and he laughed and he said, I think that's a pretty dumb strategy. And I said, what do you mean? And he said, well, you joining Sequoia, the next Google, they don't care that you join Sequoia. It doesn't mean that that's going to come along. And so you trying to force fit it into your time frame. That just has nothing to do with the way the world is actually going to work. What's more likely is you're going to make a poor investment over the first few months as you try to demonstrate your competence practically. What it's mean for me, Patrick, is I write at the top of my notebook, at the top of every meeting I take. If you could only make one investment this year, would this be it? Would you tell your best friend that they should go work at this company and take options at the 498 price with their entire career? Would you do that? Do you want to be on the board of this company for the next 10 years? There's all these things that I think help on like the. Is this something that you're going to look back on and not just feel good that you wrote a check, but that ultimately you are doing something that has a chance to really make a difference? This is practically a way that I thought about it. And the other thing is, and I stole this from Pat Brady, who's one of our partners, I literally have blocks on my calendar that are hours long, that are empty, that say most important thing. That is literally what they say. And the idea is do the thing that is the most important. Right now, that might be reading something, that might be trying to meet with a founder who you think has a chance to be important, that might be working at a company that you already are invested in, that as a chance to be great. But it leaves room for you to decide that in the moment.

I'd love you to tell the Amazon culture version of this idea. They have 14, I think it's 14 leadership principles. 14 is a lot. What do you think about those and how do you Think this might be an interesting example of keeping the main thing. The main thing.

I think Amazon, I don't know what their market cap is today, but presumably north of a trillion dollars. Any feedback on them that's not super positive is kind of weird to give, I guess. But I would say that I think Amazon's culture is largely based on one thing. It's not based on 14, it's based on customer obsession. That is what Bezos would die on the hill for. And I think the rest of them are cool. They are nice to haves, they are important to Amazon, but they are not the main thing. If he got one thing, it would be customer obsession. And I think the reason that that is so important on your own company is like, what is that version for you? I think a lot of people have the 14 of them or whatever that number is. A lot of people have that in their company. It's actually not hard to write seven or 10 or 15 management principles. It is extraordinarily difficult to say the one that you would keep no matter what, what is that one that you keep no matter what. And Bezos can do it. No way does he say something other than customer obsession. And so the thing that I try to like really do myself and try to tell people who I care about what is that one thing, and live that all the way through before you have the other ones. Because I actually think what happens, Patrick, is people. They are so busy trying to appease the people in the company that are not going to make the biggest difference that they actually mistreat the people in the company who can be obsessed with the one thing and will make a huge difference. Focus your effort on those people, on the people that are self selected in and that want to be there and that are going to make a huge difference. And tell them what you're really about. In my interview at Sequence, literally in my interview, Douglione told me we have 10 leadership tenants. I don't know a bunch of them. I can't tell you them quickly. What I can tell you is there's two things that really matter. Not one, two. There's performance and there's teamwork. That's it. And so I want to tell you, this is my interview. If you don't perform, you're not going to be here very long. Think about how many people are selling somebody on joining something. He's using performance as an honest thing and he's using it as a sale. That's the thing that's so crazy that appeals to me. Oh, this is a performance culture. Nobody is going to be around, is not going to be pulling their weight. And so that's the thing I think that you can do. If you get to like, one thing, what do you really stand for? And then it's like a bat signal to all these people who that's what they care about too. And it's actually a very negative signal to a bunch of other people. Great, who cares? Doesn't matter.

How do you know you've got a good one? There's this interesting investing thing. You know, don't put all your eggs in one basket. And then there's a counterpoint which is don't put them all in one basket, but just watch the basket very closely. And this seems like that latter one, which is if you get a good one and you take it seriously, it will take you far. But that demands we ask the important next question, which is, how do you know you've got a good main thing to begin with? What do good main things share in common? What are the attributes?

I love that. I think that if you go back to this embrace reality thing and you're brutally honest about how your business is doing on two dimensions, you can figure out if you have a good mate thing. Ultimately, what you should be able to do is your business should either have excellent metrics and they can be input or output excellent metrics and or the best people in the world that want to come work there. You got to be able to look at one of those two things and that's got to be it in order for you to really believe you have an amazing main thing. Ideally you have both, but if you don't have that, what evidence are you looking at to suggest that your main thing is great? And by the way, it can be polarizing. It doesn't matter if you don't like the idea that the company I have, that's okay as long as somebody who's best in the world does want to have that. I don't have to appeal to everyone. It's like not in vogue to say nice things about Facebook or Meta, but their value of move fast and breakthroughs was an amazing, amazing value because it was very clear of what they stood for. If you don't want to work that way, that's totally cool. You don't have to work there. But it was extremely communicative of this is the style of company that we want to have anyway, I think on the like, is your main thing good? Slootman, you. You've had that one was an Amazing episode. Amazing episode.

I was tired after it.

Yeah, I think it's some version of. It's either excellent or it's shit. And I think that most people try to live in the middle and they make excuses or reasons. This is something. Patrick, I will tell you. I think one of the mistakes that I and many people have made over the last couple of years is when you're making decisions at a company between growth and investment or profitability, there's like newer and newer and newer heuristics for how much did you invest and how much should you grow. And the crazy thing is there's been something that's been decided a long time ago that's actually pretty good, which is the rule of 40. It's actually a pretty good thing. And maybe you should say it shouldn't be better, it should be 50 or 60, but it probably shouldn't be low. And you think about it, oh, gosh. We held ourselves to too low of a standard in the last couple of years on how businesses should perform on that trade off. We didn't learn something new that meant that that was no longer relevant. We all just chose to ignore it. And you're like, no, if we would have held ourselves to the standard of, yes, you now have a lot more money, capital was cheaper, cool, but you still should only invest it if it's a good trade. And until we see differently, this is a metric that we should trust is whether it's a good trade.

It brings up another dimension of this for me. I try not to have too many beliefs. I feel like you get locked into them. But I'm starting to believe that things that work tend to work like, shockingly quickly. If it's a new product and it launches, if it's going to work, it often works immediately and then really ramps from there. And I'm wondering if that same. I'm curious if you agree with that in general, but also whether or not that's a litmus test potentially for a good main thing. Is that good main things, for example, you're one on your personal family and friends. My guess is that created an orderliness that worked instantly. So what do you think about that as like another dimension of this, that the feedback loop for stuff that's good is actually really short?

I love that. It's either working extremely well or it's not working at all. I think one of the things that's sort of interesting is these companies that turn out to be amazing, they're like screaming early on. They're not modest things. It's like, oh, my God, the stories that people tell is like, oh, you know, our servers are overheating crazy things. And so I really like that as a litmus test. And I think that it should be obvious if it's a good one. And I think that's a good working definition. Well, a test as to whether something is a good main thing.

You've written a lot recently in the past year, and I've really enjoyed reading all the writing, and I'd love to just kind of pull on some of the ideas you've written about as we covered these different topics. On this notion of main thing being the main thing, the one that really comes to mind is this notion of joy and competitiveness. This kind of interesting two by two. I don't know how you want to think about it. Talk about that concept of joy and competitiveness inside of a culture, I guess, let's say, and how that's related to focus.

This one is interesting in that I am a person that gets to help define the culture at Sequoia amongst our partnership, but I'm not the only one. And I think our culture is around performance and teamwork. Well, I was thinking about our culture at home, and our culture at home, I think, is around joy and competitiveness. I think families have culture, and we are a family that cares a lot about people smiling and laughing, and I think that brings a lot of goodness. But we also care a lot about winning. And I think in competing, our entire family is this way. And so the example that I try to give there, and I believe, and I think it relates to focus, is we don't have like 10 values in our family. We don't have 10 words I would use to describe the culture. We have two. And, you know, it's not one, but it is two of like, okay, these are the things that I think matter in our family. So the reason I think that that is interesting is they should be things you're willing to defend even when someone overdoes it. What that means in our family is there are times where one of my children flips over the board after a board game because he's pissed that he lost. And like, of course, I'm like, no, man, you can't do that. But I am, like, a little proud too, that he really cares, that he cares at all of his soul. I talk about later. What should we do? There's a little bit of like, well, the worst thing about him is that he's overly competitive. Fine, it's all good. And my Point to that for companies as they think about their culture is pick one thing, pick two things, and be ready to defend them when someone goes crazy on it, when someone does it too much. And make your engagement survey. If you insist on having one of those, only about those, how you're doing on those two topics rather than all the other ones. There's a bunch of companies, Patrick, where they will send out the engagement survey, the culture amp, they get it back and they do poorly on work life balance. And then the founder presents it to the board and is like, well, we did well on this. And then we did poorly on work life balance. And then you ask her, okay, cool. Do you care about work life balance right now? Because they have like 30 people at their company or whatever. And she'll be like, no, actually not like, I think we gotta grind, we gotta get after it. Well, then why did we put it on the engagement survey? To see how we're doing on it. And then light bulbs like, oh, but I thought I had to. No, you don't just put on what you care about and then tell people. Actually, I know we did poorly on this. We are going to do poorly on this for a long time because the main thing that we have to do is this and we're willing to deal with that. It is going to be an intense culture. Amazing even. Your culture should be focused. Your business should be focused on here's what we care about, here's the thing that will move the needle. And your culture should be focused too. And both of them have a main thing.

I think if we think about this section of the conversation and the question that emerges that's so powerful is just keep shrinking down things that you think matter to one in any aspect. Just as a thought exercise. Like, it's really interesting. I'm reminded of this exercise. Joseph Campbell, who was the guy behind the whole Hero's journey thing, where he would have people pick. I think it was like seven stones. They would stand at the edge of a cave and there would be this ceremony where you had to imbue each stone with, like, something that mattered to you, your spouse, your home, your whatever, prized possession. And then you had to ritualistically throw them in the order into the cave until you just had one left.

Oh, I love that.

It was crazy. And he was like, you knew for damn sure you had this stack ranking done right? And it's. The key thing is, like you said, it's painful. So I take from the first part of the conversation, everyone can ask this question about so many things in their life, and I think it's a really interesting exercise. But now there are some subcomponents that I'd like to explore. So there's leadership. I want to come back to being a good leader on top of a good main thing. But before you even get to that, I think you need some sort of core motivation aligned with the person that installs the goal, the main thing that runs pretty deep. And I think this is a good excuse to talk about what you've learned through Sequoia. I'm especially interested in recounting your first conversation with Mike Moritz about this talk, even just as an example, a little bit about your own motivation, your family background, which is really interesting. The topic of motivation is important. So maybe to begin, you could tell us what you think about this, how you assess how deep motivation runs.

You and I, one of the reasons we, I think, enjoy talking to each other is we both like learning new things. Learning new things as you get older is fun. And this is something I would say I've learned more recently, like, last few years, as opposed to something I've always believed or something. So when I was interviewing, actually for Instacart, Mike Moritz is on the board from Sequoia, and he was interviewing me there. So this is now seven years ago, and he asked me 10 minutes of, like, are you smart questions? Which is what I was used to in an interview. And then the next question he asked me was, what is your relationship like with your parents? And I remember being like, oh, my God, of all the things, like, you're prepared for a lot. Going into an interview fully had never even considered answering that. And honestly, I'm not sure I really answered that for any, like, what conversation does that come up in? And we then spent an hour and a half going through, like, deep stuff of truly starting at the beginning. What are your parents like? What is your brother like? Talk to me about each of them. Talk about how you feel about each of them. All these things tell me their stories. And I really didn't know what to make of it, honestly, at first, I was just tired at the end of it, and I felt very much like, man, I said things I'd never said before. I said things I didn't even know I thought. So later, I asked Mike, did you just ask me those questions? It was two years later you just asked me those questions. Or do you ask them of everyone? He said, no, I asked them of everyone. And I said, why? And he's like, look, I think that the only thing that endures is like the intrinsic motivation. And I think understanding the source of that is critical. Why does it matter if you succeed? What is the thing that's. That keeps you going? And I would say that I kind of have bought into that. There is this idea of what is the thing that drives you forward. And it's not always like a nice thing, but it's interesting. And I would say for very successful people, a lot of times it's like guilt in some form we've talked about. Sometimes it's fear, but I think getting to that so that you can predict whether somebody will keep going and what will make them keep going is pretty valuable and pretty tough. But it's something I have, like, full religion on now.

Maybe just as an example. Can you explain your own motivation, even if it is negative?

I'd say one aspect of it is. My grandfather came here when he was 35 years old. He and my grandmother had five children. And my grandfather was an engineer in India. You know, fine life, whatever, but not. They didn't have much. And I guess you, like, decided you didn't want to live like that. And so he came to America in 1957. He left my grandmother and the five kids there. It's kind of weird to think about. It's like 1957, it was pretty different to, like, leave, you know, they didn't see him ever. They didn't talk to him ever. And so people in his family, people told my dad and his brothers, this guy's gone. He's like, gone. Created a new family in the us he's never coming back. There's like a real fear of that amongst the people that he cared about. 1960, he comes back, he brings back my grandmother and their youngest daughter, and he leaves the four boys there. My dad at that time, 1960, is 11 years old, and his dad's been gone since he's 8. They don't come and get the boys again until 1963. And so I'd say one component to the motivation is obligation, man. Like people did. I'm 40, 35. This guy upends his whole life, and he does all this just so all the rest of us can have better opportunity. I've had nothing in my life that's that difficult. No chance. The age my dad was when he left, my grandfather left is the same age as my youngest son. I look at my youngest son now, he's the best. He and his brothers, I love them so much. I can't imagine leaving them for anything. What opportunity for somebody I've never met. Would I go do this or. My grandfather was not a perfect man. I don't mean to suggest. I just want to mean that, like, there was something pretty crazy that was done, and there is an obligation and a guilt or whatever that comes from that. That I think is true. And I think almost like an inadequacy of, like, man, like, what struggle have you had? And if you haven't, what excuse do you not have to go and do something, think about what people did for you? So there's that. To the extent my brother listens to this. My older brother is wonderful. Three years older than me. He has always been and is always nice to me, but he was better than me at so many things growing up, and he was so likable. And every time I go into a classroom, you're Raj's brother. Literally every time. And I was different than he was, and he was more studious than I was, and he was better in class than I was all the time. The teachers liked him better every time. And I think that the reason I'm competitive is because everyone liked my brother better growing up. That's not his fault. I love my brother. He, like, somehow still manages to care and be so good to me. He was good to me even then. He was annoyingly nice to me even when he was my big brother. He didn't beat me up. It's not his fault at all. He's awesome. I'm very close to him. But constantly having somebody who's better than you at something and people like better, I think that's something that makes me pretty competitive. And I don't know if that's healthy or not, but it is real.

Josh Wolf has this phrase, chips on shoulders. Put chips in pockets, which is kind of interesting, but a chip on his shoulder, which a lot of times people will wear as a sort of badge of honor, whatever the thing might be, like you described. I'm struggling between the virtuous and the vicious, intrinsic motivators where fear and guilt, they seem to be very powerful motivators. But I don't know, it just sounds kind of unhealthy. I'm curious what the range of motivators that you've seen, maybe with founders you've worked with or just with other exceptional people. And have you seen ones that are more. I'll call them, virtuous. And what might those things be?

I haven't heard of something that I think is enduring, that is super clear and positive. It doesn't mean. It doesn't exist. And I think what's true, Patrick, is I actually think it's kind of hard to predict how some of these will play out over time. You're trying to predict how a demon or a motivator shows itself and what the implications are of that over a long period of time. I actually think it's pretty hard to predict. I think what's interesting is you're probably looking for like an extreme there in one way or another, and you're sort of hoping that it will be harnessed in a way that's positive and all that. But I actually don't think it's that easy to know in the business of investing. I think sometimes the more data you have, it helps. But on the motivator side, the earlier you invest in someone who has a deep motivation to do something, the less you know exactly how it's going to turn out, is maybe the way I'd put it. I think the more data points you have of them in that seat, like I do growth rather than like the seed investments generally, you have a little bit more evidence of how have they dealt with executives or how have they done certain things. But I do think sometimes you just don't know when you are looking for some of that extreme.

What about the art of sussing this out in conversations, starting with maybe what you learned from Mike Moritz again, but also just in developing the skillset on your own. What does great look like in terms of the ability to suss out someone's core motivators sometimes in a short period of time?

I actually like the investing business for maybe different reasons than some other people like it. I like it because of the competition of it and almost the integrity of the game that you and I are talking about. It's so hard and it is objective as to whether or not you are good at it and all that kind of thing. But what I really like about what you just asked is I really like getting to know the people. I'm not a hedge fund investor and I would never be because I want to spend time with the people that are building the business and a lot of it. And I want to spend time with them early on. And so I'd say the first thing is you actually have to care about getting to know this person independent of whether or not you invest. If the only reason you care is so that you can decide whether or not to give them a term sheet, I think people are pretty good at figuring that out. Do you actually want to know this and is it just for your memo that you can share with people later or whatever. So I think the first thing is, like, a genuine curiosity or caring about it, because otherwise, I don't think the person wants to open up. There's even an element of, look, if you tell me something you want me to tell somebody else, I won't. But if we are going to work together for a long time, it is valuable to me for us to get to know each other. And I'm happy to go first. I think there was a tactic of, like, actually being willing to tell somebody some of your own stuff, because otherwise, I think oftentimes people think that what they have that's negative is unique, or they think that it maybe it will rub somebody the wrong way and you kind of want to make it okay for whatever that is. I think the second thing is doing it in a different setting than is normal. Across a table from somebody is pretty different than going for a walk. Then a person, I think, is way better than any other forum. One thing that Alfred Lin told me, which I thought was super helpful, he's like, a lot of times people don't like looking people in the eye when they're doing certain things, when they're talking. And giving somebody the chance where they don't have to do that the whole time is actually pretty valuable as you think about going deep with somebody. So, like, figuring out ways where that's not the norm. And what an incredible observation of, like, humans. And I thought that was kind of an interesting one. The third is the willingness to ask. I was uncomfortable asking. One of the reasons I asked Michael Moritz why he asked me those questions was I said, do you think that you can do that because you're a former journalist, you're extraordinarily successful, you're 65, and you're a knight. And he basically, like, really shot it, said, no, it has nothing to do with any of that. What it has to do is genuine curiosity, and people want to talk about themselves. If you actually care. It's hard to ask somebody a question. It's hard to ask somebody something. When they tell you something that seems canned, that kind of seems like a canned answer. Can you do it again? It's hard to ask people about some of these things. And sometimes it doesn't go exactly the way you'd expect, but when it does, you're like, oh, shit, you really get something.

We've talked a lot about focus and motivation and evaluation of a core idea and speed. One thing we haven't talked about is the leadership. On top of all of this that it takes and how to be a great leader. And this is maybe the thing you have the most experience helping run Instacart. And I think having talked to, observed, thought about great leaders a lot and luckily you've written something on this that I recommend everyone go check out which is a post where you explore this joint concept of being demanding and supportive of people that you're leading. And again, I'd sort of love you to pick this apart. I think there's probably some examples from sports that we could talk about. But maybe to begin, just give us the idea itself, like why do these two words pair so well together for well defined leadership?

Do you think Adam Grant actually said this one time which is most. He was talking about parenting. He said most people think of parents as you're either it's a spectrum between being highly demanding and being highly supportive of your kids. Pick where you are on the spectrum. And he was like, that's all wrong. The best parents are both huge unlock for me when he said it, I remember thinking I just heard something that's going to make a big difference in my life. Like oh my God, I love that. And I've used it over and over and over again since. And the reason I think it's so cool is I think it reframes, trade offs and not. And it's more like in the moment. What are you doing? The concept is quite simple. Which is the best leaders expect an extraordinarily high level of performance. They expect a lot and they're there for you in a very real way. But in each moment they're titrating the level of tough but supportive. I realize that everybody who I respect as a leader kind of does that. They are extremely willing to tell someone that they're not performing and they're extraordinarily honest about those things. And frankly they are sometimes very difficult because they expect so much. But when the chips are down, they are there for you. They are absolutely there for you. The reason I like it so much is I think it applies to everywhere. It's one of those things where like you talked about not having that many beliefs. This is one where I'm kind of like, this is the right way to lead. I don't actually think it's just like one way. And again, I could be wrong, but I don't think I am. The best leaders are really both. I think Adam had it right. I look at the extreme example that people would bring up for demanding is probably Slootman. Oh my God, what a hard Ass. He writes books about how you just need to focus and get things done and amp it up and all these things. Okay, cool. He is extremely demanding. We all agree on that. The crew that rides with him from company to company is pretty consistent. And my presumption is that those people feel like he's got them, he's got their back and they earned the right for him to have their back. And that's probably something that they feel extreme pride in. I've earned the respect of Frank Slootman. I've earned the support of Frank Sleepman. I'm like, okay, cool. I look at Greg Popovich. He would always start every season of coaching the spurs by just ripping Tim Duncan apart in the first practice. Every year and the whole season. And there's like all these clips of during the games, him like yelling at Tim Duncan. It's incredible. Tim Duncan made Greg Popovich's career in many ways. But go and watch Tim Duncan's retirement ceremony and watch what Greg Popovich says about him. Watch how much he's there. Tim Duncan went through a lot during his period and Popovich was absolutely there. He would have been his friend even if Duncan had left and gone to Orlando. And at the end of every season, just the book ended, Beginning of every season, he's shouting at him in front of the whole team. At the end of every season. He started his exit interview with him with, thank you for letting me coach you. Emphasis on the word coach. I think one thing that's been pretty cool has been when people have been very tough on me, leadership wise, later in life or even later in working with them, I've thanked them for making me earn things. The reason that I think this kind of ties together, of demanding and supportive is so valuable is I think the key to happiness is earned success. This is something I read one time or heard one time from Arthur Brooks, used to run the American Enterprise Institute. Earned success. The reason a trophy matters is not because you freaking get the trophy. It's because you earned it. It's the feeling that comes along with the trophy. The thing that happens when you're demanding and supporting with people is you create opportunities for them to have earned success. You create opportunities for them to feel happy and to feel like they earned that happiness. It is absolutely so cool. We talked about, I'm a dude guy. I love Coach K. I admire Coach K's results. One of my best friends is Shane Battier, this iconic Duke basketball player. And he'll tell these stories about how, remember, Shane is player of the Year the winningest player in college basketball history. Pretty good player for Duke. Shane will tell the stories of Coach K. Like just being so hard on him. Well, in film, finding exactly what would motivate Shane in a demanding way. Being like he knew Shane cared a lot about how he'd be viewed in the long history of new basketball. So he would say things like, no, Grant Hill would never do that, that play. Just the notion of figuring out exactly what would motivate him and being a real hard ass on that so valuable. But then now, 20 years later, he writes in letters and Shane keeps them 20 years later. That to me is amazing leadership. I think it works everywhere. I think the best leaders, they just figure out where to tight treat it and they figure out when you need the really tough, demanding, I believe and then they figure out the time that they have to be there for you because you're like broken.

We've talked about a lot of things and I'm glad we've got them all done. Before talking about companies, you said performance and team are what matter at Sequoia. My guess is that those same things then now extend down into the companies that you want to support. I'd love to just hear, since you moved from being an executive running a big business into an investor seat, how you've developed. Obviously Sequoia probably has answers to this as the party line of Sequoia and I'd love to hear those too. But what is it then that you're looking for in companies? Like if ultimately performance is one of the two things, they gotta be great big companies. So what have you learned so far about identifying the attributes of these things? And obviously we've laid good groundwork. They should be focused, they should have a good main thing. There should be evidence for that. You know, there should be motivation and so on, good leadership. But when you go company to company, what is your process? How are you using all of these ideas to actually evaluate companies?

So I think the first thing and people are different. There are people who will inside of Sequoia, outside of Sequoia, investors who are incredible at thinking through different business models. They do a lot of like writing about them. They think about the future and they can sort of predict it in a way that's pretty amazing. That is a genuine compliment to a set of people. And then they kind of go look for people that are building the future that they envision and they are thesis driven like that. I don't know how to do that. The thing that I try to do is I try to spend time with people that will inspire me and have them tell me about the future that's going to get built. And I have to evaluate whether I believe in it or not. So it's a different process because it's not hours and hours and hours of reading and then a beautiful document that then I go and chase. It's much more of try to find people who I think have some point of view and an extreme point of view, ideally at that point. And what I try to look for, and I'll tell you how I look for these things, but I try to look for companies that are early and inevitable. This is the combination of words that I think about like Stripe did an amazing job of this. Their mission is to increase the GDP of the Internet. Cool. Most people probably believe it's inevitable that the GDP of the Internet will go up. Okay, they're like associated with a megatrend. Now there's a question of are they early in that? Are they going to be able to execute whatever? One thing I look at a lot and on behalf of invested in fair, I invested in benchling two companies. I'm very happy that we get to be part of both of them. I really in my heart believe that they are early and inevitable. Then the diligence becomes like, will they execute on it? And are these teams you want to back and can you do all these things? But those are two things I look for, which is that they're at the beginning of a very long term trend and that that trend is happening with or without them. And the question is whether they're leading and ushering in that trend. I do believe that it's like hard to force something. I don't think there's any management team that could have made Webvan successful in 1999, even though online grocery was inevitable. Do you see what I'm saying? I think that you needed the smartphone in order to make it and usher it in. I'm glad, very glad that Instacart came along to capture that. The trap with the way I try to do it, which you have to avoid, is I think Joe Grundfest, who's a Stanford professor, has this thing which is inevitability doesn't mean imminent. You then have to decide, oh, is it actually going to happen? And that I think is a lot of like the team's insights. Why is it going to happen now? The next thing I try to look for is it's catnip for me if somebody understands their business in real detail. When we invested in Fair. The thing that I loved was the just absolute militaristic detail of every number that was in the deck. You asked a question about a number that was in the deck, they just bring it all the way down you. And I talked about craftsmanship. It was just so high quality, just an understanding of exactly why these things are happening. And I was like, oh, I love them. If somebody really knows why something's happening, like three levels of detail down and the inputs, that is catnip for me. And the reason I think that matters is I think that you only know about that if you care about the topic. And I think you've decided that that's important and you're going to know everything about it. And I think that that is pretty representative of something that will matter in the future. And then the thing that I'll tell you on Benchling that I was impressed by, beyond the Megatrend, all the stuff was Sagittarius grit is like multiple standard deviations away from the mean. He doesn't even recognize that. It's weird that he had four years with no revenue and he kept going and people were telling him to open source it and doing all these things. He's like, well, I don't understand the question of why I keep going. You know, that is very different than the way most people are. But the other thing I'll tell you about is this a very humbling job. It's hard. I don't want to present it as like, oh, like, you know, I know exactly what I'm looking for and it always works. One thing that is very true at Sequoia, or just in general, I think, is if you're not constantly learning it, you will lose because there isn't like a playbook. But that's what I kind of try to do. And then the soft things that I look for, I like this metric. I try to figure out how will I feel if this person called me at 10:30 at night. I like, really try to think about the way it will feel. The phone rings. It's this founder. Am I excited to talk to them? Am I like, oh, why am I talking to them? And I think you and I both have this factor that we both care about a lot. How do I feel?

The green button test, as I call it.

That's it.

I'd love to then take all of these ideas, these amazing ideas of yours, and turn them back on Sequoia itself to help us understand how they manifest in a firm that's obviously historically been one of the best how demanding and supportive manifests there, what a partner meeting looks and feels like, what the apprenticeship model looks and feels like. Maybe you can bring some of these to life with your day job and a firm that I think people are really interested in.

The first thing I'd say about Sequoia is I think Sequoia has a pretty strong belief that yesterday doesn't matter. The statements that people hear about the place are true in that we're only as good as our next investment. That's a very real sense of what it feels like inside. And I think the question then becomes, why? Why is it like that? And why is that the case? The words that come to mind would be like, performance, teamwork, and leave it better than you found it. Those are things that, when someone asked me to describe Sequoia's culture, that I would say are the things. There's a reason performance is first. There is no role without that. All the elements of apprenticeship, all the elements of culture, all of them are designed with this idea of it better work. We better be in the most important companies of tomorrow. If we're not, then everything will get changed. One of the things that's interesting at Sequoia is if you go and you are the first person to talk to a founder, you're not the one, if Sequoia works on it, who will necessarily be involved with the company? There's a conversation with the founder, which is like, the founder, who do I work with? And the answer is, you work with all of us. And they're kind of like, well, they recognize at first. Like, seems like a platitude. Well, no, but which one of you will be my board member? And then the answer that always surprises them is, like, whichever one you want. It doesn't matter. It's not like, oh, you know, Johnny or Jamie sourced it. And therefore, you either get Johnny or Jamie or you don't get any of us because they get differentiated. The purpose of this is to make sure that you get the best thing. Do you remember that tweet a while back that said the best articulation of a venture capitalist, a value prop. And it was this guy wrote, improved odds. I love that. Our job is to increase your chances of being a legendary company. What do you think will help you get there amongst what we got? Well, I'll be here for you. And I used this analogy before, but I think it's true. I think that the aspiration for Sequoia is not to be like a golf team. Everyone hit their ball, add up their score. See what we get. And it's the aspirations to be a basketball team. Either we win or we lose as a team. I think that the manifestation, though demanding and supportive, it's oftentimes on one side of the spectrum or the other. I don't think it's always both. We will be in a partner meeting and it is a real discussion and it's tough. Sometimes it's described as full contact. It's a very written culture. People will say things like, this was not a very good memo. I don't know how to help you make the decision here because I don't have a lot of my questions answered. That is a really painful thing to hear amongst the small group, like Scotia's pretty small in the investment team. The growth team partner discussion is 10 or 11 people. These are all people you know and respect and you care about their opinion. When someone says it's not a very good memo, it's tough. But that will happen. It will happen where someone will say, I really think this is a really important company and we really need to invest. And someone will say, like, I just don't understand what you're saying. That because of X, Y and Z. So the demanding side of it is you do need to bring your A game to the partner. It is not a rubber stamp. It's a real thing. We're unanimous. Everyone has got to be in because there's none of this later, like, oh, I didn't even think we should do it. I think the supportive side ends up happening. And obviously this is complex. It's been complexified through Covid and we have to work through it. The supportive stuff happens a lot of time after the meeting, the sidebar afterwards of effectively communicating that you believe in the person and that the reason that you said what you said was about the company, it was about the analysis, it wasn't about them. And. And directness is kindness. And what can I do to help you? I can do this reference with you on this analysis. I think if we did it this way, I'll do it with you. There's a lot of that that happens. My point is I think it's necessary. The demanding nature is very real and it's a set of people who put a lot of pressure on themselves to do that. The last thing though on the leave it better than you found, I think is good. It is a good forward looking thing because otherwise it's pretty intimidating to go somewhere. It's intimidating and empowering. Maybe the way I put it. I think the intimidating thing is Sequoia has had success that I've had nothing to do with from the past 50 years. It's intimidating to think about leaving it better than you found it there. But it's empowering, too, because it's a recognition of if we just keep doing the same thing, we're not going to be better. We don't have an aspiration to stay the same. We have an aspiration to be better. Try it. Try something new. Give the idea. My first day was intimidating because Mike was there, Jim was there, Doug was there, Rudolph was there. These are people that have done a lot of stuff. I personally felt it better than you found it to be positive because it's like, all right, cool. There's an expectation that we'll try new things and we'll change it up. One of the things that you and I have talked about is I think that I'm at my best when I'm play free. I'm at my best when I'm a little loose. I'm at my best when I'm not looking over at the bench. Every time I make a mistake, wondering if I'm going to get benched. It took me a little while. I think a lot of times it takes people a little while to get to a place where they want to try things, but certainly that's the objective for what it is. The number one thing that I would say for someone that's trying to figure out what it means to work at Sequoia or a place that has had good success or wants to have good success, is there's real respect for the Founder. That journey that they're taking is impossible. It's so hard. It is against all odds, it is all of that. Either you need to match that or you need to not be in it. One of my favorite things about Sequoia is the fact that people that have been there 25 years are grinding. You're either all in or you're all out. And I really like that for the founders because the idea of, well, we have to make a decision, but I don't know when I'll be able to talk to this person that sucks because the founder is in there killing herself. And the idea of, like, well, I don't know, this person's away for the week and they're hard to reach. No matching that. And I think respecting that is a big part of what I like about working at Sequoia. I don't mean to suggest that it's perfect. There's a lot left to do. The point I was making on Covid. Like during COVID there were times where we had too much demanding and not enough supportive because we weren't around each other. A lot of the facial expressions and the body language and all of this, that happens. It happens better when you're in person. We got, in my opinion, a little bit out of balance. I think that the apprenticeship was harder at the beginning of COVID because people started how do you teach them? How do you get taught yourself? One thing that was really hard when I joined Sequoia was I had done some other stuff in my career. I came from being a leader at Instacart. And then there's elements of being a rookie that was really hard. It was not like a pair of shoes that just fit all of a sudden. Because it's a performance oriented place. It's very much like a performance at this place place. So the past. When I say yesterday doesn't matter, that sounds good. Except for when your yesterday is the thing that doesn't matter. That's actually like shit, that's hard. I don't mean to suggest it's all rose. They say if you work at a restaurant, you won't eat there anymore. I think so far I say Sequoia is the opposite. For me. It's a place where once you're in close, you would definitely want to invest in it.

We did this amazing business breakdown of Rolex the other day, which is crazy. Rolex is a nonprofit. It's the biggest watch brand in the world and it's a family controlled nonprofit since its founding in 1905. And the person that was breaking it down had privileged access or knowledge about it. He had been one of the few people that went to the four different locations where they make everything's vertically integrated. They have their own gold foundry. It's a wild story. And he said something which stands out, which is it's one of the only companies he's ever encountered that as you get to know it more, you like it better. It's the restaurant thing.

If you really go back to the.

Kitchen and watch it, you're probably going to like it less than like the best dish comes out or whatever. The front facing of something is almost always the best version of it. I think the apprentice model is where the rubber meets the road. And I'm really curious what that is like. If you had to again teach that concept like apprentice sounds great, but what does it actually mean to do that? Well, because that seems like that would drive people driven industry so much success or failure when you're bringing in even very talented rookies into the team, Sequoia.

Requires a willingness to play both roles, the mentor and the apprentice, and have that kind of change day by day. So I'll give you an example that at least comes to mind for me. Carl Eschenbach joined. Carl had a 30 year operating career as the President of VMware and in my opinion is probably the best go to market exec in the valley and one of the top CEO candidates for any enterprise company that would ever come up. And he joins. There's a lot that people can learn from Carl. A lot. Even people that have had tremendous success in investing, they can learn a lot from somebody who's run companies, who's led 20,000 people, who has hit quarters every time, everything. And Carl could come in and kind of be like, look, I'm the resident operator and I will teach you all a bunch of stuff that is about operating and that would be a very valuable role. And a bunch of people could apprentice under Carl, but those people would have to apprentice under him and be willing to apprentice under him even though they've created investments that are breathtakingly successful. But the other thing is Carl has to say, I don't know how to do some of the things that you all have done. I haven't done that before. And he has to be willing to, to be a rookie on things. How do you determine this? Part of an analysis that determines whether we should invest in this company. Carl doesn't love writing memos. He didn't love writing them before, he writes them now really well, but he didn't love them. He said he had to learn how to be a good writer in prose. He's cold. Calling companies for sourcing. Think about how many layers of people there probably were when he was running the sales org. And I always thought that was cool because he's in the hall of fame and he's an apprentice. And then there's people who are on the hall of fame on the investing side who are apprenticing under him. The reason I thought that was kind of a cool articulation is I think most people think of mentor and apprentice or whatever as there is the guru and then there's the apprentice. And it's fun to be the guru and it's tough to be the apprentice. But if you are willing to do both, where there's things you can learn and then there's things that you teach, it's pretty magical. But it's hard. It's really hard to admit that you have to apprentice under something. I'd worked in an investment job before I came to Sequoia, so I had some ego, and that ego was stamped out over some period of time. The thing you did before was great there. Cool. But it's different than what we do here, and you do need to learn that. I've talked about Pat. He taught me a lot of stuff and he was patient with me, but it also required for me, ego wise, him being a wonderful partner and saying, I have some things to learn from you, even though he has much more to teach me. Lifelong learning is really good because it means that you constantly want to get better. And I do think that is a hallmark of the place. It's like we haven't done much. We got to go and do it better. That means we got to learn.

Maybe we could talk, especially given what markets are like IDsummer here in 2022, about what all this feels like now. We had had this discussion seven months ago or something would have been very, very different environment. Lots of companies were flying high, prices were crazy, exits were crazy, cash was flowing. We're sort of in like the opposite environment now. Things are very different. What does this feel like to you, environment wise? And what are you telling founders that you work with and ones that you're considering working with about how their behavior needs to be adjusted given the market that we're in.

We're in a correction, not a crash. Like, I don't think it's going back to what it was. I think we're a heck of a lot closer to normal now than we were then. Inside Sequoia, the belief is if we are good at this job, the fact that it's hard or harder should be a positive, not a negative. Either we deserve to be good at this or we don't. And a harder game, like, good, let's go play it. Let's go see if we're any good. And I think I told you before, this feeling of always feeling like you're one step away from going out of business or one step away from failing the people who came before you, that's like a very prevalent feeling.

Paranoia.

Yeah, Huge paranoia. Yes. The game is harder. You know what? Step it up. Let's go. I think to the companies. What's very interesting, Patrick, is the commentary, I think, is different by a company. But something that's consistent for me is one communicating that I don't think I did as good of a job as I could have last year of recognizing that this market was crazy. What I mean by that is that our business plans of the companies that I work with, I could have done a better job of saying hey, the durable way that this business will ultimately be valued is on cash flow. The proxy for that is going to be our gross margin. The efficiency of that gross margin growth is this. Just because the market's crazy doesn't mean our financials have to be too. And thank goodness a lot of the companies have done well anyway. But I don't think I was as good as I should have been on that. I don't think I was as clear eyed as I should have been. I start with that when I talk to the companies. And the reason I start with that is because if I now have a point of view and I don't start with that, then what credibility do I have to give? The point of view I have now I kind of have to start with I wish I had said more of this 12 months ago. Cool. Now I firmly believe in like the Bill Parcells. You are what your record says you are. Investors are going to judge us on our financials and they're right to judge us on our financials. And great input metrics should show up as excellent financials. It's been on the input metrics but soon they should show up as excellent financial metrics and of boring things like sequential operating leverage and boring things like really doing well on rule of 40 and boring things like net dollar retention being consistent and strong. I really believe ultimately businesses are going to be judged on their financials. The further that we get away from that, the more that we're lying to ourselves. That is probably like the conversation that is going on. And I think that amazing founders often get it before anybody else does. And I think the more important thing Patrick is making sure my belief is it's not about the investors later, it's about them having a business. I think it's an accurate way to decide whether a business is a great business or not. I like believe in the P L as a good indicator as to whether or not it's a great business. It's not about making somebody else happy. It's about actually having a durable business. The big word that I would probably use a lot now is durability. The current environment is durable. This is the durable reality. And I think we need to build a business that is durable as measured by its financials.

I don't think I've ever asked you this. What does a great product mean to you? What are the dimensions of great as it pertains to the Product itself, if.

You made me pick one. Retention is probably the thing that I think is the best indicator of.

Just like, so interesting how much I'm hearing this lately. But go on, look, do they come back.

Cut through everything else. Do they come back and do they use it more and more, all that kind of stuff? I think if you gave me one, that would be it. The other things around metrics for whether something is a truly great product would be. I think virality is something that people talk about a lot, but it's got to be like, real virality, not you're forcing it. People want to talk about why it's great without being compensated for doing that. I think that's an indicator. I'd say the softer things are almost more of what I look for when I think of a great product. And I would say it's something that you feel, that you hear about it, that makes you not be able to sleep afterwards because you're like, oh, my gosh, I've never heard that before. The reason I went to work at Instacart was because of my wife. It's because when I asked her, what do you think of Instacart? She said, I don't know how they make money. Great analysis, by the way, at the time, she said, but if you wanted to move, the first thing I would do is see if Instacart delivered to the new house. Dude, I mean, come on, who says that I wouldn't move unless this product was available there? Like, whoa, you don't hear that very often. And so I think that the example would be something they're like, oh, my gosh, how does somebody say that? And I think on every company that has a great product that I've ever heard, there's been some stat or some statement or some something that you're just like, whoa, I did not know that that was something that somebody could say about a product. No. And so there is this emotional element that I think is pretty unique that comes up in great products.

At the very start of our conversation, I think the very first thing you said was the litmus test around focus is pain. If you're not feeling some pain, then you're probably not really doing this exercise. Right. And there's a wonderful story that I think I'd love to start to wind down with around Instacart. Mentioned it a few times, the unit economics being lopsided and out of whack when you joined, and specifically the episode of the 2015. I think it was a board of directors meeting and just what that felt like and what you did to turn things around. I think it's a great business story, but it's also a good example of where we opened the conversation with, which is maybe we'll just call this episode focus or something like something very basic.

Flourish.

Just focus. Keep narrowing the focus. Tell us that story. Because I think it's a great example of how powerful that can be in a business.

Joined Instacart September 28, 2015. The first board meeting was November 10, 2015. These dates are, like, burned in my brain. We presented the financials from September, and the first time I saw them was right around Halloween. And when I saw them, I remember calling the controller afterwards, hey, you know, these are wrong. Would you mind please, resending them? And honestly, kind of annoyed, come on, it's important to get the financials right. And the controller said, what do you mean? Well, they say we're losing $14 on every order. They say we're burning $12 million a month. They say we have less than a year of cash. Obviously, this can't be right. And they. Long pause. No, that's right. So I think the first part of the story is just, like, fear, of course, of like, oh, God, this is not gonna work. What have I done? The real honest answer is you think about just going back and leaving. I mentioned they were September financial. I was like, oh, man, I was only here for two days in September. Maybe I can call KKR and ask if they'll take me back. But anyway, I think that, like, first decision was just to stay. Which, yeah, I did. And then the board meeting was us presenting. You know, honestly, I was sort of hoping that that board meeting be one where the board explained to me why I was overly concerned and why it was going to be fine. Because, you know, I don't know, maybe you're hoping, maybe a lot of other companies look like this. Maybe there's experience that I don't have that tells me that it's going to be fine. That is definitely not what the board said. The board said, this is extraordinarily alarming. It had gotten worse than it was before. This is a huge problem, effectively. And so the only good thing that came from that was we had a main thing. We had an obvious main thing where if we didn't fix this, the business was going to be broken and it was never going to work. What we said at that point was, to the company, there's only one thing that matters, and it's to make money on the order. And what that means is whatever that does to growth, whatever that does to all the other metrics that we care about, it will do. And other than, like, integrity as a countermeasure, just like we will never have anything that's not done with integrity but everything else on the table. What now? And so the reason that was such a fun experience for me was one, of course, it worked amazing. But I learned so much about leadership during that period because we had a lot of good ideas as the leadership team of here's what we got to go do. But a lot of it was also just, like, asking the right questions to the team. And people had incredible creativity. There's this Tyler Cowan article someone sent to me the other day, which is so good, it's so short and just called elevate ambition. One of the best things you can do as a leader is just tell people they can do more. Right. Demanding. But just telling the team, we can fix this. And being like, what ideas do you have to fix this? Here are the constraints on that. The ideas that came up when we did that were so good. I have goosebumps right now thinking about some of the ideas the team came up with. On realizing that we could take minutes out of every delivery. The moment we figured out that every minute was worth 25 cents of gross margin, the moment that we got the T shirts for everybody, we have, like, a strict no more spend policy. The one time we broke it was to get everyone T shirts that were sweet T shirts. But that said, every minute counts because it was such a seminal moment of, oh, shit, this makes a huge difference in our business delivery efficiency. Anyway, the thing that was so cool was that we did it together and we got the main thing was the main thing, and we knocked it out. As I look at my career, it's like the thing that I'm most proud of, I would bet. And it was also truly so hard. But I am 100% sure Patrick would not have gotten done without this intense, maniacal, singular focus. Anyway, it's something that I think has paid dividends for Instacart in the long term. I think there's no story of Instacart that'll be written without that being a huge moment. And I also think it set the template for how we would get things done in the future. Incredible, intense focus on the thing that mattered.

What were the handful of things that most drove the switch over? You mentioned the per minute cost. Were there other things that were the most important?

One of them was a pretty cool thing which Was we realized we weren't charging sales tax and we weren't charging bottle deposits. The reason I say that these are interesting is like, that's like some pretty detailed stuff in the actual. We had a rule that we couldn't charge customers more because obviously one answer fixing economics is just raising fees. So it's like, okay, look, the fee is going to be here. We can't go above that. And I still remember when the person came up with the idea like, well, wait a second, I know we're asked to charge customers more, but I noticed that there are these bottle deposits that we have to pay that we don't charge anyone for. And I also noticed that we're not charging sales tax properly and sales tax varies by county. And so we would need to like really understand this. What a brilliant idea. Even though you said we can't charge customers more, does it count if we're just charging them what they actually should be paying? That's the cost of the goods. No, I was wrong. That was the wrong constraint. You were right. Let's do that. That was like big thing of just the team figuring out. And the reason that the one I like so much on the permanent cost was because if you ask people to lower cost, nobody cares. If you ask people to get profitable, nobody cares. If you ask, you'll make the product better, everybody cares. And so the answer of like realizing that a lot of our cost was in the cost of labor and realizing that labor is dollars per hour times number of hours, and realizing that dollars per hour can't change because you need to pay the shoppers at a fair and appropriate wage. And then the only thing you have left in order to move that number is number of hours. And you want to do more deliveries, you want to have fewer hours, but you want each delivery to take fewer hours. You want each delivery to take fewer minutes. The work that the team did at that point one was just the identification that minutes for the driver and the work that people did to break down each of the 110 minutes at that time that it took to get do a delivery into each component part level of the ideas that people came up with of like, well, wait a second, we spend four minutes parking. What if we asked our retail partners to get parking spaces towards the front that might save us two minutes. Interesting, this consistent application, of course. And then you have people high fiving on the hallways of getting minutes out. And then like even little things like showing up late to a meeting and someone being like, no, no, no, Robbie. Every minute counts. And like, just like that kind of thing was so fun. I remember that ended up getting of the $14 we were losing, that ended up getting like nine or $10 because people got 40 minutes out of the deliveries. So that was the biggest one. But it was a collection of small minutes of getting.

You and I have learned the lesson that every time we talk, we need to schedule way more time than we think we're going to need. And it's happened yet again that somehow we're at the end of our allotted time. I think this has been an absolutely awesome conversation. Different in some unique ways. So much fun. As I always have talking to you, I'm forced to ask my traditional closing question. What is the kindest thing that anyone's ever done for you?

I've listened to this so many times and I know that that's the question. And I also recognize the very clear irony of you asking me for one thing and me saying that I'm going to give you more than one thing. But I think this merits an exception. There isn't just one. So the things that have been the kindest to me are boddy. My grandfather coming to the United States for us, my dad commuting an hour and a half every day to work so that we could go to a better public high school, and still being there to this day, every minute that I want something, he's still my closest professional advisor and personal guru. My mom coming here to the States taking care of us every day and doing everything that she could solely to live a life that would make my brothers and mine better. And then the last one, of course, is my wife, who makes my life happy every day by being this incredible partner and being this incredible parent to our children and teaching me what it's like to have a life partner.

Wonderful set of answers. Like I said at the beginning, I think the topic of our conversation today, this whole idea of focus and do less but do it better is really powerful. And often you just have to learn the lesson by doing stuff. But having conversations like this helps me a lot as a good reminder for this really important, beautiful principle. So I'm so thankful for the time and for the conversation.

Thank you for having me. It means a lot that you did. I always love talking to you.

If you enjoyed this episode, check out joincolasis.com there you'll find every episode of this podcast, complete with transcripts, show notes and resources to keep learning. You can also sign up for our newsletter Colossus Weekly, where we condense episodes to the big ideas, quotations and more, as well as share the best content with we find on the Internet every week.