Human Resources

Hiring and Culture

Sam Altman: Part two of Culture and Team. We have Ben Silbermann, the founder of Pinterest, and John and Patrick Collison, the founders of Stripe. Founders that have obviously, some of the best thinking about culture and building their teams.

There’s three areas we are going to cover today. One will be general thoughts on culture as a follow up on the last lecture. And then we are really going to dig in to the findings of these companies and building out the early team. Then how that changes and evolves as these guys have scaled their companies to the hundred plus, I don’t even know how many employees you have now but quite a lot, these very large organizations and how they adapt these principles of culture. But to start off, I just want to ask a very open ended question which is, what are the core pieces of culture that you found to be the most important in building out your companies?

Ben Silbermann: Sure. What are the most important parts? For us, we think on a few dimensions. One is who we hire, what those people value. Two is what we do every day. Why do we do it? Three is what we choose to communicate and I think four is how we choose to celebrate. Then the converse of this is what you choose to punish, but in general I think running a company based on what we celebrate is more exciting than what we punish. I think, the four things I think make up the bulk of it for us.

John Collison: One thing, I think Stripe has placed a large emphasis on, more so than other companies, is transparency internally. I think it’s something that’s been really valuable for Stripe, and a little bit misunderstood. All the things people talk about, like hiring really great people or giving them a huge amount of leverage.

Transparency for us plays into that. We think that if you are aligned on a high-level about what Stripe is doing, if everyone really believes in the mission, that if everyone has really good access to information, and everyone has a good picture of the current state of Stripe, then that gets you a huge amount on the way there in terms of working productively together. And it forgives a lot of the other things that tend to break as you grow a startup. So as we have grown, we started off two people, we’re now a hundred seventy people, we’ve put a lot of thought into the tooling that goes around, transparency. Because with a hundred and seventy people, there’s so much information being produced that you can’t just consume it all as a fire hose. And so, how we use email, things like that, we can go into it more later. But that’s one of the core things that helped us work well.

Patrick Collison: I think culture, to some degree is a resolution to a bandwidth problem. In the sense that, when you start out working on something you are coding all the time, but you can’t code all the things that you think the product may need. And so the organization gets larger. Maybe in some idealized world, I don’t actually think this is true, but ideally you should be involved in every single decision, in every single type of moment of the company, everything that happens, but obviously you can’t. Or maybe you can if you’re two people, but you certainly can’t if you’re five or ten. At that time, it comes very quickly, by a hundred and fifty, it’s completely hopeless.

And so culture is the invariant that you want to maintain, as you get specifically involved in fewer and fewer decisions over time. When you think about it that way, maybe intended importance becomes self-evident. Again, the fraction of things you can be involved in directly, diminishing, exponentially, assuming your headcount growth is on a curve that looks like one of the great companies. And yeah, that’s super important. It manifests itself in a bunch of different ways. For example, in hiring, maybe the reason the first ten people you hire, the decisions are so important that aren’t just hiring those first ten people, you are actually hiring a hundred people because you think each one of those people are going to bring along another ten people with them. And thinking exactly what ninety people that you would like those first ten people to bring on. It’s going to be quite consequential for your company but really briefly I think it’s about abstraction.

Sam Altman: One thing a lot of speeches in this class have touched on is hiring those first ten employees. If you don’t get that right, the company basically never recovers. But no one has talked about how to do that, so what have you looked for when you have hired these initial employees to get the culture of the company right? How have you found them?

Ben Silbermann: I guess this answer is different for every company. I’ll say for us it was very inductive. Clearly I looked for people that I wanted to work with, and I thought were talented. I have read all these books on culture, because if I don’t know something, the first thing I do is go read about it. Everyone has all these frameworks, so I think one big misconception that someone said once was, people think of culture as architecture when it is a lot more like gardening. You plant some seeds, then you pull out weeds when it’s not working, and they sort of expand. When we first hired people, we hired people that were more like ourselves. I often looked for three to four things that I really valued in people. I looked for people who worked hard, had high integrity, low ego. I looked for people who were creative, super curious, which meant they had all these interests.

Some of our first employees are some of the quirkiest you have ever met. They were engineers but they had all these crazy hobbies. Like one guy made his own board game, with his own elaborate set of rules. Another guy was really into magic tricks, and he not only coded a magic trick on an iPhone but he shot the production video in the preview. And I think that quirkiness is a calling card that we find, the people that are excited about many disciplines and extraordinary at once, tend to build really great products and are really great at collaborating.

And the last thing, we really want someone who wants to build something great. And they aren’t arrogant about it, they want to take a risk and build something bigger than themselves. And that, in the beginning, is very easy to select for. If you were in our position, we were in this horrible office, nobody got paid. There was no external reason to stay except wanting to build something to join. In fact there was every reason not to. And that’s something, looking back, that I really value. Because you always knew people were joining for the purest of reasons and in fact forgoing other job opportunities, market salary, a clean office, good equipment just for the chance to work here. To this day, I think a lot of those traits are seeded and embedded in the folks that we look at now.

John Collison: The first ten hires is really hard, because you’re making these first ten hires at a point where no one’s heard of this company before. Nobody wants to work with you. You are these two weird people working on this weird idea-

Patrick Collison: Their friends are telling them not to join. For our second employee, he either accepted the offer or was just about to, and his best friends took him out the night before, it was a full on assault, why you should not join this company. Why it is ruining your life basically. And the guy continued to join, actually one of those friends now works at Stripe, but this is what you are up against.

John Collison: And it’s hard, no batch of ten people will have as big of an influence on the company as those first ten people. And I think that everyone’s impression of recruiting is you open LinkedIn and it’s sort of like ordering off the dollar menu, I want that one, that one, that one and now you have some hires. At least for us, it was over a very long time period talking to people we knew, or friends of friends into joining. We didn’t have huge networks, we were both still in college by then. So there were really no people that we worked with to draw in. So a lot of those early Stripers were people we heard of from friends.

The other interesting thing they had in common, they were all really early in their career or undervalued in some way. Think about it, if someone is a known spectacular quantity, then they are probably working in a job and very happy about it. So we had to try to find people who were, in the case of our designer that we hired, he was eighteen and in high school and in Sweden at the time. As the case with our CTO, he was in college at the time. A lot of these people, they were early on in their careers, and the only way we could, you can relax one constraint, you can relax the fact that they are talented, or relax the fact that it’s apparent that they are talented. And we, not consciously, we relaxed the latter.

Patrick Collison: Finding the right people, you have to think like a value investor right, you’re looking for the human capital that’s significantly valued by the market. You probably shouldn’t look to hire your friends from Facebook, and Google, or whatever, they are already discovered, and if they want to join you, that’s great. They are probably harder to convince. John has spent a little while yesterday afternoon trying to figure out in retrospect, what traits out first ten people had in common and felt were significant. Generally speaking in culture I want to carry out everything we say, advice is very little advice, wildly extrapolated and I think there is a lot of truth to that.

For our first ten people, the things that seemed to be important, they were also very genuine and straight. And I think that matters quite a lot, there are people that others want to work with. That there are others that people trust, that they are intellectually honest on how they approach problems. They are generally people who like to get things finished. There are a lot of people who are really excited about tons of things. Only some of those are excited about completing things. There is a lot of talk out there, like hiring people off their GitHub resumes, that doesn’t really ring correct to me as there is a large premium on lots of different things. I think it’s much more a priori, much more interesting to work with someone who took two years to spend time going deeper into an area. And then the third trait that we looked for is that they cared a great deal, it’s offensive to them when something is just a little off.

In hindsight there were all these crazy things that we use to do that, do in fact, seem crazy. Like I should have not done them. Everyone was always like, it was borderline insane how much they cared about tiny details like we used to. Every single API request that ever generated an error went to all of our inboxes and phoned all of us. Because it seemed terrible to get an error that didn’t get a resolution from the users standpoint. Or we used to copy everyone else on outgoing email and point out slight grammar or spelling mistakes to each other. Because it would be horrible to ever send an email with a spelling mistake. Anyways, those are the three traits we came up with, genuine, caring a great deal, and completing things.

Ben Silbermann: I have something to say, I don’t think there is a wrong place to find people. So when I look back at our first hires we hired, they came from all over the place. I put up ads on craigslist, I went to random Techtalks, we used to throw weekly BBQ’s at the office, bring your own food and drinks and then we would just talk to folks. I think every time I went to get coffee at Philz, one of you guys were recruiting. Because your office was strategically placed next to the best coffee shop. But I think the really good people, generally are doing something else so you have to go seek them out instead of expecting that they are going to seek you out. Triple when no one has ever heard of or is using the product that you work on.

John Collison: Yeah and it’s probably really important to have a great elevator pitch, not just for investors but because everyone that you run into right now is six months to a year down the road a recruit. So the right time to have gotten them excited about your product, the right time for them to have started following us, is as soon as it can start. It’s going to take a very long time to recruit people, so getting people consistently excited about what you are doing will pay back later.

Patrick Collison: Maybe this is a little tangential, but a bunch of our friends started companies right out of school. And we started thinking, what goes wrong in those companies? And I think the most common failure mode was doing something overly niche, overly specific or bad. I think there is a major shift in time horizon as you go from classes to a startup. A class plays out on a quarter, or a semester, where a startup is a five or ten year thing. And I think this is really problematic, because it’s really quite hard to hire people for niche things. If you told someone, look we are going to build a rocket that goes Mars, that sounds almost impossible but sounds fucking awesome. It’s really easy to convince people to work on it. Instead of, well we are going to work on, I’m not going to give any specific idea, probably going to sound like we are doing a startup. But if you pick something pretty narrow, generally comes out of this class project that’s actually much harder to hire for.

Sam Altman: One specific specific question that has come up a lot is how, as a relatively inexperienced founder, you identify who the really good people are. So you meet people at these BBQ’s, you are friends, maybe you have worked with them. What did you guys do specifically to identify that this person was going to be really great? Or did you really get it wrong? When did you learn you could identify raw talent? Or say they work at Google, or Facebook so they must be good.

Ben Silbermann: You will never 100% know until you work with folks. So the flip side is, if the person you hired is not a good fit, you owe it to them and to the company to tell them where to improve and if they aren’t working out, then to fire them. But I think, generally, the question of talent falls into two big buckets. One is, you have some sense of what makes them good at their job. And there are some areas where you can test that area. And there are some that you don’t. And the ones where you don’t are much more difficult. So what we would do is a few things.

Before we talk to anyone, we try to figure out what exactly is world class in that discipline need. And this comes in a little later when you are hiring the head of finance and you know nothing about finance, except what is contained in a library book that you got. Like an introduction to finance or marketing. So I always made it a habit of mine to talk to people I knew de facto were world class and just asking them, what are the traits you look for? What are the questions you ask? And how to find them? If you are looking for the next person that is as good as you, where is that person working right now and what’s her phone number? I think that learning what’s good and bad during the interview process is extremely expensive. It is an expensive use of your time, expensive use of everyone else’s time. A recalibration of that really matters.

Then once you have someone in an interview process, you will build the process over time to screen quality. Pinterest, we have an evolving set of questions that are rotating through and we are always asking if these are good indicators or bad indicators of quality. The other thing the questions are supposed to do is give us a sense of, is this the right place for this person to come in and work? This is the point you guys made about being very transparent. About what’s going to be easy or hard. Really great people want to do things that are going to be hard. They want to solve tough problems, so there was a sense of brilliance in Google sending out these interview questions that were thought to be really difficult. Then people who like solving problems, they come out and seek those. I think it’s really important as companies get bigger that they don’t whitewash the risks. I heard that Paypal, you go in and after the interview they say, by the way, Mastercard wants to kill us and you will be doing something that is illegal, but if you succeed you will redefine payments. Or when they were recruiting for iPhone, they didn’t even tell people what they were doing. You won’t see your families for three years, but when you are done, your kids, your kids’ kids will remember what you built. I think that’s a really good thing in recruiting as well. Be very very transparent on why you think it’s a great idea, but you lay out in gory detail why it’s going to be hard. And then the right people select in or they select out of that opportunity.

Patrick Collison: Evidence suggests they were able to see their kids though.

John Collison: I think one thing you have to do when identifying talent is have the confidence to interview in a way that works for you. I think, say you are not the world’s best engineer and you are trying to interview engineering candidates. I thinks it’s tempting to co-opt what everyone else does, get them to put things on a whiteboard and do other engineering things. In the case of Stripe, we flew a guy out and we spent a weekend coding with him and looking over his shoulder. It was the only way we could tell and get ourselves confident if that guy was any good. And I think you can extend that to any roles you are not an expert in. In that I am no business development guru but when we hire for business development roles, we have a project that we have them talk about, how they would improve an existing project that Stripe has or which new projects they would go out and do. And even if it is not my domain area, I am confident enough I can judge those really well. I think people often have this imposter syndrome when it comes to interviewing for roles.

Patrick Collison: I think a specific tactical thing to do, again, for the first ten people is to work with them as much as you can before committing to hire them. Once you hit a certain scale it’s kind of impractical to put them on that side and be unskilled. Expensive from your side. But it’s really worth it to the first ten people, right. In the majority, the first ten people, we worked with them to some capacity for a week in advance. It’s pretty hard to fake it for a week, it tends to be quite clear quickly. Another answer I thought of to the question, how do you know if someone if great? And people talk about this notion of the 10x person or what the skill set is. I don’t know what 10x means. I think the slightly more intuitive decision is, is this person the best out of all of their friends at what they do? It’s a little insensitive on how they choose among friends, but for me at least I find that a better way to think about it is, is this the best engineer this engineer knows? And the other thing worth mentioning is, on the first ten people on the culture and team topic, I think everyone doesn’t realize until they go through it themselves, how important it is because in life and media people focus too much on founders. Here we are and we are reinforcing the structural narrative that Stripe is about John and Patrick and Pinterest is about Ben. When the vast majority of what our companies do, 99% are done by people that are not us, right? It’s obvious when you say it but it’s very much not the macro narrative. These are abstracts and you associate them with certain people. For companies like Apple and others, Steve Jobs was a tiny, tiny part at the end.

John Collison: So don’t screw up is what you are saying?

Patrick Collison: Something like that.

Ben Silbermann: I think referencing people is really important Referencing people is just what it sounds like. Asking people with experience for their honest opinion. We do that really aggressively but we are trying to figure out what this person is like to work with. We are trying not to validate if they told the truth on their resumes because we assume they told the truth. So a very standard question is in an interview I might say, hey we both know Jonathan, because we are both friends, if I asked him what you are best at, what you are the most proud of, or what you were working to improve, what would he or she say? Because it creates social awareness and accountability. Then I typically ask something that makes the question, that is typically soft, feel a little bit more quantitative and then calibrate that over time. To evaluate this person’s dimensions, is this person the top 1% of the people you worked with, the top 5%, and the top 10%? And it forces scarcity that gives them material reference. Instead of saying, hey what’s the best thing about John? You say, he told me he was good at these things. Can you validate it? Yeah, sure. It’s the type of tool that should be taken seriously.

John Collison: And referencing, obviously, isn’t easy to begin with. But it does provide really useful over time. And I think for name references people do want to be nice so you have to create an artificial scarcity by saying, where would you rank this person with people you worked with. You should aim to spend fifteen minutes on the phone with that person instead of letting them say, yeah this person is awesome.

Sam Altman: Also those references are a tremendous source of recruits. Once you hire these first people and they join, what have you done to make them effective quickly and to get them to the right culture place? Hiring is usually difficult but then not as difficult as making them happy and effective. So what do you do with these early employees to accomplish that?

Ben Silbermann: Well the answer to that has changed since we went from small to bigger. When we first started it was because we needed that person, a long time ago. So their whole onboarding was, here’s your computer, we already set up your environment, don’t worry about it, this is the problem we have to solve together. That’s the nature of the startups, we were all in this tiny two bedroom apartment. All the other things, building personal relationships, spending time together, it all happened magically. You didn’t have to do anything.

The one thing I would like to add to that is we always reminded people where we want to go with that someday. Because it’s really easy to drop someone into a problem and they would think the whole world was this little problem in front of them. We would always say, someday we want to do for Google what they did for search. Our plan for trying to get that done.

Now as the company grows, I think that problem has to get a little more formalized. So we spend a lot of time thinking and constantly trying to refine what that person looked like from the day they came in, to their first interview, through 30 days after they joined. Do they have someone’s name they know? Do they know who their manager is? Have they sat down people on their team? Do they know what the general arch of the company is? And what the top priorities are? And we have a program we do. It’s a week long and they have functions to go in deeper. And that’s something that has always been refined. And the output metrics on that is one, we ask people, what did you think afterwards, then 30 days afterwards? Then we also ask their peers and manager, hey is this person up to speed? Do you feel we did a good job at making them productive? If we haven’t then thats a key that a) we should not be hiring any more people because we’re not doing a good job bringing in new people and b) we need to retool that.

I think those things are important. I just wouldn’t discount how important it is to get to know the person as a person. What’s their aspirations? What’s their working style? How do they like to be recognized? Do they really prefer being in total silence? Are they a morning person or night person? Knowing those things, it just demonstrates that you care about them individually and collectively, what your goals are.

John Collison: I think there are two things that are important at any stage, though the implantation will change. First is to get them up and running quickly to do the work. That is how you are going to find the problems, it is how progress is measured in the real work they are doing. And so when we have engineers start, we try to get them committing on the first day. When we have people in business roles start, we will have them in real meetings the first day on what they are meant to be working on. Sometimes it’s easy to be tentative and ease people in. We are much more, push people off the cliff. Then second, we try to quickly give people feedback. Expectedly giving people feedback on how to adapt to the culture. When you think about it, if you have built a strong culture as all the companies up here are trying to, it’s going to take some adapting from the person, it’s not going to be necessarily easy. One thing we have at Stripe is the culture is a lot more written. So you have people next to each other, with headphones on, IMing each other. And for a lot of people coming in and working in an environment like that it’s sort of hard-

Patrick Collison: In from normal places.

John Collison: Exactly yeah. So from everything high level of how you are doing at your job to minor cultural issues, the more feedback you give them, the better they will do. Its unnatural to be telling people if they are doing a good or bad job. You don’t do that in your normal life, hopefully you are restrained. But when you have employees that is what you owe them to do well.

Sam Altman: So I think this is a good transition to when you’re companies have scaled. What are the biggest changes you have had to make to your hiring policies and to how you manage the teams as you have gone from two to ten to a thousand employees?

Ben Silbermann: There are a lot of changes. I think one thing we try to do on the team side is to make the teams feel as autonomous and nimble as possible within the constraints of the organization. That means over time we are trying to make it feel like a startup of many startups. Rather than this model setup with form policies cut horizontally through it. It’s easier said than done, I don’t think we are all the way there but one goal is that each team has control, to hold the resources that they need to get the goal done. They know what the most important thing is and how it’s measured. That way the management problem because somewhat tractable. Otherwise it feels completely impossible if you can’t decompose it into atomic components. You just look at it like, Oh my gosh, complexity level is rising geometrically, on a management level, it’s never going to work.

You have to create these abstracted units. At least that’s what we are going to try to do. Pinterest in particular, the real challenge with building those abstract units is, we want units that encompass a super strong designer, or a super strong lead engineering, a writer, often times a community leader. We want them to be self contained. That kind of makes it hard, but that kind of core is to our philosophy to build products. We put people together that have all these kind of disciplines, lots of things then we anchor them to a certain project then we try to remove barriers to let them go fast. Then we find no barriers and we sit down to figure out how we speed that up. I think hiring is a little different. I think the biggest change and the biggest asset you get is the people, referrals become more and more the life blood depending on the network of the people you bring in. So one of the lucky and in hindsight decisions we made was our actual fourteenth or fifteenth person we hired was a professional recruiter. She worked at startups, she worked at big companies like Apple. But she sort of knew where that pipeline breaks down. Knew the early indicators, and taught everyone not just how to screen for talent but to identify the people who are going to be culturally really good for the company. And I think looking back on that, its something I personally really value.

Patrick Collison: There is a huge amount of stuff here that is under management growth. Either your company fails really quickly or all of your problems become about management growth. One thing that tends to take people by surprise, and took me by surprise, is how quickly the time horizons change. In your first month, you are largely thinking about things one month ahead, right? Maybe that is what your development road map is oriented around. Who you are working with, maybe it’s a very informal relationships where they haven’t fully committed to be full time or not. The more time that goes by, I feel that has a reciprocal in the time horizons.

In one year, you are thinking a year ahead. After four years you are thinking four years ahead. That increases very quickly right? After one month it’s super short term. After eleven months, you should actually be thinking and planning a year ahead and think about human structures. Thinking about stuff Ben talked about. Where you want to be going long term. Things like that. I think that plays into the hiring and that in the early days you have to hire people who are going to be productive. Essentially , you don’t have the luxury of hiring people that look to be promising but they are not going to be up to speed for another year or two. They have to be able to work immediately. But after two or three years, then it becomes much more reasonable to make those investments.

Actually if you are not making those investments you are probably being much too short term. And so I think that’s really important. All of these problems in some sense are easy. Like, how do you build such good bonds with people? We all do it every day. How do you make it systematic, and effective at scale? It’s all going to vary significantly, in perfect proximation of what you would ideally do small, what hacks can you pull? Make it work as well as you possibly can at a large scale. A rapidly growing company, with head count here two-three heads a year, it’s a very unnatural thing. What’s the least bad way of managing that growth? I think it’s worth being systematic about it, thinking of ways to do it. Realizing you can’t do much better than ask a question. For Stripe, it’s things like, we have three meals a day at long tables where everyone can sit together, if you think about how much more human interaction happens with having these randomly mixed meals. It’s vast, right? A whole list of things like that. I think that’s the general framework.

Ben Silbermann: One thing I’m really curious about. You guys value transparency. Have you scaled it over time? I know with us, we think about it all the time. Just curious.

Patrick Collison: Startups, I can’t remember who defined it as, a startup is an organization that is not yet stuck with all these principal agent problems. That large companies, what is locally optimal for you frequently is not what is globally optimal for the company. As a consequence of that, a reason a startup can just work differently than a big company, at a big company, a lot of the things that are good for you, you couldn’t do them in a completely transparent environment because people would think less of you. But because everyone is rolling in the same direction, a startup, you can kind of make all the information transparent. Like I said earlier, Stripe used to bcc us to be on every email unless you opted out of it. We thought that would be more efficient, you wouldn’t need to have as many meetings if you could keep abreast of what is happening. And over time, we sort of built an interesting framework of mailing lists. We now have a program for generating gmail filters. For a rocky path of fifty people or so to Ben’s point of asking people how they are getting along after several days. They all reported terrible because they couldn’t find all the emails people were sending to them. They were missing things and everything.

John Collison: Gmail broke at one stage.

Patrick Collison: Right, right. At one point Gmail broke because we were sending too much email. It is hard to scale because you might contact somebody out of the company with some great idea. The person sitting across the way from you thinks it’s the stupidest thing they have ever heard. You are kind of under that scrutiny of the whole organization in some degree with all your communication. That’s the challenging side, that people more formally know what’s happening. I don’t feel I can give a stronger endorsement of it than it has worked so far. I really am curious how it will work when we are five thousand people, if we are ever at that scale.

John Collison: I think a couple things that helped us scale it, is we changed tools in changing the culture around it. On the tools front it use to be the case you could keep abreast of what’s happening in the company by reading all the email. Now we weekly all hands on deck. We actually have to put all this work into communicating what is going on in this company. Since there is so much more. The second is, cultural side so much information in terms. You have to create social norms around it. Obvious things such as what is confidential to Stripe. Less obvious things, like when emailing someone or talking in Slack or IRC that is now viewed by one hundred seventy people, it’s pretty easy to get stage fright. And it’s pretty easy with what you thought was a reasonable proposal, you get this drive by criticism and you are less likely to share in the future. We have had to create norms around when it is okay to jump into discussions and how that interaction works because people are around the stage much more.

Patrick Collison: I’m sure it’s not good to put anyone on the spot, but Emily interned at Stripe this summer. I am curious, as an intern. what you thought of it.

Emily: Overall it’s great. The first week, I spent most of my time reading Hackpad trying to get caught up on what the company was doing. It can often be quite distracting from your own work as often times there are other parts of the company that you are interested in.

Patrick Collison: Hackpad, by the way, is like Google Docs but with a news feed, where you can see all the documents.

Emily: And you are encouraged to make everything public, everything that you work on. But overall it gets you sped up rather quickly. There are these things called Spin Ups, where every leader of the team gives a thirty minute talk on what they are doing and how you can contribute if you are interested.

Patrick Collison: Do you think transparency was that good?

Emily: Yes, I remember having a hard time remembering what I should and should not subscribe to. The first week having two thousand emails in my inbox, then by the end there are three or four teams you want that information coming up from.

Sam Altman: So this question is for Patrick and John. Have the people that you hired early been able to grow up into leadership roles?

John Collison: In Stripe’s case yes. A lot of the first ten people are in leadership roles now. I think that’s one thing that corporations, it’s an unnatural skill that they need to get good at. People don’t exactly come out of the womb being good at management or at leadership. And being able to develop that in people and helping people progress as they spend a number of years at the company, it’s a lot of work when people are running around with their hair on fire. But it’s also damaging if the company can’t develop that skill.

Ben Silbermann: I think for us the answer is some yes and some no. I think one of the benefits of working at a startup is you can be handed a challenge no one else would be crazy enough to let you take on. And that could be managing people, it could be taking on a project. And also if you ask someone to take a risk like that, it shouldn’t be one way through the door if you don’t succeed. Otherwise it creates fear to give it a shot. So we have some folks managing a large team at the start, individual programmers, individual engineers. And they say, Hey I would love to try leading a project, leading a group, then taking responsibility for management. Then we have other folks that try it and are really glad they did so they know they never want to do that again. We try that, for those people, you can have just as much impact on the company through your individual contributions as an engineer or what have you. But it’s really hard to predict unless you give people a shot. So my strong preference is you give as many people a shot as possible. And in the few areas where you feel there is too much of a learning curve relative to the business development you are trying to achieve, that is when you look for someone who might walk in and really execute well on the job.

So the question was, has the vision changed since we initially started? Well I think on the vision, when we first started hiring, we were like we are going to build this really cool tool, people are going to enjoy it. I like collecting things, maybe others like collecting things. And what we didn’t expect that revealed itself early on, was that looking at other peoples collections was, it turned out to be this really amazing way of discovering things you didn’t know you were looking for. It becomes a solution to the problem that a lot of other technologies don’t have.

Over the last year we have poured a lot of resources into building our recommendation products, search products, feed products. Leveraging the unique data that we have, which are these pins that were all picked by someone and hand categorized. And the on the audience side, I think the first big surprise was truthfully when we first started, we didn’t know if anyone would really use it. eE were just happy that anybody who wasn’t related to us or obligated would use it. The biggest surprise has been the diversity of people and how diverse those groups have been. And I think that’s been one of the things that’s the most exciting. And the funny thing is, often as the company goes further along your aspirations get bigger. There is this gap that exists, and I tell my team, between where we are and we should be. Objectively we are further along, I feel the gap has widened. But I think that’s a really common trait among people who found companies.

Sam Altman: So the question is, most start ups are not the iPhone. You can’t guarantee that most people’s grandchildren are going to remember this because most startups fail. How do you convince people to make sacrifices to do join a startup?

Patrick Collison: I think part of why it resonates with people is because it’s not guaranteed. If it was it would be boring. There is the prospect of affecting this outcome, but nothing more than that potential. As far as not seeing their families and kids, startups do involved longer hours in the beginning but I think that story is overstated. Even the startups that in the earlier days had some sort of longer working days, have a tendency to exaggerate. It’s kind of like the startup version of fishing. Every startup thinks they worked more insane hours than the next one back in the early days. It’s like we literally never slept for two years. I think realistically for most people, it’s not that big of a sacrifice. I think on average, people work on average two hours more a day. It is a sacrifice but it is not forgoing all pleasure and enjoyment for the next half decade.

Ben Silbermann: Even the iPhone wasn’t the iPhone before it got done. No smart person you are hiring thinks you have a crystal ball into the future that only you have and that joining is a guaranteed thing. And in fact if you are telling them that and they select in, maybe you shouldn’t be hiring them because they didn’t pass a basic intelligence test of certainty and the future. But I think it’s fair to say what’s exciting and where you think you can go. And where it’s going to be hard and chart your best plan. And then tell them why their role in it can be instrumental because it is.

I really liked what you said, if you tell people, Hey we are going to go to Mars, it attracts the best people and you are closer to Mars and they know that. What I would discourage is whitewashing all that. And if people are joining because they want all the certainty of Google and the perk of working in a small startup with more email transparency, then that’s a really negative sign. For example, when I interview people, they often say, I’m really passionate about what you are doing. I often ask where else they are interviewing. If they list seven companies that have nothing to do with each other, except they are at the same stage, I love the stage of discovery, so I’m interviewing at Stripe, Jawbone, Airbnb, Uber, I’m also putting my resume into Google X, that’s a sign they are probably not being authentic, which you care about. And those folks, when things get hard, they won’t stick it out and work through it, because they were really signing up for an experience, not for achieving a goal.

Patrick Collison: I think the other thing that motivates people a great deal is the prospect of affecting some outcome, is just the personal development angle. And a startup because it’s more lightly staffed it’s much less forgiving. Whether or not you are the best or the worst person in the world, you are probably not going to alter Google’s trajectory. Whereas if you really want to benchmark yourself and see how much of a contribution and impact you can make, the startup is a much better place to test that.

Sam Altman: How does your user base affect your hiring strategy?

Ben Silbermann: Conventional base, you only hire people who use your product religiously everyday. And that probably works well if you make an API. For us, we screen for people who have vision and discovery online. And they have to know how our service works, and they have to have used it. But they may not be a lifelong user. And for us that’s great, we can ask what is the barrier that is preventing you from using it? Come join, we will move that barrier. Help us get closer to that vision. If you read a startup book, there is all this wisdom, but it is only useful if it works in your certain circumstance. So for us, we have had to broaden the lens a little bit and bring in people who are excited about the mission, that care about our product and our approach to building products. Even if from day one they weren’t our earliest users.

John Collison: The one thing I want to tack onto this is, we touched on it being hard to hire early on for those first employees, you have people with other options, you are very much at the ugly duckling stage. Hiring people who are passionate about your product is a great way to find people. You have a natural advantage over other companies. I know in Stripe’s case, we hired four Stripe users, people who we probably couldn’t have gotten otherwise. I’m sure it was the same in Pinterest’s case where you will get all this benefit at working with Pinterest, like, Hey it’s Pinterest.

Sam Altman: Thank you guys very much for coming in today.

Culture

Alfred Lin

I’ll set the stage with some slides and a few comments but the main stage is going to be with Brian when he comes up and talks about how he built the AirBnB culture. So, you are here, you have been following the presentations, so you know how to get started. You have built a team, you know how to build your product, it’s off the ground, it’s growing. People love it, you figured out how to do that. You figured out to create a special one of a kind company with monopoly powers, that’s big. And the market you are chasing after is slightly bigger than the paper airplane business, so you are good, right? So now what?

So we are here to submit that actually culture is the thing that is actually going to be very, very important to scale the business as well as your team. And hopefully, after this talk you will be able to know: What is culture? Why does it matter? How do you create your core values? And think about elements that fit together for core values and culture that create a high performance team. Get some best practices for the culture.

What is culture? Anybody want to take a guess at how one should define this? {Simple values in a team?} Yeah, that’s good. Did you look that up because you had a computer and an internet connection? These are some definitions that you will find in Webster’s dictionary but we are Stanford. This is kind of a trick question. It’s a CS class, the questions are never straight forward.

The real question is, what is the company culture going to be. Culture, we can generally talk about society, about groups, about places, or things. Here we’re talking about company culture. So how does one define company culture? We can take the previous definition and modify it a little bit. This is a hint of how we may want to define company culture. Every day blank and blank of each member of the team in pursuit of our company blank. Some people have filled these in with different things. The first blank, A, could be assumptions, beliefs, values, now my favorite is core values. The second blank for the B blank, people said behavior, my favorite is action. How do you act? In pursuit of goals, that’s kind of weak, in pursuit of big and hairy audacious goals is a little stronger, but a better definition is in the pursuit of mission.

So now that we have that definition, what do we do with that and why does it matter? This is a quote from Gandhi “Your beliefs become your thoughts. Your thoughts become your words. Your words become your actions. Your actions become the habits. Your habits become your values. And your values become your destiny.” If you don’t have a good culture in the company you can’t pursue your destiny.

Why it matters is that it becomes the first principles you sort of go back to when you make decisions. It becomes a way to align people on values that matter to the company. It provides a certain level of stability to fall back on. And it provides level of trust, people sort of trust each other with, but it also gives us a list with which you should be able to figure out what to do and what not to do. And what the more important thing about that is what not to do. Then finally the other thing that is important is it allows you to retain the right employees. There are people in this world that are not going to be a fit for your company, but if you have good strong culture, and the strong core values, you’ll know who you want to retain and who you truly do not want to retain. And if you take the first letter of those it happens to help you move faster.

Another reason, you’re thinking that’s like all mushy stuff, this is actually more scientific stuff. So here are indices from 1994 to 2013, stock market indices of companies in the S&P500, and the Russell 3000, and the Fortune 100 Best Companies to Work For. All these companies out there and they picked out companies that they believed were the best companies to work for. The stock market returns of those companies happen to be 11.8%, which is almost twice that of the other two indices. And so there is real power in companies that treat their employees well, where there’s a lot of trust, there is a lot of strong culture.

So how do you create a set of values and define the culture etc? Get asked that a lot. You have to start with the leader of the company and the founder, and ask yourself what are the values that are the most important to you? Of those things, that are most important in the business? Who are the types of people you like working with? And what are their values? And through that you distill together what a set of values are. Think about all the people that you’ve never liked working with. What values do they have? Think of the opposite of that. Maybe those should be considered values for your company. Finally remember the values have to support your mission and if they don’t support your mission, you’re missing something. Then the last final checks are they have to be creditable, they have to be uniquely tied to match your mission. So at Zappos, in terms of uniquely applied to the mission, we were focused on creating a culture that was going to provide great customer service. So the first core value we had, was to deliver wow through service. We are very specific that we wanted to deliver great customer service and it was going to be a wow experience. And then below that we wanted to serve.

I had a paragraph talking about what we mean by that, we wanted to support them, doing the wow through service, and support people such as our employees, our customers, our brand partners, and investors. On terms of the opposite thing, we generally didn’t like working with arrogant people, so one of our core values at Zappos was to be humble. So those are two examples where we create core values in a way that became credible and uniquely tied to our mission.

So you go through this process, you come up with a few core values, these might be some of them, whether it’s honesty, integrity, service, teamwork. It might be a list, you might start with three, might end up with a list of ten, you might have a list of thirty. It’s a good start. When Zappos went through this process we asked all the employees at the time what core values they can identify with and they came up with thirty-seven. We whittled that down to about ten. And it took a year to do this, that’s a long time and you might want to ask why. Well if you just come up with the word honesty, give me a break, everybody wants the culture to be honest, nobody is going to say I want to be lied to every day.

Service, what do you mean by service? There’s got to be a lot more depth in this than that. And everybody talks about teamwork, but there’s a difference in level of teamwork that you see in an intramural sports team vs a baseball team. How do you dive deeper into teamwork? What are the things that don’t work for a team? A lot of it has to do with communication, a lot has to do with things that people of study, and you may one go deeper into that. At Zappos we thought about, well there are a lot of smart people in this room. When they’re fighting with each other and trying to figure out who’s right and who’s not, it’s probably not the best use of time. We wanted everyone to build off each other and help each other make any idea better. The result is that the company gets a better idea, not that any individual person is right. So we wanted to make and still, this idea that it’s company first, then your department, then your the team, then yourself. And how do you do that?

We are going to go a level deeper in that. There’s another great element of high performing teams that I really like. Which is this pyramid that was created by Patrick Lencioni, and he wrote this book, “The Five Dysfunctions of a Team.” And the reason this is interesting is he talks about the breakdowns of the team. A lot of teams break down because they have no trust and even if you had trust, why do you need trust? If you have trust, you can actually have debates and conflict and get to the right answer. If you don’t have conflicts and debate, it’s the blind leading the blind. How do you actually know you got to the right answer before you commit to something? So people are not actually wanting to commit, they’re afraid of committing.

Let’s say you get to the next level when you are actually able to commit. What goes wrong then? It’s usually because people are not held accountable to things that they committed to. And if people are not held accountable to the things that they committed to, then they can’t get results. If you think about the company as a black box and results, whether it’s financial, whether you produce a great product, or anything like that as the output, one of the major inputs is the culture of the company. Some other best practices, we are actually going to talk though in the Q and A because I think they are going to blend into the conversation, is that you want to incorporate your mission into your values, we talked about that.

Performance, you need to think a bit harder, deeper, longer about your values than you might initially think you need to. One of the things I think a lot of companies don’t actually do is, they interview for technical fit or skill fit, a competency in that realm, but they don’t actually interview for the culture fit, whether someone will actually believe in and follow the mission. I think that is a big, big no no. I think you can have the smartest engineer in the world but if they don’t believe the mission they are not going to pour their heart and soul into it. And that’s one of the things where if you actually start thinking about culture, from the interview process, to performance reviews, to making sure that’s a daily habit, you get a lot further with making a great culture.

One final point made here, culture, just like customer service or fitness, is like motherhood and apple pie. Everybody wants to provide great customer service, every company wants to have great culture. What they fail to do is make it a daily habit. You just can’t be fit, if you don’t do it as a daily habit. Eventually you get out of shape, then you get fat, and then you say, Oh I have to go on a crash diet to get back into shape. That doesn’t quite work, and the same is true with something like culture. So I think we checked all of these off, so we can go into Q and A with Brian.

Brian Chesky: Hello everybody. It’s quiet in here, I’ll be honest, now I feel a little less on edge. Nothing worse than a room full of people really, really quiet staring at you, but now I feel better.

Alfred Lin: Well I did it for five or ten minutes, you can do it a little longer. So Brian, could you talk about the process by which you came to understand that culture was important to AirBnB and building a company?

Brian Chesky: Yeah, so I think one of the things we realized is, to just give you, I won’t tell the full story of how Airbnb came to be. Some of you may know it. So here’s the very short version the story, Airbnb wasn’t meant to be the company we were trying to start. I quit my job, I was living in LA. One day I drove to San Francisco, became roommates with my friend from college, from the Rhode Island School of Design, Joe Gebbia, and I had one thousand dollars in the bank and the rent was one thousand one hundred and fifty dollars. So that weekend this international design convention was coming to San Francisco, all the hotels were sold out, so we decided to turn the house into a bed and breakfast for the conference. I didn’t have a bed, Joe had three air beds, we pulled them out of the closet and called it The Air Bed and Breakfast. That’s how the company started.

I recall the story ten thousand times by the way, some version of that story, and I didn’t think I’d ever tell that a second time. I remember growing up, I also went to college, my parents were social workers and never thought about me going to art school. They had worried that maybe I would not get a job after college, which I’m sure most parents worry about. Make sure you promise me you get a job with health insurance, I end up starting Airbnb. I remember her telling me, I guess you never got the job with health insurance.

The reason I say this though is, Airbnb was never meant to be the big idea. It was meant to be the thing to pay the rent so we could think of the big idea. Along the way, by solving our problem it became the big idea. So alongside that, we won’t touch on how we built a product, that’s probably another conversation that’s being talked about, you have to build a team and a great company. And in the early days, we had three co-founders, Joe, Nate, and myself. I think of one of the reasons we’re successful was that I was really lucky. I don’t think it was really lucky to pick up the idea Airbnb and I don’t think we were lucky to be successful once we had a team. I think we could have come up with a lot of other ideas and been just as successful. I think I was lucky in that I found two great people that I wanted to start up a business with, people I admired. That almost intimidated me by how smart they were. I think that’s what the first thing is, to build a team that is so talented that they kind of, slightly make you uncomfortable to be with them, because you know you are going to have to raise your game to be with them.

And then when we were working together in the early days, this is 2008, the first thing is we were like a family. You think about founders like parents and the company like a child. That child will manifest in many ways, behaviors that parents have in the relationship. If the parents are functional but not working together then the child is, frankly, going to be pretty fucked up. You don’t want that. You want your culture to be awesome. And so Joe, Nate, and I were a total family the beginning, we usually worked eighteen hours a day, seven days a week. I remember when we were at Y Combinator, we worked together, we ate food together, or even went to the gym together. We may as well have gotten jumpsuit, we didn’t go that far. It was like we were a mission, a special force.

We had this amazing shared way of doing things with amazing accountability, and that was the DNA of a company. And then we were thinking, at some point you build the product to phase two, which is building the company that builds the product. So a lot of the talk is about how to build a product, how to get product market fit. Once people do that, now you have to build a company. It doesn’t matter how great your original product idea is, if you cannot build a great company then your product will not endure. As we thought about this, we realized we wanted to build a company for the long term.

We wanted a company that would endure. To do that, we started noticing companies have something in common. Companies around for a really long time had a clear mission. A clear sense of values, and they had a shared way of doing something that was unique to them and was really special. And so Joe, Nate, and I, when we were three people, decided to look around at companies. I noticed Apple, Steve Jobs’ core value was that he believed people with passion could change the world. He said our products change but our value never has. We learned about Amazon, we learned about Nike, we learned about companies in the early days. You can even use this to talk about nations. Even a nation has core values and a declaration so that the nation may endure longer. We started to realize that we needed to have intention, culture needs to be designed. And that is how we got connected. Because we were funded by Sequoia, Alfred just joined them with Zappos, and I was told Zappos had an amazing culture. We went to Las Vegas and met up with Tony and we learned about it.

Alfred Lin: So what did you learn?

Brian Chesky: Well, you guys are crazy. The thing we learned, and we were three people, was if culture is a way of doing things, there really are two arts. One is behaviors and those can change maybe fifty years from now. There will be rituals and behaviors that change, be different. But there have to be some things that never change. Some principles, some ideas that endure, that make you, you. And I think of core values, integrity, honesty, those aren’t core values. Those are values that everyone should have. But there have to be like three, five, six things that are unique to you. And you can probably think about this in your life. What is different about you, that every single other person, if you could only tell them three or four things, you would want them to know about you. And we realized that when Zappos was one hundred employees, they wrote down these ten core values. The thing I learned from Tony is I wish I didn’t wait until I was one hundred employees to write down a core value. I was talking to Sam, he thinks we are the only company to write our core values down before we hired anyone.

Alfred Lin: How long did it take you to hire your first employee?

Brian Chesky: So the first employee was our first engineer, I think we looked for him for four or five months. I probably looked through thousands of people and interviewed hundreds of people.

Alfred Lin: By then, when you hired him, when did you write it? Was it on day one or two or was it three?

Brian Chesky: I think we started working on it around the time of Y Combinator, which would’ve been January 2009. It was probably a process that evolved over the course of six to seven months. We finished Y Combinator in April 2009, hired our first engineer in July something like that. Probably six months. Some people ask why did you spend so much time on hiring your first engineer. I think bringing in your first engineer is like bringing in a DNA chip to the company. This person, if we’re successful, there were going to be a thousand people just like him or her in that company, it still wasn’t a matter of getting somebody to build the next three features we need the ship for users. There was something much more long-term and much more enduring which was, do I want to work with one hundred thousand more people like this? Now, you want diversity to play, you want diversity of background, age. You don’t want diversity of values, you want very homogenous beliefs. That’s the one thing that shouldn’t be diverse.

Alfred Lin: So what were these values?

Brian Chesky: Six core values, I’ll talk about maybe three of them. So the first core value we talk about is champion in mission. And what it really means is that we want to hire people that are here for a mission. We don’t want people here because they think we have a great valuation, they like our office design, they need a job, or they think it’s hot. We want people to be here for the one thing that will never change, and that’s our mission. And just to tell you a quick story about our mission, Airbnb, a lot of people describe it as a way to book a room or book a house and travel around the world. And that’s what we do, but that is not why we do it. To answer the question on what our mission is, is to tell you a story I think it describes it.

In 2012, I met a host named Sebastian, we do these new jobs around the world where we do meet ups. Sebastian is probably late fifties in north London. Sebastian looks at me and says, “Brian there is this word you never use on your website.” And I say, “What’s that word?” And he says, “That word is friendship. I would love to read a story about friendship.” I said, “Okay read me a story about friendship.” He says, “Six months ago the brunt of riots broke out in front of my home and I was very scared. The next day my mom called me to make sure I was ok, I said yeah mom I’m ok. And she goes, what about the house?” He says, “The house is OK as well.” He said, “Here’s the interesting thing, from the time the riots broke out to the time my mom called me was a twenty four hour window of time. In the periods between that time, seven of my previous Airbnb guests called me just to make sure I was okay.” He said, “Think about that, seven of my own guests called me before my own mother did.”

I think that says more about his mother than his guests. But in this summer on a typical night or a peak night, we wouldhave four hundred twenty five thousand people staying in homes and living together and they were coming from a hundred and ninety different countries in the world which is every country except North Korea, Iran, Syria, Cuba. So just hearing that story, at our core that is what we are about. That’s much more than just booking a room or traveling. That what we are about is we want to help bring the world together. We want to do that by giving a sense of belonging anywhere you go. Our mission is to belong anywhere. So five years from now, twenty years from now, maybe we’re still selling rooms and homes to meet in or not, but I can guarantee you we’re always going be about a sense of belonging and bringing people together. And that’s the more enduring idea.

So when we hire people, the first thing to make sure it is that, if that is your mission, you need to champion your mission. You champion the mission by living the mission. Do you believe in it? Do you have stories about it? Do you use the product? Do you believe in the product? I used to ask crazy questions, one of the crazy questions Sam reminds me of, I use to interview people. So I interviewed the first three hundred employees at Airbnb which people think I’m really neurotic and they may also be true. I used to ask them a question, if you had a year left to live would you take this job? I amended it, people who say yes probably don’t like their families. So I changed it to ten years. I feel like you should use whatever time you have left to live. Whatever you want to do in those last ten years you should just do. I really want you to think about that, that was enough time for you to do something you really cared about and the answer doesn’t have to be this company. I say fine if what you’re meant to do is travel or start a company just do that, don’t come here. Go do that.

So there is this old parable about two men laying bricks. Somebody comes up to the first man and says what are you doing? I’m building a wall. He asks the other guy, he says I’m building a Cathedral. There’s a job and there is a calling. We want to hire people not only looking for jobs, but a calling. And that’s the first value, champion the mission.

I don’t want to take all the time, I will talk about just one more. The second value relates to being frugal and I will tell you a story. By the way, all the founding stories of your company end up becoming the things that you keep talking about to thousands of people, kind of like a child, that these things keep coming back later in life. So Airbnb, I think Marc Andreessen said in the last talk that it was the worst idea that ever worked. I remember people thinking we were crazy, I remember telling people about the idea, I actually told Paul Graham, I said we have this idea it’s called Airbnb. He asked, people are actually doing this? I said, yeah. Question was, what’s wrong with them? So I knew the interview wasn’t going well and in the interview Paul Graham I think wasn’t going to accept us. And we told the story of how we funded the company and here’s how it goes. We’re introduced, Michael Seibel, who is a partner of Y Combinator, introduced me and Joe to like fifteen investors in the Valley, including some of the ones that have been here and all of them said no to the company. They could have bought ten percent of the company for one hundred and fifty thousand dollars. They all said no, they thought it was crazy. No one would ever stay in someone’s home.

So we ended up funding the company with credit cards and you know those binders kids in school put baseball cards in? We had to put them in those, we had to put them somewhere. That’s how many credit cards we had and we were completely in debt. And in the fall of 2008, we provided housing for the Democratic and Republican National Convention. We had this crazy idea because we weren’t selling a lot of homes. In the year after we launched, we had a hundred people a day visiting our website and two bookings, which is generally bad. It’s like releasing a song and a year later three people are listing to it a day. It’s probably not going to be a very popular song. But I believed in it. Joe and Nate believed in it.

So we are completely in debt, right, and we get this idea. We are an air bed and breakfast providing housing for the Democratic Republican National Convention. What if we made a breakfast cereal for like the Democratic National Convention? And we came up with this Obama themed cereal. And we called it Obama-O’s, the breakfast of change. Then we came up with a Republican themed cereal for John McCain. We found out he was a Captain in the navy. So we came up with… Captain-McCain’s, a maverick in every bite. We had zero dollars and without any money, we tried calling General Mills they told us to stop calling them or they would get a restraining order so that didn’t work. We found a local, though an alumni of RISD, who made a thousand boxes deal for us. We ended up sending them to press and eventually within a week it got on national television, national news. We made forty thousand dollars selling breakfast cereal.

In 2008 we made five thousand dollars from our website and we made forty thousand dollars selling breakfast cereal. I remember my mom asking so are a you cereal company now. And that wasn’t that bad part, the bad part was the honest answer which was technically, yes. But the reason I tell that is our second core value is to be a cereal entrepreneur. I’m sorry for the cheesy pun. But be a cereal entrepreneur. We really mean, is that we believe constraints bring out the creativity. When you raise eight hundred million dollars suddenly all that scrappiness, it’s easy to lose that scrappiness. It’s easier for people to tell you I just need this fifty thousand dollar contract. I need this, I need that. When people are desperate and not being a little bit frugal, not being creative, or tell me they can’t do something, I’ll just take a box of cereal and even the suggestion of Obama-O’s is you need to be scrappy and frugal. So again a lot of the founding DNA of your company becomes these values, these principles. Everyone knows that if you don’t give a crap you shouldn’t be here. And it doesn’t mean you have to give a crap it just means you have to to be here. You also have to be creative to be an entrepreneur and super scrappy. And these are some of the values we learned.

Alfred Lin: So you guys should start to think about questions when we open up to questions from the audience but I have a few more questions to ask. So this all sounds nice, stories are great. The people here are a pretty skeptical group. It’s a CS department class, probably left brain focused. This feels like a softie, right brain focus. How does having a strong culture help you make important, tough decisions?

Brian Chesky: Well I think that having it so, here’s the thing about culture. There are three things they never tell you about culture. First thing is they never tell you anything about culture. No one talks about culture and no one ever tells the need to have strong culture. So there’s tons of articles about building a great product, there’s tons of articles on growth and adaption, and a few things about culture. It’s a mystical thing that’s soft and fuzzy. That’s the first problem. The second problem is it is hard to measure. Things that are hard to measure often get discounted. These are two very hard things. The third thing, the biggest problem, it doesn’t pay off in the short term. If you wanted to start up a company and sell it in one year, the one thing I would tell you to do is fuck up the culture. Just hire people quickly. Culture makes you hire really slowly, makes you deliberate about your decisions that in the near term can slow progress. Putting an investment into the company short term.

First thing is the need to be very clear about what’s unique to you that you stand for. Once you do that, you need to hire people that believe in that. You need to make sure you hire and fire based on these values. One thing we do is constantly repeat over and over again when we interview, we want to make sure they are world class and fit the culture. The first thing I used to ask people at the end of the interview, I would say if you can hire, this is a functional question, if you could hire anybody in the world, would you hire the person sitting across from you? If our vision is the best in the world, why aren’t we hiring the best in the world? Every single person is meant to hire a person better than the previous people. You are constantly raising the bar. Then we have separate people called core values interviewers who aren’t in the function. So it you are an engineer, the core values interviewers are never engineers because we don’t want them to be biased and say well I know how good they are. And they interview just for values, to make sure that people care about the same thing. And we said no to a lot of really great people because we just didn’t feel right about them being with us long term. So that’s one of the things.

Some other examples of when we have had to make hard decisions: in mid-2011, we were mostly United States and we had this internet clone funded by these guys called the Samwer brothers, anyone ever hear of them? They basically clone internet companies. They recently went public. They take American websites and clone them and then quickly try to sell them back to you. It’s kind of like putting a gun to your head. So they had done this to Groupon, Groupon was the fastest growing site in the world ever. They stopped doing Groupon and started cloning us, and this is back when we had forty employees, we had raised seven million dollars. They cloned us and in thirty days they hired four hundred people. And they wanted to sell the company and if they couldn’t, they were going to destroy us around the world.

The problem with Airbnb is if we are not everywhere around the world, a travel site not being in Europe is like your phone not having email, it doesn’t actually work. So we were kind of in trouble. We had this conversation, it was a pragmatic decision of should we acquire them and then there was the values decision. The pragmatic one probably said buy them because you can’t risk losing international, so just guarantee you are going to get international. We ended up not buying them. The reason we ended up not buying them was I just didn’t like the culture. I didn’t want to bring in those four hundred people. I felt like we were missionaries and they were mercenaries. I didn’t feel like they were doing it for the beliefs, I thought they were doing it to make a lot of money very quickly.

I believed in a war, missionaries would outlast and endure mercenaries. I also felt like the best revenge against an internet clone was just to make them run the company long term. You had the baby, now you’ve got to raise it. So that’s what we ended up doing and that was a very controversial decision. A lot of people were telling me you should buy this company, we didn’t and I think it worked out

Alfred Lin: What percentage of revenue comes from Europe?

Brian Chesky: More than fifty percent

Alfred Lin: I think it worked out. Okay, anybody have any questions? I can keep going . No one? One statement we had at Zappos is culture and brand were two sides of the same coin. Airbnb has a great culture and a great brand. Do you care to talk about branding, it’s kind of a weak thing, it’s a value we don’t tend to focus on.

Brian Chesky: I actually just said that to Sam. I think Silicon Valley is not historically really strong or we don’t talk about culture and brand very much. They are two sides of the same coin. So culture, like the principles and the beliefs you have inside a company that you want people to be aligned with long term, whatever happens inside the company eventually comes out, you can’t hold it in. And brand is really the promise outside the company that everyone identifies with. So I think having a clear mission and making sure that you know that mission and the mission comes through the company, is probably the best thing you can do for both culture and values.

And then the second thing you know is that your brand, the way people think about you and your company, is often decided by your brand evangelists who are your employees. If you have a weak culture, we often think that companies that hire employees, people that are deeply passionate, create companies that customers are really passion about. Those are companies with strong brands. And so Zappos had a really strong brand. A lot of companies, Google, that cared deeply about culture, they actually have a question, is this person Google? Which is meant to be like the catch all for the digital culture. It was a very strong culture, Google has a unique, there’s no such thing as a good or bad culture, it’s either a strong or weak culture. And a good culture for someone else may not be a good culture for you.

So I think brand is incredibly important as well. Brand is really the connection of you with your customers and so if you have an incredibly strong culture, the brand will come through. The final thing to say about brand is a lot of people that talk about their brand talk about what they sell. So if you’re Apple, one way of doing the same, we sell computers and the new screens are larger and faster and they talk about bits and bytes.

I remember Steve Jobs had this really important talk where he says the way to win, this is 1997, isn’t to talk about bits and bytes. The way to win is talk about what we value, what our core values are, we believe passionate people can change the world. And that was how they introduced a different campaign. So Apple, before they had this huge renaissance, became the most valuable company in the world. They did the Think Different campaign, which is basically saying this is what we believe in. That if you buy an Apple computer, you’re also saying I believe in this too. And there has to be a deeper core belief, and if that doesn’t happen, you’re a utility. And utilities get sold at commodity prices.

Alfred Lin: The question is how do you know how to communicate this company culture or core value to the outside world?

Brian Chesky: So the question is, how do you communicate what Airbnb does in the earlier days. Well we learned a lot because in the early days we communicated like a utility. We actually said Airbnb is a cheap, affordable alternative to hotels. Our tag line was forget hotels, save money with Airbnb. And over time we felt like that was, this was way back in the day, we felt like that was way too limiting, that it undercut the idea. We changed our tag line to travel like a human. Which we haven’t kept, but it was basically meant to say that we believe in a certain kind of world and we really feel like travel is mass produced. You feel isolated, you feel like a stranger, and we want to bring the world back to the place where it feels like a village again, where the service is coming from other people, where you have this feeling you belong, and you are treated like a human.

No matter how successful you are in life, often traveling will remind you that you are not that successful. Go through TSA, stay in a typical hotel, sometimes you’ll have some problems. We really wanted to make people feel special. This is some of the stuff we did in the early days, we did a lot of storytelling. I mean I’ve probably told the story of Airbnb ten thousand times and this is a something that is kind of related to culture. Someone asked me the other day, what’s the job of the CEO? There are lots of things a CEO does, but what you mostly do is articulate the vision. To articulate a vision you have to develop a strategy and hire people that fit the culture. If you do those three things you basically have a company and that company will hopefully be successful.

If you have the right vision, a good strategy, and the people to get there. And so what you end up doing is articulating the vision over and over. Whether it’s recruiting, talking to investors, getting funding, doing PR interviews, speaking in a class room. You are always reinforcing the values. You’re doing it in an email to a customer. You just do it a thousand times, it changes and gets better and better every time. So it kind of evolved.

Very good question. How do we make sure the hosts are reinforcing the culture of Airbnb? So the answer to that is we do a pretty good job, but not yet an amazing job at that. When we first founded Airbnb, I took the Craig Newmark school of thought, Craig is the founder of Craigslist: anyone should be able to use Airbnb. If you want to rent your place, you should be able to. It turns out, many people believe in our values because we talked about them and believed them. But there were people who rented on Airbnb, not because they believed in the values but instead because they realized they could make a lot of money renting their home. And not everyone was a great culture fit. These people actually did cause us a lot of problems, so this was a lesson for me. I didn’t think, it didn’t occur to me in the early days that the hosts had to completely fit our values. We met them, we attract people like us. We realized hosts are like partners and they need to believe in the same culture we do. So now we have this program called the Super Host program where they have to demonstrate values to reach this kind of badge which gets the priority customer support and distribution. We are having this important host convention where we bring all the hosts in and will be talking about reinforcing our values. So the answer is, we were really late, but we now do it by reinforcing it every step of the way.

Q: Brian, Airbnb has made some great contributions to the open source community. Do you have any thoughts on how that contributes to your culture and company values?

Brian Chesky: Yeah, I think just in general, it may be related to two things about Airbnb. We tend to be a pretty open culture just in general, we believe in a shared world where people are giving back, contributing to making communities and industries stronger. It’s my philosophy to talk about everything internally, except for things that relate to customer or client privacy, if it doesn’t relate to those two things, then we will talk about it.

As far as open source culture and engineering, we wanted to make sure that we had a really strong identification of the team and so we really felt like a lot of source code shouldn’t be you know, we felt like every company needs some kind of moat that protects you from your competition. We thought some technology would be, but we also felt like we wanted to give back from a technology standpoint. We preferred our moat to be that we provide the very best experience in the world when you use Airbnb, that has the biggest network effects. We thought that kind of took precedent over some of the technology that we use, so we decided to try to share some of that out to people. I think it does relate to the values, I never recommended, I never one day recommended we do any of that. We hired engineers that we thought shared our values in culture and they felt that was the right thing to do.

Q: You talk about conventions, what did you do when you had no money and you only got paid for those who used your site. What did you do to scale that up? How did you get users to the site.

Brian Chesky: So this is not about culture, but I will answer it anyway. The best advice I ever got was probably from Paul Graham. Paul Graham said, I remember he had this line, it’s better to have a hundred people that love you than to have a million people that just sort of like you. It’s literally better to have a hundred people love you. And the reason why, if you have one million customers, one million users and they just kind of don’t care about you but they use your app and think you’re okay, to get them to care is a really hard thing, I don’t know how to get a million people to all of a sudden care. But I do know if you get a hundred people who love you, those people, if they feel incredibly passionate, they will go out and eacb tell a hundred people. All movements that lead to companies or ideas start with just a hundred people.

So the reason this is so critical, is he gave us another lesson which is that if all you need do is get a hundred people to love you, is do things that don’t scale. So it’s hard if you’ve got a million people, you can’t you meet them all. You can meet a hundred people, you can spend time with them. So that’s exactly what we did. Joe, Nate, and I would go door to door in New York City, or in Denver where the Democratic National Convention was, literally staying and living with our users. It’s a joke that when you buy an iPhone, Steve Jobs does not come sleep on your couch. But I will. That was really critical, living with our users. All we had to do was get in with them and share a passion with our users. You work backwards from a hundred people, even one person. But with our new technology, imagine what would be an amazing experience for just this one person. Walk through the journey from that one person, make it perfect for that one person. Once you make it perfect for one person, it’s actually really easy to make a service easy for one person, it’s not that hard. Where everyone gets in trouble is they try to solve both at the same time. So the first thing we did was went door to door, that is one thing, that set up memories.

I will give one more example before I stop talking about this. Right now with Airbnb you can click a button and put in your home and a professional photographer comes to your home and photographs it for free. We have five thousand photographers around the world and we have photographed hundreds of thousands of homes. So it is the probably one of the largest on-demand photography groups around. I believe this started with Joe and I, we were staying with this one host, in New York City and her house is amazing but her photos were terrible. So we asked, why you don’t put up better photos? This is before the life of the great cameras, 2008. She couldn’t figure out how to get photos from her phone onto her computer. She wasn’t a very technically savvy woman. And I just said, we will just take photos for you. Actually, I said, what if you could press a button and somebody would show up at your door to take professional photographs? She said that would be magic.

So the next day, I knock on her door going, I’m here. I photographed her home. I sent a few emails to people saying we give this new magical photography service and if you want, you can press the button for a professional photographer to show up at your home. So they would hit this button and it would send me this alert. We rented a camera in Brooklyn. And in January 2009, walking through the snow, we photographed people’s homes. We did this by hand without any technology. We managed that with spreadsheets. I wasn’t going to bother Nate to design something for photography. Then we started hiring contract photographers. Eventfully we got an intern to manage all the contract photographers. Then we made a full time position to manage the other interns of the contract employees. And at some point, this is before we built anything, at some point there were too many people to manage. There were like hundreds of photographers. Then we built all the tools to do all the photography. But we did it only after we knew what the perfect service was.

Q: One more question, the question is, in this particular situation with Airbnb, a lot of people think it is not necessarily a technology company, but more of a marketing company.

Brian Chesky: Good question. I will answer the question with a story.

Alfred Lin: Let me preface that question with a series of questions. Do you today have propriety technology?

Brian Chesky: Yes.

Alfred Lin: Do you have a moat?

Brian Chesky: Yes
Alfred Lin: Do you have network effects?

Brian Chesky: Yes.

Alfred Lin: Do you have pricing power?

Brian Chesky: Yes

Alfred Lin: Do you have a good brand?

Brian Chesky: I think so .

Alfred Lin: Are you a monopoly?

Brian Chesky: I am not going to answer that one

Alfred Lin: Getting back to the question, just forgetting about all of that, companies that have network effects and sort of get off the ground, the fly wheel is going, people just think you are lucky.

Brian Chesky: Let me just answer that one. It’s a totally fair question and people have said it so I want to answer it. The guy who owns Sequoia Capital, his name is Doug Leone. One day, I think it was a year, year and half ago, he says, Your job sucks. And I was all, What the hell does that mean? He says, You have the worst job of any CEO in my portfolio. I said, Tell me why.

And this is what he said. “First of all you are a technology company,” and I would say that at our heart we are a technology company. “So you have all the challenges of all the other portfolio companies. But beyond that, you are in a hundred and ninety different countries. So you have to figure out how to be international. You have to hire in every country in the world.” We are literally in every country except North Korea, Iran, Syria, and Cuba. We are a payments company. We handle billions of dollars of transactions a year, we had to get a business license in the state of California. We have serious fraud and risk. It needs to be locked down like Fort Knox. He said, “That’s usually where companies end. But you have to worry about all the other crap. Trust and safety.”

We have four hundred and twenty five thousand people staying in other people’s individual beds, in their sheets. Think about a woman from Texas staying in the Middle East, or vice versa. Think about the cultural conflicts that could happen and misunderstandings. You have four hundred and twenty-five thousand people a night. It’s like being the Mayor of Oakland. So imagine you are the Mayor of Oakland and all the things that happened in Oakland tonight. You have trust and safety.

Now we have regulatory problems. We are in thirty thousand different cities. Every city has different rules, different laws, and many were written in a different century. They were written before you had all the technology. Then you have issues like search and discovery. Google has this thing about being really good at search. Google can give me all these results, but it’s clear that there is only one or two right answers for everybody. We have forty thousand homes in Paris. There is no best home in Paris for anyone in this room. So we have to be really, really great at matching people and technology. Another example, Facebook is a digital product. Their product is their website. Our product is these experiences that you have in the real world. We are not just an online product, but also an offline product. So basically the long and the short of it is we have to be world class at technology, world class at design, we have to be world class at branding. We have to convince government we are good for their neighborhood. Because we have to convince people that we are not crazy, this is a real thing, we have to make sure trust and safety is world class. We handle all these payments and handle risk. And I didn’t even mention culture. This was not about culture. I really do not see it as a marketing company.

Alfred Lin: Thank you.

Brian Chesky: Thank you guys.