#248: The 10 Commandments of Startup Success with Reid Hoffman
On this special episode, we're going to share with you the '10 Commandments for Startup Success.' They're drawn from the new podcast Masters of Scale, which is hosted by my friend and today's guest Reid Hoffman (@reidhoffman). Reid has been on the show before, and you might remember him as the co-founder of LinkedIn, and the partner at Greylock who invested early in Facebook, Airbnb, Zynga, and a bunch of other startups that experience dramatic success.
On this new podcast, Reid shares his theories on how companies scale from zero to a gazillion, and he tests them with famous founders like Mark Zuckerberg of Facebook and Reed Hastings of Netflix. He and his team pulled together a special remix for us to use on today's show -- distilling the very best, most actionable advice from the first season of Masters of Scale into these 10 commandments. They've included a lot material that hasn't aired yet. So even if you're already a subscriber, you'll hear some new things here.
Stick around after we count down the 10 commandments because Reid was kind enough to answer a few of my questions.
Show notes and links for this episode can be found at www.fourhourworkweek.com/podcast.
This podcast is brought to you by Four Sigmatic. I reached out to these Finnish entrepreneurs after a very talented acrobat introduced me to one of their products, which blew my mind (in the best way possible). It is mushroom coffee featuring chaga. It tastes like coffee, but there are only 40 milligrams of caffeine, so it has less than half of what you would find in a regular cup of coffee. I do not get any jitters, acid reflux, or any type of stomach burn. It put me on fire for an entire day, and I only had half of the packet.
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the more the This podcast is brought to buy for Sig Matic I reached out to these Finnish folks young entrepreneurs very talented after a Acrobat introduced me to one of their products which is mushroom coffee the specific one includes China in lion's mane and it knocked my socks off I highly recommend if you try it you start with half a packet it's been very strong and light up like a Christmas tree in the best way possible people always ask me what I use for cognitive enhancement and for them right now this is the answer I try to force this on all my houseguests is a hell of a thing if I have employees or people come over who are working on projects with me I always try to feed them because I'm going to get the limitless of fact I get a lot more out of them the first time I mentioned this product and for Sig Matic on the podcast their products sold out in less than a week so you may want to check them out soon if you're listening to this and the coffee tastes like coffee it takes just seconds to prepare with hot water and oddly enough only includes forty milligrams of caffeine so it has less than half of what you'd get a regular cup of coffee I don't get any jitters acid reflux or any stomach burn any of that it's very and very very cool so if you don't like caffeine they also offer very strong the caffeine free mushroom lectures which I will sometimes have in the evening I find Tioga specifically to be very very grounding and earthy so that is another option and I have a cupboard full of their products at the motor is right around the corner my kitchen you can try something new try sample pack which is great also right now by going for Sig Matic dot com ports iced him that's for cinematic F O U R S a GMAT I see dot com ports iced him and use the code it empty I am to twenty percent off of your first order another expensive anyway if you're in the experimental mindset I do not think you'll be disappointed to try the this episode is brought you by head space the world's most popular meditation that I have it on my phone all the time when the maneuvers when I'm in airplanes when I'm in those in between spaces and I want to do some good for myself across all of the guests that have this podcast more than eighty percent have the common behavior the common habit of some type of meditative practice it does not have to be complicated or expensive head space is meditation Made Simple I've used it for hundreds of sessions myself it provides guided meditations you can use whatever you want wherever you want whether on your phone computer or tablet of sessions that focus on everything from decreasing stress and anxiety to eating healthier sleeping better even be more creative but I suggest you keep it simple simple simple this is a huge impact in my life try their cake and per gram is fantastic ten minutes of guided meditation a day for ten days it costs you nothing tried out and I promise and I don't do this very much that you will see a significant benefit from it download the head space at and train your mind for happier healthier life learn more head space come for sliced him that head space come forward slash him the the Hello boys and girls is diverse welcome to another upset of the tenth Air Show where it is my job to interview deconstruct or showcase world class performers of all different types and look specifically at tactics that you can use maybe those are for books maybe those are stories with really detailed specifics of their favorite failures and successes the keys they got them to where they are whether they are chess prodigy is incredibly good athletes former generals in the military that is or business icons in this episode I'm really excited about his new Mike that's how seriously and taking it and I have literally thirty four pages of notes on this episode in front of me and the title or one of the potential titles is the ten commandments of startup success and there's a lot of lead to business there's a lot really to life and it features one of my favorite people there are two real components here the main guest is Reid Hoffman he served in the driver's seat here and get to his bio in a second the really two parts so there were six or seven questions I really wanted to ask Reed and I sent them to him he was able to answer those which are related to you would put a billboard what are your favorite or most recommended books and many other things the worst advice given in his various fields of expertise and so on the other part of it is drawn from a a new podcast of his called Masters of scale and I don't listen to a ton of podcasts are few like hardcore History which you guys know Allison Joe Rogan masters of scale is one that makes the cut every bite sized and actually recommend the brain chess key episode not long ago in my newsletter fiber Friday which you guys can sign up for free if you want to not blog for slash Friday but it is so detailed in really gets into the messy of building startup businesses going from zero to hundreds of millions of users for instance so I highly highly recommend it and I loved so much that I connected with Reid and his team and I asked them to put together a bunch of really tactical highlights now Reid has been on the show before for those who don't know who has read often find all the socials at Reid Hoffman so Twitter slash Reid Hoffman R E I D Hoffman linked In of course and so on his offer for two as the Oracle of Silicon Valley and this is by not just tech insiders but the best in the game and this is because his company building and investing track record is just other worldly it includes as investments very early Facebook err be easing a flicker and many many many many many many many more he is co founder of LinkedIn which has more than three hundred to Microsoft for twenty six point two billion dollars prior to that he was executive vice president at PayPal which was purchased by e bay for one point five billion there are his nickname was firefighter in chief which was given to him by then CEO Peter teal and noted venture capitalist David Z That's S Z also very very fascinating guy says of Reid quote he is arguably the most successful angel investor in the past decade and quote They're both now Partners and Greylock Partners a top tier venture capital firm so what do you guys can get in this episode you get the new questions and then you are going to hear reads theories or stay principles and how companies scale right they go from ground zero all of the two gigantic gigantic companies and he's going to explore each of these principles the Ten commandments with famous founders many of them you'll know Mark Zuckerberg of Facebook Reed Hastings of Netflix Brian Chess key Mark Pincus and many many more you'll see here for people like Sheryl Sandberg and the list goes on he and his team for masters of scale pulled together like I mentioned a highlight reel of tactical specifics of the distilled the very best most actionable advice from the entire first season of Masters of scale and they've included a lot of material that has not aired in the some exclusive clips from the cutting room floor so even if you're already a listener to master a skill you hear plenty of new things here so just to remind you you can check out masters a skill certainly in the show notes can be found everywhere as well as I will re direct this to their best page Tim the blog forward slash masters to go there that'll take you to page where you can find all of these episodes in their entirety which I highly highly recommend and with all that said as always you can find the show notes links to everything that is mentioned in this episode at ten the plot forward slash podcast so I hope you enjoy this very special episode as much as I'd actually listening commandment number one expect rejection but learn from every single nail as a founder you have to be resilient you have to learn whether rejection as it is a universal experience and this clip you're about to hear brings that to life in full color I've been turned down a hundred and forty eight times that's Katherine Min Shu co founder and CEO of the muse a career development website that she pitched to investors hundred and forty eight times not that she was counting they were literally days where I had an over breakfast in over a ten thirty a m copy of the It's an over lunch disinterested two pm somebody left a meeting earlier for and I would go to drink and feel like I was being laughed at her and when we finally raised the RC ground I went back and counted it was both painful and gratifying at the same time looking at other's names and again I remember that no Arab or that no Arab or that know and they stink everyone staying the the today users in the millions Catherine raise sixteen million dollars last year and her tail is the origin story of most great startups so if you're hearing a chorus of no's you should look for other signs that you're onto something I believe that the best ideas often appear laughable at first glance most of Turner's hear a chorus of no's as they get started have to expect in fact it's not just when you get started because in the beginning it could be a handful of prospective customers then its venture capitalists then it is maybe even private equity folks and investment bankers and so on and so forth potential suitors it goes on and on and on snow you have to expect it to condition yourself deal with it Reid says that these nose can actually be a very good thing particularly in the beginning you don't want everyone to say yes and here's why The first truth of our freshmen best thing is that the very are contrarian because the Tryon is part of the reason why a bunch of large companies and competitors haven't already done it why bunch of other entrepreneurs haven't already succeeded at it and so that leaves the space for the creation of something and the great something big you have to have that initial space for example in the early stages of Google it was search is a terrible way of making money in advertising is advertising his time on site and what a search do it shuffles you off the side is bash you can go but that's not a good business model like an airy like oh a couch or room from someone else who are the freaks on both sides of that transaction so all of these things have a similar quality very smart people will tell you there's no there there so it can be a good thing to hear a lot of nose to get those rejections but sometimes your bad idea is just a bad idea so how do you tell the two types of feedback apart or put differently had you interpret the nose Reid has a great way of describing the kind of know that you do want apparently you want a what he would call squirmy now and re explains this with the help from Tristan Walker versus company produces the Devil Rays are which is designed for men with coarse and curly hair so how can you tell a truly bad idea from a bad sounding idea how can you be sure your ugly duckling could become a Swan this is the key to have to pay attention to the quality not the quantity rejection you want to see at least a teeny minority investors were you don't have to get them to a yes but you should attack some fiction as a reason their way to a no Christian has a keen ear for this quality is conversation he can pinpoint down to the PowerPoint slide number the moments his audience stops paying attention to slide in there I think is like sly fourteen were talked about proactive acne system as like a kind of a good analogy to what we're trying to do it's the difference between Cottage let him babble as likely to gain in practice the system that solves a very important issue in this PC look me and never get this said Tristan Asher issues related to raise about shaving irritation and are as profound and big an issue for people as acne I was quite a sight you know kind of understand what you're saying but all you have to do is get a photo in black men and eight of them said this is a permanent thing I do it does get on the phone with ten white men and or of them would say the same thing one and two new to get the same ratios so it wasn't that it was like a bad idea or not as important just that that person was unwilling to acquire the context necessary to understand working on that's just laziness that point I can't fix that so I just gotta move on until I find somebody who knows how quickly Trista is mine moves on the next investor inequality the questions drops he knows mid pitch that the conversations over the rest is noise those half hearted questions I like the elevator music of the pitch process it's meant to pacify on spinners in fact crates of them also waste their time Tristan will tell you he prefers a hard no to a comforting maybe I mean look Italian messes with me all the time we want to invest in people who can execute with something with a pedigree chasing a significant white space and a big opportunity for us is like check check check check and her nine lives and those like how much is the right knee just like trying to say something that as opposed to telling the truth about truth a bit more trust in is interesting question here how much of this investor hemming and hawing so it's really going through their heads as a partner Greylock I want to share what happens after offer leaves were investors left to mull over the crazy idea that begins with a debrief of the investors partners if I'm presenting my part as a Greylock and they'll go that's great we should do that I'm like there's a bunch of hyper smart people and no one say watch out for this or watch out for that it's too easy the idea so obviously good I can already hear the stampede of competitors trampling over our hopeful it'll start on the other hand you don't want every person in the room to say read how your mind these and wondering am I drinking the Kool Aid in a very bad way what you want is some people going you guys and some people going I see it you want a polarized reaction to take my decision to invest in every David Z told me during every media brief David C is a partner at Greylock investment fall well every venture capitalist has to have a deal it doesn't work that they learn from every NBA can be yours and AIDS is a super smart VC investing ten invest in Facebook invested in Pandora he personally returned to a half billion dollars to Greylock spawns he's a smart smart money gets and believe me I weigh his actions carefully if someone as far as David is reason me I worry but I also get excited it's an emotional roller coaster and is this sort turmoil plays out in the background discussion it's hard to give a notch for hard know the best ideas make you want to say yes and no in the same breath so you want to hear squirmy know the squirmy know refers to the kind of knows that mean you're potentially on to something but let's be honest it's never easy to hear know and sometimes it can be extremely excruciating comparable to read also asked a few entrepreneurs to talk about how they deal with rejection and how they learn from rejection to GERD yourself for a string of rejections some entrepreneurs simply develop thick skin others feel like a normal part of the workday you know these people pressure dreams living the the there's another hopeful approach the arm returned and had me talk to the number of honors the seemingly in all kinds of industries like Abby followed the founder and CEO of Global Citizen Year her not for profit send students abroad for your international between highschool and college back in two thousand and eight she was struggling to get funding she turned to a leadership coach for advice we asked advice from the nose are actually a gift you heard that right gift and he said between now and then we talked two weeks from now I want you to go out into the world and gather as many as you possibly can now it is or to be rejected over and over and over and over and come back and report on it and ended up being the most important they could have ever done and most important advice I could have been given at that point the most successful entrepreneurs listen closely to the nose they mine for clues Katherine Min Shu the founder of the muse got her share of rejections over the course of one hundred and forty eight knows she shared the top of this episode we asked about the reasons that investors Turner down a bit too early for us packed into action when few hundred thousand monthly active users gimme a call this is a Fool's errand it's expensive it doesn't scale that's not very top that's not a scalable platform aren't you worried that you're going to lose all your users once they turn thirty and you know have babies wore a tie to get that women in New York and seventy s goal of this product but I think you can really hard time finding women who care about their careers once you go outside of you know the coasts and I just remember looking at people and thinking you know a lot of women in his right to ask this question she knows than most investors and she also knows more about her business entrepreneurs have to learn how to hold on to what they know through the arduous process commandment number to hire like your life depends on it because it does hiring the right people can make or break a company and this is a theme that comes up again and again with successful founders their baby's brain chess key personally interviewed the company's first five hundred employees for instance that is incredibly time consuming pain staking work Brian would not have had any other way patience he says in this particular case pays dividends one of the most important says and start to make it to the higher the higher becomes vet and so we interviewed people for core values what this ended up in that met we spent like four five months to hire first engineer back then a lot of people thought we're crazy because times of the essence of your starter you said it's like jumping off a cliff and seven airplane way down imagine jumping off a cliff trying to some of the airplane and the way down and some of their help you the airplane and you spend five months debating whether they fit the culture meanwhile the grounds coming that takes like real patients and some courage the reason we did that though was because we thought in the high class event we are successful I want to work one hundred more people like this because I hire someone to interview the new people and so we thought of hiring at this mechanism where do I want to if I could hear anyone in the world but I heard the person sitting across me and I want ten hundred more people like them but if you launch a truly successful company eventually the hiring process has to scale Eric Schmidt had a lot to say about hiring quickly but not hastily one thing to do something quickly quite another to do something in a rush when he was CEO of Google the company quadrupled in size each year while maintaining super high standards which are famous even with in Silicon Valley he told read how he did it to the company was getting very large very quickly and I had suggested to Larry and Syria that it was a problem with what I called glue people and good people are very nice people who sit between functions and hope I decide that don't themselves out a lot of value and I thought these are nice people we don't really need them we can have the scripts talk directly and Larry looked at me and says we could solve this problem if you just review all the hiring and sat there we can't look at all the higher that truly count so the company of course invented number of hiring algorithms which are useful in DC today many of them include pretty aggressive hiring interviews from peers asking people to do work and so forth ultimately the judgment has a lot to do with the person is interesting and so we would for example take a position that we want to hire rocket scientists because rocket scientists are inherently interesting and sales we love to hire Olympians or Super Bowl winners in football players because the discipline that they had in their lives as young people men and women to get to that point indicated that extra set of display I want to acknowledge that most companies don't have the option of hiring rocket scientist Olympic athletes and Super Bowl winners but there does have more pragmatic advice for companies that can set the car and Himalayan heights today I would suggest that this is since been confirmed by many studies that persistence is the single biggest predictor of future success and so we would look for persistence and the second thing was curiosity what you care about the combination of persistence in curiosity very good predictor of employee success in a knowledge economy so persistence plus curiosity is one formula for hiring success more to Zuckerberg the CEO of Facebook has another approach here's what he told Reid to the single most important thing is to get the best people you can around you and what I look at my friends who are running other good company is the single biggest difference I see and whether the companies end up becoming really great in reaching their potential or just pretty good is whether they're comfortable and really self confident enough to have people who are stronger than them around and I've adopted this hiring rule which is that you should never hire someone to work for you unless you would work for them in an alternate universe which is me that you should give them your job if the tables were turned and you are looking for job would you be comfortable working for this person and I basically think that the answer that is no then your doing something expedient by hiring them but you're not doing as well as you can on that for all these things that Cheryl for example it is much stronger than me at and that makes me better and make Facebook better I'm not afraid or threatened by that I value that and that's what makes this good of course here Mark is talking about Sheryl Sandberg CEO of Facebook and she has her own take on this rule and a lesson everyone talks about but I really mean as you really do want to hire people who are better than you are and who are different than you are the sort of that diversity right I don't just mean racial national age gender all that diversity is super important I mean efficient at how good of diversity which you get from others by principle such as personality covers the you know if you are a white male who likes to curl and Cy Fi movies probably don't want your whole team to either I think that David Fisher David Fischer I have worked together at Treasury at Google and Facebook personality types were just very different I'm much more up and down I will get nervous some things not moving fast enough I will be exuberant and I will be damn it a bit David is absolutely calm and overtake its of working together that balance has really been important because sometimes all it could even say this is an emergency I'll say no it's natural calm down and sometimes I'll say David you're moving fast enough and I'll say right more can I have that too we are very different right we are separated by obviously gender fifteen years he's my boss is fifteen years younger completely different personalities completely different working styles and I think that served Facebook wealth come in the Number three in order to scale you have to do things that don't scale and this commandment came from the very first episode of Masters of scale with Brian Chess key and that is what got me hooked on this podcast because of how actionable the specific examples were and it might sound counterintuitive that you have to do things that don't scale in order to scale but it's really important you get your hands dirty in the early days and specifically hand craft the experience for your handful of first few customers and to use the term the cool kids like to finesse all of the touch points so every single separate interaction that your product or service has with your customer if you look at it as see a slideshow or separate chapters how can you optimize each of the US and to serve your customers one by one you often take the concierge approach and again that is to perfect your prototype at which point then you can pour fuel on the fire to scale but if you do it before and you run into all sorts of problems so don't stop until you know exactly what your prospective customers want that's what we're being B C O'Brien she skied it Bryant agreed back to his lean years the early days when he went door to door meeting ever be in the house and person the Clipper going to hear started prying recalling a conversation had in two thousand and nine with Paul Graham of why commentator fam who gave him a some perplexing it seemed at the time advice and he asked us where's your business and I go we mean like with attraction will have a lot of traction people must be using it I said there's a few people in New York using it he said something never forget he said to your users are New York and you're still in our view said yeah we still doing here the main go to your users know that your customers one by one and I said but that won't scale for huge remind the customer to get me every customer he said that's exactly why she do it now because the only time you'll ever be smaller you can meet all your customers get to know them and make something directly for them Brian is co founders followed his advice the latter we literally community recommended so we would be in like um air for tonight dinner and then Wednesday I was going you are literally on doors all over host and had their addresses me say knock knock lo hei is Brian Joe or founders is one of the EU it's a little creepy just a knock on the door unannounced we need excuses to get home so they came up with an offer that the host couldn't refuse we turn to professional photographer cheer home and photograph her home course we have any money in the can of Play photographers to join I shut the door wow this company's pre small these home visits became heir be in the secret weapon it's how they learned what people loved it's really hard to get even ten people of anything but it's not hard if you spend time with them so I want to make something amazing to spend time with you and like what I did this what if I did this what if I did this from those questions handcrafted experience is born find out hey Anelka couple the guests and who they are looking at profiles great we want your profile I want to photo great layouts I wonder with him to school OK to add that stuff and then you literally start designing touch by touch point the creation of the peer review system customer support all these things came from us literally just to live but a nice joke that when you buy an iPhone Steve Jobs incomes even a couch but I did it was their particular experiences really stuck in your mind I remember we met with a couple host and it's winter it's snowing outside and were like in snow boots and we walk up to the apartment now and we went there to photograph the home and were like Hey I'll upload your photos to the website you have any other feedback and comes back with a book binder he's got like dozens of pages and it's in the end of creating a product roadmap for us like this this this this this and we're like Oh my God is our roadmap as he's a customer I think that always stuck in our mind as the