So Keith, thanks so much for joining us on the nfx podcast and you and I have known each other for over a decade. Now, you know, I've hosted two parties together for founders of your house. We've had you talked to the nfx killed in the past and we've connected on more than one company and we're Co invested. So you've got this Powerhouse background then, you know, you've got so many great inside stories from some of the most influential companies the world so many aha moment somebody yell Eureka moments that you were there because you're a
Radek person because you're a business model person. You're a person who really looks at your mental models and whenever we talk, I always love hearing about some of the insights that you're able to glean through all these experiences over the last 20 plus years of doing these startups. So today I'm hoping we get to unpack your brain a bit for the benefit of Founders. I get a well, you know, I've got one question to ask you a fill-in-the-blank type of a question. So everyone we have in this podcast has unique ability to see things that others do not that's kind.
We're all about and you know, you are certainly in that camp by far. So is there anything about you that you've noticed that allows you to see things others do not some way of thinking some way of learning that lets you have that super
power. It's a great question. I mean, I think you're right certainly to be an investor 1-cos to by definition see things that we don't see and appreciate them before other people do or it's very difficult to be a successful investor cities mostly true founder.
Cause I think it's a whole lot easier to build a business when you see the world differently at first and allow yourself to kind of build traction momentum to help evacuate Advantage before the rest of the world sort of realizes that you're on the right track where it probably derives from is being surrounded by a lot of people growing up more on the political side both in New Jersey and then at Stanford with people who are pretty left wing.
And never really being a leftist myself always sort of forced me to think for myself because by definition all the stuff I heard from my parents and all the stuff. I heard from my professors and most of my classmates as as intuitively felt was wrong, but I had to re derive from first principles and for reading history and finding my own sources said a philosophies and so that probably translate into other fields later even though it was
Wasn't intentional it wasn't like I'm going to go think differently about politics and then I'm going to apply that kind of thinking to business were all that was, you know, a byproduct a decade later not an intentional strategy at all,
you know, it's interesting. You know, we have very conservative Senators with very liberal daughters and sons and then you grew up in a liberal family and didn't naturally accumulate that type of perspective and I can see how that would force you to start to just re-examine everything.
Make sure that your question questioning everybody and what they're saying.
Yeah, I think that's where it started when it's early. Remember those sixth grade. My parents were kind of anti-nixon protest or types, you know, anti-vietnam or have a lot of friends and colleagues in their vault and various organizations for the 1970s. And then I remember when Ronald Reagan was running for president in 1980, you know the received wisdom of my parents and
Our friend crowd was you know radio is evil is gonna blow up the world who's ever synthetic and we were Jewish and then you know, you got a lot did and some of the hostages get home from Iran will then go up
and not seeing the world as others. Do you almost probably develop an affinity for?
Things differently. I remember talking with Stanton oski when we were building one of our companies and and you know, the board said, you know, we've got to build a really great technical system and he says well the way everyone would do it is this way. So that's definitely what we're not going to do. And so and he and I and obviously you feel very comfortable sort of starting from that perspective it, you know, Keith you call yourself a contrarian a misfit, you know, you've told yourself those things a past. What do you think the basic principles of a contrarian
are
I think the ability to think being able to derive a set of used independent of what other people around you think and that's very difficult to do truthfully because everybody's influenced by The Five People You spend the most time and there's also studies about this. So if you're a PC, you're influenced by other PCS. So for example both Crystal Ventures, where work to know about your fun we consciously
Don't spend too much time though. He sees
because the average DC returns over the last 40 years or not. Very good. So you spend all your time with average be seizure and start thinking like average feces. So, you know khosla would be very differentiated in that perspective and ownership on our offices in the Presidio. We're geographically removed from other Venture firms. It's very very conscious strategy to be like Outsiders so that we have a differentiated perspective. So I think I mean I apply this to all kinds of
Parts of my life. I have kind of a philosophy of unlike the anti-football person. I called this. I don't that I coined it. But it's only borrow this Brazen appropriated called Jomo my brother my life about Joy of missing out. So the more things I missed the happier. I am you know, so I look at Instagram and miss all these things that makes me more happy. So you tend to apply it to all kinds of parts of your life. Not just
business has been tennis again when you look at me like a companies to you often decide if an idea
Consensus and actively avoid that idea.
Absolutely. I mean peeps computer obviously read a book about this and it's you're in a walk we talk about secrets and basically what Secrets does the founder have Team have insights about the world. There we go, six or wrong, but truth could be accurate. I think we only apply that as far as the founders fund pretty seriously. So one of the questions I always ask ourselves is what what are other people are just factually wrong about everything to be blind to and we don't have a compelling answer to that will carry on.
Likely to actually offer to advance it is a first of all scream
gonna hand, you know, you said the khosla ventures often avoids being like every other VC and Founders fund you move from one to the other and I know you wrote about how that was the most difficult business decision you made in your life. What have you found to be different at this point about being over
so truthfully like on the scale Spectrum all these funds in the World khosla Ventures a powder product closer cousins than or there are you know,
There's a lot of consistency in terms of the kinds of companies the ambition of Founders. We want to invest in some of the differences are a felon respond were very multi stage. So we invest from seed I'm about to leave see them estimates. We do series a answer to be pretty common Venture when we also need growth rounds. So we'll invest 1 billion dollar company and will invest two hundred million dollars the company and we'll do both all day long and go back and forth. That's very uncommon.
To pay the KV was mostly a seed source a patient should be investor to hire ownership mentality buying or civil fraud and then needle to do down with other people's money over time, which is a very conventional very traditionally successful Venture for model. I found her son were high condition investors. So we have concentrated positions over 17 companies like across the portfolio. We have more than 200 million dollars across the company to dadaji Greater second. Probably most acute differences. We don't do Monday partner meetings. Well now nobody does what
Readings but at the time found her son was pretty unique and knock having assembled partner meeting. We have a way of proving Investments, but it's based upon a set of approvals that are custom and unique to each company. We never know how everybody in the same room sit for a presentation of company and then bike vote on it investment. So that's pretty different. So effectively means that I have Mondays or each type of my days available to meet
hours and work with portfolio companies for sitting in an insular meeting to be
Investments very smart and you know in that you're a contrarian and a misfit. It doesn't just apply to your investing right? I mean it applies to your life and what not. Are there other ways that that you feel like it expresses itself in the rest of your life as well.
I'll give you some of that some examples from the sublime to the ridiculous. So the most of live stuff in the united that sort of set of views about politics of the world will skip over that for a second.
Ridiculous examples, so I started maybe seven or ten years ago. I had like six very different ideas about the world that we're kind of consider crazy even among my friends and family and when I set up basic proving is so one of the ways, you know, sort of believed in but it's becoming a little bit more normal. Is that the more stress you have in your life the better it helped you in your the wealthier. You are the happier you are there's a great book by now recommend called the upside of stress by telling a Google Doodle.
Out of Stanford that sort of proves us but when I started thinking this way 20 years ago, there was no research that really validated this definitely a really big I actually don't believe that stretching is good for you. Like if you have a great athletic as a whole set of reasons, why don't you stretch before playing sports you can talk about that another one that's become very conventional by the time, you know, I was growing up was very differentiated. I have always believed that sleep is Magic that
Are you sleeping better in your life healthier going to be more successful and it's sort of always organize my life for four years Grassley. So we followed we try to get our sleep. Now. There's a lot of research goes 2009 that confirms the benefits of sleep and major disadvantages of lack of sleep. So, you know, that's no longer pressuring you want to kind of fun silly one. It's close with I happen to be a fan of Apple Maps. I hate Google Maps. There's a story behind this and give you a lot.
Some examples why but like fundamentally half my friends definitely pick up crazy on this topic, but you can might be up a fair
amount. Yeah, those are great examples and also you mentioned the politics and and we don't need to go there. If you don't want to we can edit this out later Keith, but I'm just really interested because I felt like, you know, we are a community in Silicon Valley of contrarians or people who are trying to think differently than the larger the larger world and come up with new things and yet
We've created an environment that might be hostile to people like Tim Ferriss or Peter teal who felt like they wanted to remove themselves from the community. You stay here, despite your political views. How do you how do you feel about that ecosystem that we ran and and your and your role in it? And what could be done?
Yeah. I mean I think because it is fairly close - despite what people like to think about those dolls and you're right that a lot of people who are conservatives or public entity or whatever will if they have the luxury of see
Access locked out you did a couple examples I can start to think about others and there's more on the way, but you know, what I do for a living I felt the best place I could be was at the center of the ecosystem of startups and followers got one of the work with most interesting most ambitious Founders and at least as of now, there's a high concentration of them instead of a lie. So I felt it'd be professionally negligent of me to leave even if I can find a places that would be more comforting but that said, you know if you're trans or talk
I grew up in a you know, anti-war household of of George McGovern and you know and somehow managed to skate diver went to Stanford, which was incredibly left just borderline socialist or communist was there and you know survived that and I went to law school which is full of like often professors. So they being to some extent and I go crazy if I was
comfortable in that role.
Feels natural that's great. That's great. That's good. So do you think that we should and could have more contrarians or by definition? Does that ruin the situation? I mean,
well, it's hard to judge. If a source is a great quote about this great tzb contrarian. It's extremely rare difficult to be contrarian, right? So they either the consensus has a lot of truth to it. So you can mint artificially were contrarians. But unless they're seeing things are insightful, you know in some pretty cool bases are in.
Me it's not really having that much value. I do think extending the debate. All the window bait is actually helpful in just validating truth. But the challenge of being a contrarian is not being prefer and the real challenge is the Venn diagram overlap of right and different. Right?
Right and you think it takes a misfit to launch a falcon 9 for instance to do something super ambitious like that. Yeah. I mean the
time your friends are going to tell you crazy. I mean I have talked about sort of investing standpoint when I make it.
A new investment. I really want half of my favorite you cease to think about like crazy and like laugh at investment. I don't know a hundred percent till after necessarily because then you know, maybe I'm actually missing something not them. But if none of them will often or 20% that I'm probably not taking enough risks and it's probably not a differentiated enough investment. So, you know, I really do consciously think about when I hear a pitch like a what other people going to miss and why and then B is this going to sound ridiculous to
Step smart people because then it don't hang enough risk and Factor they'll be compensated for being right if I'm right
and was there a time to speaking of crazy was there a time when you were running one of your companies where you thought yourself? This is crazy
if I ever felt like what we're doing is crazy. I surely would have lobbied very possibly and you know, hopefully persuasively to whoever was making the final decision that we shouldn't be doing X Y or Z. I do think there's Dallas times said many times. I've been involved in the world. Thought we were crazy. So
Example back in I can't help is red herring which for the time was, you know, like the centerpiece of Silicon Valley consent technology Kentucky consensus opinion ran this cover story on PayPal called Earth to PayPal and you know, Peter never forgot this like actually when we celebrated our IPO, he held up the cover and when we celebrated our acquisition by eBay give another speech Holyoke to cover so, you know, we got we definitely were considered to be weird.
Misfits at the time, but internally, I'm not sure. You know, I actually thought we were well and that is it that we're Misfits but I don't think we're wrong. It's a same thing. You know, I think the companies I was involved in. I think we're making the most part quite wise decisions and you know, whether the world appreciated or not that that wasn't the key criteria fortunately in most companies will work on
done and you know, the speaking of just quickly PayPal has long time ago, but now when you look back what
What were some of the things you put your you can put your finger on today that created such a mafia the created such a flowering of a sort of a Cambrian explosion of Entrepreneurship coming out of that one company. What were some of the elements that you feel were there?
Yeah. I never wide your credit goes to rape here in Oxford create. They had a philosophy of hiring and finding the right people. I had, you know, ultimately sourced a huge fraction of it on that work through the personal networks Peter through his sketch.
That Stanford and knocks mostly hire Engineers out of either decisive experience in Chicago or the University of Illinois. And you really brought the two teams together and mix them. I said, they deserve most of the credit because they identified people with high potential at scale and mix everything together. Once you're in the building that I think there are seven management philosophies that were very different at the time that may have enabled us to be successful this company picnic available, but then subsequently
So for example, we didn't really believe in general managers. So Peters out of it that we were going to hire people whose skill and life was managing. We were going to promote the best person each domain in each discipline to lead that discipline. So for example, the best engineer would become VP of engineering the best designer we decide to invest personally partying best time expressing the CFO and that led to a building a craft putting a crafting and it's sort of a meritocratic feel because everybody knew that their boss is actually pretty damn good at what he or she
And you didn't have a Steven realization of well, you know, I'm excited acts by reports of a person who has no clue what the whole you know idea who or what I'm doing or why so important so I think that was pretty fundamental and then the third thing that's pretty important was the most of our business is very challenging. There's a lot of obstacles a lot of people enemies that didn't really like us from these masks are the federal and state governments at different times eBay Xterra. So, you know, we sort of a trial by fire situation and I think light
The metaphor of War you don't think bond with people in that kind of environment and you get to see who's really good under pressure and stress and who actually your doesn't Thrive under the circumstances. So when people will suddenly went to start their own companies, I think a lot of us have perspectives on how would this person do as a Founder? Because being a Founder is you know, he talks about all the times actually boss excetera the particularly fun pay, it's very painful. It requires a lot of you know self self actualization.
And initiative and I think we had a pretty good insight into who is likely to thrive in that environment and that's why I think some of the companies did really well, so it's
not a I think it would also be fair to say that you guys are sort of exiting those companies who are five six seven years into the internet, which was a pretty prime time to start exiting and start new
companies. I think we've met I'd say that's clearly right, but I didn't feel that way. So your PayPal Republican 2002
And your Silicon Valley is nuclear winter was two thousand and two thousand three, maybe four and so when we exited PayPal and we're starting a new investing or started new things 2004 called two three, four five heading out which cop you're talking about. Most people didn't think that there was another wave of consumer Innovation that was likely to be successful. We happen to believe that which is why we started all these companies under each other companies etcetera in history or for that is being right.
But it
wasn't obvious at the time. The reason why should people Network became kind of more essential to Silicon Valley was there's vacuum most of the traditional networks in Silicon Valley were doing a lot of interesting things in two thousand one, two, three and four, they're afraid and fearful and so people came to us because they didn't really have a choice like we're ready checks are willing to work on companies join companies that became the Next Generation, but there was
It's a clearer. It wasn't fear of visibility into there was going to be another generation of it.
Yeah, that makes total sense. And you know, one of the few found that a lot of companies not only have you invested in so many mature found that a bunch with I'd love to hear a time where you threw out the rule book or and a either blow up in your face or went incredibly. Well, like what are some of these stories about you and I have talked about some of these things. I'd love to bring some of these up for the other Founders to here
in most illustratively. I fix awesome lawyer and the same history of law.
Yari most field is understanding of group of really well precisely and then going to deviate it's like knowing when to deviate is remember earlier, this is going to sound / I think very crazy but I remember being kind of a with kind of a going high school student and they sing in this class and reading some of these, you know, great works of literature that we read sophomore junior year and noticing that some time occasionally violate grammar rule.
Rules and you know, I've been a little crazy kid. Well, you know, why is my paper get worked up what I do this and you know something about their bits wearing this and you know, the correct response by my English teacher was well when you master all the rules you get to violate them. And if your sister did it true that you know, it's like a value to that deviating from Wolf doesn't make much sense for say it's knowing why you're deviating from the rule now, obviously follow the rule book or not going to create a company iconic company from scratch. There is no rule book that tells you how
Build the next Space X and Tesla by definition and so you need to
know what
rules you're going to change. That's why I don't like the phrase best practices best practices just need you to philosophize your replication something else. You can borrow best practices, but we need to know where your attention only not following quote unquote best practices or you're just being a little bell curve which is not the goal Ida kind of funny other example in 2003. I got Basics and as so hesitant to get lazy
Things we're not so obvious reasons that that my colleagues will be swapping the exact schedule appointments that cancel the last minute for six months. They're terrified of somebody, you know, putting it in my idol Asia and I remember what finally convinced me I went to this doctors quite good surgeon I surgeon and he did all these tests on me for like learn how a box is a room and he looks at me and smiled and said I will tell you something. You've never been probably happy to hear before but you're right in the middle of the golfer.
And it's like there's nothing that will go wrong with this procedure. This procedure was made for you and your eyes and the only possible thing that you're wrong is if I screw up and so that led me to realize that you know, I should go forward with Ginger was trying to be a good decision. But like that's how you kind of have to think about the world as you don't really want. It is not Spirit fibers, so they don't want to be the middle developer. You need to be, you know at the extreme 1% and then it's consciously choosing those things we want to do differently.
So now I mentioned something you need different a file management philosophy firing philosophy with higher different people different backgrounds than will stand in Silicon Valley manage and promote of the different the Xterra. We use a different distribution strategy to talk about so you always want to consciously violate, you know, some of the rules but it's a very intentional strategy like alcohol while eight slots or were both like closed platform.
Most of all for 20 years of argue that you can color clothes popcorn the center there's lots of intentional your secret. They don't let people talk to each other. They can be a company that work on different teams. That's very unconventional. They don't actually use metrics when most part to measure themselves in all of those three things would violate most of Silicon Valley Norms, but they're very indispensable Capital success. There's a reason why I think the most viable company certain most viable technology
companies today, so you when you were running companies in Europe,
Two teams you guys could decide which rules you're going to violate and which unique things to do. When you're an investor. You kind of have to take the set of violations that the founders are bringing. Do you ever get that wrong you ever you ever say all that? You can't violate that way. You should violate in a different way
or well, I guess a awesome question. What you doing?
I feel especially early in companies trajectory as a pastor sir. He got a dialogue about Well, what we'll do you violating why and that allows you to see understand how the person's brain works and calculations are making the bad version of that conversation is they don't even realize they're violating the rules or they don't understand the reasons why they're deviating. It's not very thoughtful conscious decision. That's usually disasters can a recipe for a maths because you don't want to be violating all the rules like you want to survive.
Actively teach there is a darwinistic they evolution of quite how humans behave than you want to tap into some learnings from history. You're standing on trips under a giant sort of thing. And so if you're trying to reinvent everything that probably means you're not really successfully Reinventing anything and you're probably also creating a mass on the backside of your reinvention. So there's a it's a great dialogue to filter out, you know, how Sally and insightful
someone can be in the past.
I've talked about some of the metrics that you would use to measure the business. You told me a story about Yelp having discovered a metric around the number of messages amongst the Yelp Elite in their local areas as being a key indicator of what was going to happen in the future in each of the cities where Yelp was expanding back in 2004 2006 that stuck with me and you know, can you tell that story and then are there other stories of other companies you've been working with whether it's opened or PayPal or the other ones that you found it or helped start?
Absolutely. So I remember this is that even that price second one being that joined the Africa the board of Yelp and I Remember You know, Jeremy stoppelman was finishing his presentation the basic presentation of work out and then he basically gave this vision of that Yelp was really building this social product which you know, not everybody appreciated. It's fine and there's a different social product. It wasn't the viral social product and expand their friends through email or whatever.
To you selling this off and framing, you know, the vision of the company against that sharks and I looked across the table and I said, okay, but your business social products. What's the key measure that will tell you whether you're right or wrong because you're working with office getting better and he looked up without hesitating said it's a unique number. The number of many messages one on one personal messages from one Community member to another and person at a time. I thought the answer was like ridiculous thing.
That would be to keep after for the company but you know very quickly thereafter certainly within three to six months. I realized she was actually right that that was the key predictor for whether we were building a true community and whether people were attending events because they want to be part of the community whether they have Crawford use because they want to be part of a community where they going to be able to eat grass because it might be part of me is just totally right into this very extremely Connor counterintuitive, but that's an example.
You know as an investor board member.
I can ask questions about it further. He's right but he was you much more right than I ever would have been because why it's his company and what Hugh success wide versus device started in a miserable disaster. Hopefully once in a while I was able to help him, you know craft a couple things correctly to there's if you can go here there's a lot of and I helped with a few
good questions is often easier and more productive than trying to actually come up with a solution.
It's a great. It's a great.
Remember asking the question is the right way to go in a series of question is something there law schools. That's pretty native to people who requires sex or the socratic dialogue kind of stuff but a probing set of questions can get you to a better answer in a way that's more constructive than a standard
debate. Yeah agreed agreed other examples of metrics that you thought were incredibly powerful that helped you realize that either an open door or yell or PayPal was working or something else. Well,
he's a famous pay pogchamp what's been told, you know occasion?
Lately, but I think it's worth looking at because it sort of is nobody really believed that eBay was target market for hip hop act. So there's an official list of top 10 Target applications for PayPal and eBay was on the top 10 list and there's documents still exist actually the populist and then we'll David Sachs noticed was there's 50 for sellers on eBay, which is a very small number actually the time they have hundreds of thousands of selfish. The 54 is very small.
But our safety for sellers who had hand typed into their listings, please take me through PayPal and David notice that in the first reaction, by the way, we call executive team from day one was oh my God, why are these people using hippo and we should get rid of them because that's not that's not what we're supposed to be doing. David came into the office the next day and said, I think I found our working and then therefore it started invest in productizing
Who's manual labor for the sellers? So we created a logo hit home ago. They can search as put the pipe and then we create an automated way to insert the logo as opposed to finding you do it and Steve a listing these solid my muscles but basically became both the marketing the market for the company to focus on as well as The Guiding Light for the product strategy for two
years come and so that was a very small signal in a sea of data that David Sachs had the skill.
And the the Acumen to understand this could actually be a scalable platform because there's already hundreds of thousands of people who want to do transactions here. They're being underserved clearly as he's 54 Vindicated and let's make that he's let's reduce the friction on that and see what happens and we reduced a little bit of the friction and it really took off and then next two years. You just kept doubling down on that and that's what create HTML button HTML button that could be
easily inserted and they created what we call the auto insert where you can also serve it all your listings and that was basically the issue.
Repay tolerate their Nation, you know, there's other examples too. I remember thinking to evaporate Red Square. We were just launching and so we'd shift about 10 or 20,000 squared into the world and we started to grow and we were doing a marketing like most things been kind of money to be working like at the time we raised our series of a but as a and shouldn't have real money to spend on a top position, but I
As you sit next to jog and this we actually did have a fairly refined dashboard for early stage company and remember job pointing to his computer like my second week thereafter. We say or by third week second week after the shift in squares and noticing day by day. We're adding more users for that for Fairly consistent trying to find a soon startup spend the five biggest very statistically significant. But anyway, it wasn't that is it was like growing a little bit each day and said, why is this happening?
And I pause just under the standard set of rules in relation to be hopping we weren't doing anything to create this
great house. No viral mechanism in snod that you were tracking who's no Jemaine PR thing that was happening. I mean, we
have spiky are like not see the company and that was not in the state of South. So I thought about it for a few minutes and I for a minute hypothesis and its really only has given the constraints to
So aha maybe this is a function of people seeing squares in the real world the actual device and some fraction of them that see it setting up and it's because it's the only thing I can think of that could explain this. So once you have a hypothesis and NASCAR says, well, how do you validate that that you tested?
So if true your should be a ratio for every new square root shipped in every new customer and every transaction in the rate of growth turned out there's a perfect relationship was exactly one percent. So for one percent of all transactions on what's safe day 0 we'd have 1 percent of signups the next day new sometimes and they just perfectly system like this is amazing. We have actual viral Loop in the real world, David.
Actually, I explain this story today that many years ago and he wrote a blog post that combines hip-hop Story the square of story and talks a little bit about a few bird in his blog post so you can read about this but it was really that Epiphany the once I've realized that then there's a lot of topics that occurred to me about what we should do XYZ differently because we have this new this observability deep in the real world that's causing growth, but it was not at all obvious. It just almost never works. It's very rare.
Demoing this actually work
right where you basically have people using the product and through Word of Mouth like with an Uber, you know, you you're waiting for your getting out of the bar. Someone calls an Uber you get into the Uber with them. And you said how do you do that? He says let me show you the app and then sort of Word of Mouth sort of hand-to-hand combat. If you will it grows by by word of mouth in the real world.
It was the aesthetic appeal of the device. This is the consistency of the device with the name. So you can remember you see a square square remember ghost. I know but it worked it worked.
For like 18 months there were things later that you change the equation a little bit but fundamentally 18 months where we definitely would not have enough money that we could have raised just grow on a deposition obviously payments is not the highest working business your feedback Cycles a little long. So paid marketing at best is a complicated first where it really can't be the primary
driver Donna Donna. Those are great examples. So do you have a kind of mental checklist? I'd love to dig into
some of the mental models that you like to use when you're making decisions. You have mental checklist or approaches for decision-making.
Yeah. I mean, I think everybody does you kind of have to if you're making decisions whether it's exactly the right decisions all day long every day or is it master who pretty much making decisions? What were the other which me even was meetings to take either? It's not coordinate investment decision actually effectively is so absolutely I have this set of mental models for whole bunch of different.
Next up higher what companies I like to invest in, you know, etcetera etcetera etcetera. And actually that's mostly how I work with Founders post a mess with the really great Founders. Don't ask you, you know, should you ever be that's a pretty rare way too afraid to question what they actually say to you and is almost 4 beta will be what's the what's the best conceptual way to approach this problem? Can you give me a framework for deciding between A and B. So, you know I try to focus on how you frame.
Name an approach to solving a problem and then that's nice because it scales you can
and so what are some of your favorite ones that you find yourself repeating more often than not.
Yeah, so I gave a whole lecture Stanford sponsored by Y combinator and 2013 on how to run a company. It's called how to operate and walk through a lot of of philosophy acceptable Frameworks on when to delegate when not to delegate when you know how to think about different.
As usual structures Tara so many others are transcripts of it. If you don't like watching a full bore a YouTube lecture reading the transcript is actually pretty good for you - all they the slides especially separately framework when the hire someone with experience versus but not too when hire someone to help the company toilet Window mode versus later somebody I've treated like my vest my favorite investment formula. So I tried to distill things. I don't use the Peter Killian like you
I to grid very often but if you didn't see our to one's got some pretty good framework Samaras. Well, I only have one to one but 2x2 grid I ever use but yeah, I tried to develop these and then you know, I have my former Chief of Staff is now a principal Founders fund billion possible set of want to push that try to steal somebody's so that your Founders can beat these he's like, you know called lessons for kids and there's lots of different topics. He he's written really excellent stuff. They don't want to sound rude.
Your shape so I highly recommend those. Well,
let's create. Those are great resources. Thanks for doing that. You see if you've also said that every problem is a leadership problem.
I've already got it about I didn't actually quite this this is a strike philosophy, but when I read it not surprisingly makes a lot of sense, you know, it's like the version the Netflix version of the same is every problems with a context problem of like people people make poor decisions or decisions that you don't agree with. It's probably because they don't have a safe flight.
So you want to give people as much information and transparently as possible so that the rest of the relation make the same decisions the CEO one. This is the striped version is obviously the right person doing the right things. You're going to get the right
answers come on it and one of the things I've heard also is a lot of the problems that we think we have boiled down to recruiting problems, which I guess then translate into the leadership program.
Yeah, they're eggs. It's a little bit like I have to like sports or you sliced pork right now. It's
Rustlers but fundamentally course is a lot about building the right place the right players and right position over we Thrive as a second baseman terms of and part of the Arts is getting people in the right places that they can Thrive and understanding that occasionally the wrong and maybe the right answer is to try to moving them around and see if you know, for example the best relief pitcher of all time starting to starting pitcher. We might've been a pretty good starting pitcher, but he
Wouldn't have been a first-ballot hall-of-famer as starting pitcher most likely so someone had the Epiphany that you know, maybe you should be a relief pitcher closer and the rest
is sort of History, you know, you know, I mean, I think one of the things that I thought you said so well, as you said that the team you build is the company you
built. Yeah, so I learned this from vinod khosla many others on my board square and he said this and that, you know, if first honestly I found it like a little surprising because like
Typically people so Valley think about technology and Technical advantage and IP and then they think about distribution of data to distribution strategies and never heard facts.
They often forget the people and the way he expressed it is just so simple and cut through the Clutter and make as the more if I was one of those things that every minute you think about it gets more more more powerful than cycle. So now, you know four blocks. This is probably mentioned this to me eight or nine years ago. Now I think about it every day. It really is the people the team you build really is the company and the right people you end up with a phenomenal company along people.
Unmitigated disaster and most companies are somewhere between
you know, this place a little bit into this debate that is coming up more and more about remote versus being in Silicon Valley and I traditionally if you look at the total returns and intact 85 90 % of all the returns have been in this job and this Silicon Valley area, but increasingly with the remote Technologies and people say stuff, like look now, I can go hire the best people no matter where they are. You know, how do you come down?
Down on that when you think about you know, the company is the people you hire.
I think it does depend upon the company with Kobe's both vision is applicable for visioning on the new areas it and what skill sets you need. So for example, the benefit of being co-located is
mostly
extemporaneous conversations dialogues that wouldn't have happened by scheduled meeting. So, you know, I'm in the office late at nighttime the office of Sunday afternoon and some random individual the company probably doesn't even report to
walks up to my desk and says hey keep it goes like yeah, and I look up and I say, you know what that's actually pretty interesting more exactly what we should do, but what if we treated this way Riff on it
That could be a pretty good idea and some of those ideas are really text ideas. Those are very difficult to schedule like by meeting by Fiat by calendar and by remote so that said some companies have a very linear roadmap. It's very obvious what the value proposition is, very obvious what you need to do what the sequences and The Innovation cycle isn't required, you know in small doses of time that might work pretty well remotely kind of so maybe with a B2B company
or an Enterprise software on that end of the spectrum
Ravenna consumer of making on the other end. Yeah,
but it's the step function Innovation that I do worry about remotely happening. I watched it hit on a lot of really good ideas came from spontaneously deals together spontaneous late nights almost like borderline, like fooling around, you know, like over a drink or pizza. Somebody has a definition got filtered out like over the pizza and beer but like pretty good ideas to in the same thing Square in my experience some really good ideas popping in
like random time are holes. And so I do think that you will lose some of the that Innovation for the companies that need that set function Innovation want to consistently compete on that basis
kind of so as you're looking here Investment Portfolio over the last two years. Some of the companies are more remote. Some of them are less remote or do you find yourself to saying look I want if you're under 30 people. I want you all in the same office because we need an innovation curve that's going to give us the 10x which will lead to the hundred to 200 to 400 x Returns on the investment or you
You staying now in this area? I'm okay with remote because of its nature its linear nature.
I think in some areas. I'm okay over those really thrilled like so for example the criteria that would love you to be more. Okay, and there was a co-founder the reading the pre-existing relationship with the CEO and was going to open it office with the we're here. She has a network. Okay, I can buy that. So for example, one of the companies that have been developed in four years now, it's doing really well. It's called Fair fa fa IR. They've always build their engineering team in Canada because one of the three co-founders the
Canada and you know but he's a co-founder and so they've been able to see other engineering there at you know, half the cost less entitlement all the benefits but that works because it is a very significant existing relationship because a lot of us call math. Now interesting enough of the product Innovation actually does totally flipping all the office and from the CEO about but it made it work, but that's what their circumstances. Secondly. I think a lot of works by remote for the first time right now and if
Finding is not that bad. But remember there's not a pre-existing relationships for the companies have suddenly switched on remote because of covid and then I do wonder about what would those conversations look like and how high fidelity with the debates dialogues be if there is no pre-existing relationship from The Real World before they had to go vote. So for example, I see it. I get a lot of one beings or beings these days are all them as you call.
And five plus four games a week the ending modern if that could actually there are some differences but some things are better something for the worst. But what are the reasons why I believe in the moderately effective is in almost every case. I know the executive team and the other board members quite well, sometimes measured for decades often measure for years. And so the social cues in various things that are more difficult. Ooh,
Being from a conference call. There may be other ways in pre-existing relationships. They all sat that versus joining a new board from scratch with people. I've never worked with before whether their investors or downstreamers and exactly a team. So we'll see how that starts out as me and other people start making Investments where there's a whole new construction fast,
that's remote set of relationships a whole new set of relationships that are outside the example that you're seeking Kramer
guy. I work with a lot of you know, I have
fortunately co-invest a lot of great people at work. I enjoy working with a lot of investors from other funds that serve on boards and we some of us work together with entrepreneurs. So that's a code backseat together for a decade plus some of us are social friends. So there's a lot of pre-existing relationships that were topping into on these you board meetings that I think make them significantly more constructive than if we were just throwing together a random assembly of people say, okay now make this work,
you know, you know like
It is funny. I'm sensing a growing sort of religious religiosity about remote that's coming from certain segments of the founders. And I think in part it's in reaction to a religiousness around feces only investing in Silicon Valley over the last 20 years. And so
yeah, but where we started at and also dial doctors started like knowing the rules. I think there are some advantages to being cold looking in one headquarters think Apple Amazon, basically
But knowing when to violate those rules again, you know is part of the art give up is done phenomenally. Well over don't only company from the very very beginning. You know, I remember a kitty when we let this deep round. There's something about it, but it was very clear of it. You know COI the very specific strategy. It was very thoughtful and very intentional and you know how differentiated value proposition and it reinforced some value proposition. So but it's been phenomenal so it can work but I think it's a conscious.
Vision to make it work and being very attuned to what ones to change derivative lie to support that structure.
It's interesting what I'm hearing. So often from you today as I have in the past, it's just we've got these playbooks, but they can become to formulaic and each company's individual. Each time is individual. Each market is individual and you have to make the right decisions for every new circumstance in order to make things grow really big and do really yeah,
every successful company is a customer
Through culture distribution product and when it really works is because they becomes the artistic like they tap into each other, you know that the reinforced each other and so there is no prescribed formula. There are prescribed trade-off. Like I think one of the other thing is going to be doing some work experience of women work. There are can do is constantly highlighted right? There's the grass wasn't Greener. There is a natural reaction All Humans options and
Moving on you're not doing and say oh my God now be magical with everything will be perfect. Usually nothing's perfect. There is no free lunch and there's trade-offs. So one thing I try to do is highlight for the founders. And yes, you can do that. Just know that the following two or three things made Undead, you know, and so make sure that you really care about this one thing you're going to achieve first of the trade-offs we're going to sacrifice and that's what you also see Founders actually switch back and forth among strategies and education strategy using or
Initial cost is it realized that they needed to one of the disadvantages and that means the decision-making Trail, you know some of the more Savvy Converse that worked with actually why I asked you that question Point Blank saying, how will I know if this isn't working way I wanted to where should I be looking at looking for the signal that things are a little bit enough before there are really
yeah, maybe maybe the superpowers of the founders and the boiling down to what things for them are.
Painful that would be painful for another set of Founders. And so they can they can balance in a different way than other people
they had and they should also be for the quite about Teeny built some big deal. They also should be complimenting themselves with people who find things they find painful to be happy painful. That's a great way that we discuss has not force me to do things. I don't want to do on our get out of here to do across state to do but it's only likes to actually do those things because it turns out like there's enough people in the world that probably for everything.
I don't like to do there's someone who actually enjoys it is quite proficient at it and maybe I can be very happy doing what I like to do in find someone else to do the other stuff and then we can both be both one plus one equals three, but also be more intellectually and emotionally.
Yeah. Yeah, and if the company in general has that capability then the compare competition won't you? Can you can Excel you know, when someone works with you Keith after a few years, what do you think that they feel like, they've been learning from you? What's that?
Parents like it boy. Now that I've been working with Keith for four or five years. I've learned this I've learned. What's the thing? You think you bring to people when you're coaching them but they might have gotten else we're
watching is really important to me. You know, I think it's easier to company is executive to how people learn by osmosis watch Shadow and pick up various things we care about what they like bird as a as an investor. It's more challenging.
They're able to bring people with you and if fully immersive way all the time, there's a lot of constraints on that said it's harder to teach as an investor in hence may be harder to scale a venture fund because of that. So it is executive though. You can work with people quite closely and what you want them to learn is like one of my one of my colleagues to work for me for six years, but work with me for six years used to say there's like the revolution Camp which is like a lot of a lot of
Early feedback, like what's that were being Y and then people can learn sort of independently, you know, their address lists not even regular stylist is really well. Some people are like prefer to drink coasters actually and some people just really don't like it and a lot like specific principles, but the most important things I think people in pick up the Bhaskar what makes vibrating work on your life principles. Sometimes they actually can extract it in a more.
Assisting powerful way that I can just really musical watched. I've definitely had insurance and former colleagues direct reports. You can be played back to me. My answer my philosophy better has got different to committed before it's done by a surprisingly insightful to hear yourself thinking and someone communicated better than you have boarded up. But then you lost that in your brain because that's the right way to describe it. Also occasionally like all borrow. I'll see something or way of expressing it.
That kind of steal it and then scale like, you know, like there's no one might say something in a microcosm and all sort of realize that wow, that's actually extractable to all kinds of problems. We're going to apply it across the organization. I'm going to talk about on the podcast, you know, excetera. So sometimes it's also learning from them having an eye on what they're doing or saying that the Ancient King of different and realizing that it might be something that actually is
Google for everybody a lot of people and you know platform either because you're running a relationship with your Twitter followers or whatever to see all that philosophies. They try to actually works both ways. But ultimately the number one skill that people who observed the forward deputies of mine that got us to do interesting things on their own is they can hold the business equation the rate that every business is like an equation of my view and that's what the word strategy.
It moves that you understand the connection between variables exact size wise and z and sometimes the reason why it's important to hold all these new brain is sometimes the right move is not the try to force x to be greater because you actually think the most remarkable Toronto where you can move the accident. It's actually change the why we're changing this D. So let's talk about in today a tangible with some of conceptual approach. They can Enterprise software company often Enterprise software companies have issues with cell walls.
Right, we're not selling our customer fee of its customers like a thing for everybody involved. Well, there's an interesting set of questions there, which is are we targeting the right customer or returning right decision maker are we placing the product correctly or reframing the value proposition of graphically or is the planet actually a problem. There's a set of things takes attendance positive and the art is knowing how they all relate to each other and knowing what order to change the dial and that's what it's gr. / example or CEO actually has a feel for it.
mission for economies all connect and which ones by toggle and I'm not talking about so I think the first step of founder is to write out the business occasion to the other business equation is different for each call me and understand the weighting of the variables and then try to get the variables into the right places and then figure out if we're not if you're not happy with the results where did you and what ordered chicken and most of the people that I work with closely can do this after a year
three years of working together and doing quite well and it's actually surprising it's a surprisingly rare skill I don't let people sort of point this out to be at that and you know that so-and-so and not surprisingly to do yours you can do this nice
that's a good way to say it is there a myth of the founder archetype peace-loving and is that archetype static and you know what I want to get at here eventually sort of how you how you think about the founders that you choose to work with a one of the things
Said is that the good Founders will not ask you about should I do a or b they should ask you how should I think about this set of decisions? That's that's a Founder architect or a behavior that you might find in the archetype you're looking for. Do you have a Founder archetype that you've articulated for yourself or or not yet?
I think your three comments. I think there are attributes.
Founders that tend to thrive but not Architects. So for example, we Peter killed questions that they could clean Powerball is you would not want Ilan to be running are being unique and invaluable walked by and she has to be like spacings. So I think it depends on what the company kind of the commute was the hardest challenge or are really cool and he's the founder of world class.
What's the best possible founder and founding team for that statistic follows? That's always critical there would be times when like literally I will invest in the founder because they're working on. Oh my God. This is deep work a problem for you and me just so obviously they have world class abilities tackling the single biggest source of friction. And then there be other challenges that other companies. Maybe they wouldn't be perfect for there's probably some set their program everything, but that's pretty
And then third answer though. I think there are like you.
More Central Casting quote Keith Founders where it's very clear when someone needs then as an angel investor someone another investor weeks than I need them right reminds them when they were just like yeah, you should work with kids. There is a set of people that you know, you just instantly communicate in a very efficient extremely productive way, but I think that's you know, the least important most
Morgan is a failure going to be on light highly unlikely a positive way to succeed at this problem because if something about a murder and then be in either a partner for him up maybe and if not, I'll go find a partner, you know, maybe or
John so you actually take the time to think about that personality fit as you think about decisions.
Yeah, I think there's a way in this is like
It is like as you know, a lot of people talk about but it is like a marriage and certain long-term relationship that goes through trials and tribulations now
and you want someone
that any counterbalances you of a you don't want to Stage the topic honestly thought about described like so if I'm super stressed in the founder, the last thing I want to do as a board member I stress I actually want to cook for you. I actually a bit.
And then there's times when I think there's maybe two I mean fucking with your tracking with the little bit like, you know, like that's the time when you watch out for that question. So understanding about our psychology their framework and then being like a cushion for them and then sometimes being, you know more demanding and it's not always obvious which would be like things are going. Well, actually if I don't need more demanding there's about me I should probably be more supportive of these Paradigm. So I think
It's not just a personality fit. It's just can you be constructive dialogue? We're one plus one really feels like it's free.
So what are those things about people that you won't give up on me? What what what makes for great raw material because you could be an Elan personality could be Brian chesky personality, but still there's some commonalities that you get a sense of and that you're you know, the founders from people who know this guy's going to love Keith and he's going to love him. What were
those things? Yeah tenacity and the state resource like the program.
Malaysian better than my old formations capacity fast learner a quick big could pick up speed now fairly impatient and explaining things meaning like I like to explain this once and expect that people usually drop it. There's probably nothing that frustrates me more in life. Socially even worth of questioning is repeating myself. Like it drives my friends and partners crazy. I just really like to have a very heavy Blaster whatever train
the very good governance. So you have a conversation with me was we never going to forget that the conversation I can recycle conversations. I've had 30 years ago really so tries me crazy to repeat myself people who tend to like pick up with about fasting of speed people who like people are ambitious. Definitely. I mean you're there's ambition ambition. There's like different levels of innovation. We would never find something either cave your Founders fund. It doesn't have some low emission, but I tend to like the outrageously ambitious.
all borderline crazy I can pay you know what would people say Keith Ballard Iran means implies often that keep the deal with a little bit of craziness people who want to change the world or you know how screams somewhere usually you know something is Steve Jobs Apple commercial about think different there's a bit of Truth to the automobile I tend to have work while turning work with and work for a lot of people that get that DNA so it doesn't bother me expect the best part of
what makes a person Supercross it is that they're gonna see the world different and differently and they're going to occasionally have very strange questions so far and that isn't a problem for me I can work with that
off with you
now understand the Playbook and understand where deviate that sort of thing and so if you thinking about these Olympic athletes that are out there trying to change the world and are highly ambitious the difference between number one and number 20 is actually fractionally small do you what's the sense that you have that what happens differently for that number one person because that's the that's the business that we're in right we're looking for that monster outlier
and
it's actually one of the few days it's either your outrageously really get up women aged like and I mean outrageous and it looks like I was like we were worried about that one that I should say I have never seen somebody who's next
they are either extraordinary extraordinary and that stands for our thinking about another model that sometimes works with the compounding just a rate of learning across many things and you know it's a small gains times during a year or two years it's actually one of the hardest things to do because ultimately doing the founder of specially for Angel investment is for jobs now I'm going to this particular ball today what's important going to be like
Ten years and that's what reading worth question. I understand you're looking for sustained rate of growth. But sometimes we have to make a decision. You don't have a lot of Three Sisters picture you without their hard made a judgment call on the 20 minute 40 minutes 60 minutes with a local rate of growth over the next 10 years. You're applying a line on one data point.
You are the last way you want to try to do that is to go look at you on today and try to retrofit today's meal is not selected. Whoever you're trying to find today is neither a real on the rocks look like what they do today when they were 22 and what you're really trying to do is find out someone who looks like the 22 or 24 year olds budget not
the 40 year old when the compounding rate of
growth exactly. So that's that's the most that's the other thing is
either they're not be single best in the world at something mention right away. They have some compounding rate of growth that looks absurd and then if you know you work with them over 5 or 10 years, you just don't want for the ride and get to watch this amazing.
Well, I think it's very well articulated as always Keith and I really appreciate you spending time with us as a great day today and thank you so much. All right absolute pleasure. Yeah. Yeah. I will. See you soon.
