The Art of Scaling with Reid Hoffman (Greylock) | Disrupt SF (Day 2)
7:20PM Sep 6, 2018
Our next guest really doesn't need an introduction. I'm sure that all of us are familiar with them or at the very least have used a product that he has touched. His name is Reid Hoffman, founder of LinkedIn and now partner, Greylock. Please welcome to the stage. Reid Hoffman. And our moderator. Matthew panzarino. Yeah.
Oh, right. Yes. All right. packed house. Good. Welcome. Reid.
Great to be here.
Thank you for coming. So you obviously investor for many years co founder of LinkedIn and now you're the author with Chris Yeh, of this book, Blitz scaling. So could you just off the top to set the scene for us and what do you define as Blitz scaling
Blitz scaling is prioritizing speed over efficiency in an environment of uncertainty in projects, building companies deploying technologies, etc. And what that fundamentally means it's a compact definition is that actually, in fact, what matters is when is the is the speed at which you get the scale, right? The we're now in an age where the businesses survive and thrive or the quickest innovation matters when it gets to scale. And so the secret of Silicon Valley and actually a bunch of areas in China, is that how do you get to scale very quickly and very powerfully, and how do you make the decisions to win the poor on the gas and then how do you make it happen?
Okay, one one sort of common lament among entrepreneurs is that the tech giants have sort of suck the air out of the industry and that it's very difficult to achieve scale quickly when your competitor can fast follow or outright copy you or sort of undercut your business. So what is your advice to people looking to cut into something that may seem tangent to market but that may easily become a core attention of one of the eyes of Sauron that are already existing
Well, there's our First Lord of the Rings reference.
So I think that like there is with large companies, if you try to steer right into them, you get difficult competition. Someone said to you, I'm, I have a new search startup, right? I want to either do it on desktop or mobile. And I my new search thing was like, Well, how are you going to get to market? How are you going to get to scale? These will be central questions in terms of what you're trying to do now.
But I think that all companies including large ones, have a limited number lenses of focus. And because we have, you know, five giant tech companies that gives a lot of space for startups. So I tend to be pretty sympathetic to the space and areas in which startups can go I think having five and seven and then 10 large tech companies actually creates more space and room for innovation it politically also when the tech companies the large companies themselves are competing with each other so but the challenge is always is when you're trying to get
Figuring out Blitz scale, you have to figure out how do I really accelerate customer adoption? How do I actually get a whole bunch of customers? And one of the things I think we want as a society is we want to make sure that when we get new platforms, like move from the internet to mobile, that the platforms also enable that because I think we have still yet to see a lot of the interesting companies coming out of mobile because the platforms are not quite as open as the internet.
Okay. And do you think Chinese companies have a genuine advantage in that area with scaling over, let's say, a company based in the US?
Well, there's a bunch of things they do Blitz scaling a little differently than then we do here in the US in Silicon Valley.
They have advantages of a lot more engineers, they have advantages of a lot of markets and areas for growth. They're even doing Blitz scaling and things like chicken farms and other kinds of things, because they're building out all of this new infrastructure from the very beginning. And so they're applying it and then you always get the
Technology leap flock, right. So like, for example, there's a number of countries that have much better wireless and video wire, because let's go, let's go straight to wireless. So there's a number of different advantages that China has in this regard. There's also a number of advantages that are present here in Silicon Valley depth of tech, the the kind of how the platforms you know, kind of thinking about building platforms and how do those platforms play across the technology so I think it's not a they have the advantages or we have the advantages it's there's some strengths here and there's some strengths here
okay. When you were writing the book and you increase reading the book was the most surprising case study you came across
surprising. It's funny, it's always the question I'm least are good at. Like, what's your favorite ice cream? What's your right do you like the most x? It's like, No, that was good. That was good. That was good.
I'd say that the case study that probably you know I think to some degree the reason why we decided to open with it and was obviously when I was a participant in was the Airbnb Wimdu one and we did that because that was the one that had the right drama right the kind of the right like understanding how this plays and it was a question of okay you got this startup that still trying to figure out should it really start hitting the gas and going acceleration is doing come that classical wisdom of you know measuring its cash flow really carefully growing the measuring product market fit iterating and testing and all of a sudden that competitor comes in says, Okay, we've got more money than you've ever raised Europe's really important market. We're planning on killing you here unless you buy us for a large percentage, even though we've just started and what do you do about that? And the answer part of the reason why it says okay, we're going to blitz scale ourselves, we're not actually going to buy that we're going to actually start our acceleration curve and then we're going to gear up the organization and capital so do and even though I was there so it wasn't surprising because I knew it was the most dramatic right which is one of the reasons we decided to open the book that way.
And when when they come, obviously, since you were there, what was the was the decision? Like? Did it feel like a relief to go like, Hey, this is the way we're going to go, we're not going to spend the money on the existing company, we're going to put the same amount of money or more into, into blowing it up, or was it the moment of anxiety
will like, so one of the things I thought I say about startups, you throw us off a cliff and assemble an airplane on the way down and the whole thing's a lot of anxiety. So definitely was anxiety because it was kind of a question of, we're making an existential decision here. And part of it is not just, you know, like, okay, we decided to compete. We, we, we, we,
we don't succeed in competing, there's a big problem, but also say, for example, we do this integration and then the integration kills us because the culture of this integration actually completely tanks and you know, this very special cause beyond the money. Yes, exactly. So it's one of those choices of which you get a number in the startup game and a number in the Blitz scaling game of I'm making this this at absolute speed, and it could be life or death.
So you've mentioned like one of the early stages of that you refer to and hyper scale processes, a sort of the arena of chaos, right? Like controlled or leveraged chaos. Do you think that that period of initial chaos has repercussions down the line that could be could be untoward or it could be like you should be wary of them.
So one of the things that we one of the things that we have a chapter in the book called responsible Blitz scaling and part of it is do Blitz scaling right right, not just right from a succeed when the market scale fast be the first to scale but also from the risks that you're taking that might be risk for the users might be risks for employees might be risk for society. And so what you should do is you should ask yourself these questions about like, well, which risk am I doing, if it has a huge impact, like a life or death thing for customers, or if it has a systemic one that you can see, then you should actually try to address that early and try to address it along with it. Because those problems can actually, in fact, still kill you. And they can kill other people. In some cases, that can be a real problem
right? Like, so it's like a situation with Theranos for instance, that certainly absolutely falls under if you just want to look at it clinically, the category of like, scale at all costs, you know, win at all costs, etc. Do whatever it takes to build a big company, or at least build a company that a lot of people will give a lot of money to. But certainly, we're taking people's lives in head in their hands.
Exactly. So, so part of being part of Blitz scaling, right, it's not just winning, but but winning and being a hero and winning like doing something that's actually really, really good for the world. So you need to ask those questions and you need to start addressing them early, not just later. Now, one of the things that happens is as you scale some of the times your vision changes your responsibilities change. You know, one of the things that, you know, kind of we argue for is that as you get larger, you start investing more resources and understanding the risks and trying to address them. Because, you know, sometimes when you're 20% company, you're just trying to get established, you have, you know, Friday nights and Saturday. So think about, like, what the risks are, because you're really trying to run hard, but as you get bigger, your responsibilities and your investment in your responsibility should also get bigger.
So one of the levels of scale that you referred to in the book is like nation scale, right? So this is when, you know, sort of peak scale, you're affecting things on a nationwide level, for instance, Facebook, Twitter, you know, Google, many of these companies obviously fit that bill. So we've seen Facebook and Twitter, for instance, yesterday being questioned about, you know, how they're handling fairness on their platform to various contributors.
Do you think that there were the attitudes early on there could have been benefited from additional thoughts about responsibility or were you think that there's a scenario where you don't know how big your company is going to get, and you can't be blamed for, for not considering those issues early on.
So I think that the key thing is the companies in order to succeed and competition is global, right? So the question is, social platforms are not just Twitter and Facebook here, but we chat and other places. And so you do need to get to scale. And there's a, it's enormously difficult, right? So people are really focused on it. Many, many of these companies fail. So what you should do is you should think about, well, which risks can i reasonably see from here, and I try to address them. Now, the question about as, you know, kind of Twitter and Facebook shift from, hey, we got this cool messaging thing and people are adopting it or giving voices to a lot of people who didn't have voices before. We're making the world more open and connected. All of this stuff is great. You could see why you wouldn't actually draw a straight line from that too. Oh, and then foreign governments are going to try to use us to hack elections right like that. You just wouldn't see that like, you know
I think people will now see it now
and then and then responsibly acting against it now. So in as much as the question is, what would you have seen that earlier? No, but you see it and then you start adopting it. And that's why the responsibilities change it kind of different levels of scale.
Now, I think one of the questions that's also buried in your question, is this, this notion of, well, how do we get the kind of the question of what is the right speech and Silicon Valley companies are tended to go let's try to to make it as broad and inclusive as possible, right? So yes, we get rid of you know, because we're doing some editing we get rid of child porn and get a terrorism will get hate speech or violence speech that we see, but we try to not be the arbiters, right? Because that gets into this, this this area was like, Oh, you're censoring X. You're censoring Y you're censoring Z. And that has been the entire kind of initial history, but this is putting the companies in a really awkward place because you have
one set of folks saying, we'll look you're allowing these people come in state propaganda, do misleading truth, etc, etc. You should be doing something about that. And then you have the other side saying, oh, you're censoring you're bringing our viewpoints off the system. And so we really needed some kind of a place where the society has the kind of moral authority say, Well, this is what in the New World, this range of freedom of speech looks like. It isn't that we're asking the tech companies to establish that, but we're articulating and in some way that we say, this is what we think the range of the speeches and so you can say, Okay, well, this kind of, of manipulative speech, that's okay. And that's, that's the thing, we as a society want off these platforms. And that's the dialogue that needs to happen here. Well, before any of these other dialogue.
Yeah. And, I mean, the dialogue thing is, it brings up you know, yesterday, they, after the testimony, the DOJ basically said and they released they'd send a statement testing that they were you know, considering I me get the the wording right.
Considering convincing state convening the state attorneys general to discuss concerns, these companies were hurting competition and intentionally stifling the free exchange of ideas. Which sounds a lot like we're going to regulate the shit out of you. Right? So, are they a info regulation? And then be should they be?
So I think the thing that first has to start is the dialogue about what the outcomes and such things should be. So it's dialogue before talking about the regulation. It's like, what our objectives what are the things we're trying to measure? What are the things we're trying to accomplish? So obviously, one thing we're trying to accomplish is not having foreign interference in democratic elections. You know, another thing might be as well we're trying to actually, in fact, see that we have more ability to see and recognize truth, how do we how do we get the Oh yeah, these are these are efforts to say, but we did an investigation, we cross checked it. We actually looked at the facts we did the things that you know, good journalists do and we want more of that.
We want that that reflected in some way. Like those kinds of things make sense to me? Well, first, we have to have a conversation about that before we have a conversation about is Regulation a good thing? Now when most people think about regulation, they think about how do you stop or slow down things? Right? I actually think most of the solutions, the kinds of problems, I was just talking about our how do we advance tech? How do we how do we shape it as we're going forward? How do we build the things that configure we want versus part for example, how do we roll back now in session specific thing, you know, I, I look at it as kind of political hackery right i think it's kind of in the posturing yes posturing you know where we're trying to
you know, kind of position for maximum allow anything to be set on the conservative side as possible
right arguing for a TV time equal TV time kind of thing or social network
that's that's that's how I personally read the session stuff and you know, I think you know, part of you know what, when I When I see the administration being more concerned with truth, not things like truth isn't truth or other kinds of idiotic statements, then I will actually be more sympathetic to, oh, we actually have some genuine concerns about what are the information flows
That establish whether or not you can have a good faith conversation first,
what do you think about this whole peak Valley situation? So over the past week or so, there's been some conversation about whether or not we're at peak Valley, aka we've reached the pinnacle of, I guess, volume or momentum of innovation coming out of Silicon Valley, and now it's elsewhere. And it will only decline from now on.
So I'm a huge believer in trying to create as many places of innovation as possible. It's part of the reason I do the massive scale broadcast is part of reason I write the book, but scaling it's part of the reasons I'm an investor in Rise of the rest. There's also the things where I think it's very, very good for us as Americans and us as world citizens to actually have as many of these places possible now.
As you know, this is not the first time there's been a peak value argument like this. There's always Oh, there every two months. Yes, right. Houses are too expensive, too congested, don't see enough specific things that are going on that strike me what the next generation is,
I think that we're still going to see amazing things and the velocity of Silicon Valley is going to still continue. That doesn't take away from the fact that could there can be great other places that are also emerging and doing great things. We want those that that makes us all better for that to happen. But so for example, the specific argument tends to be around expense Well, it isn't actually really expense. That's the important issue. It's the it's the successful high outcomes, it's the building the new dragons, the new unicorns, the new amazing companies, and I think part of the reason why, you know, people kind of the mean comes back because they say, well, we're not really sure is it really AI or crypto or augmented reality or virtual reality or precision medicine or synthetic biology? Like we're not really sure which of those that is and we
don't really see we see the current ones, you know, Uber dar was just here, you know, Airbnb we see the current ones doing something, we're not really sure what the next ones are. So maybe it's now peak Valley. Well, that's been said many times. My own personal belief is we have a lot of great things to come.
Yeah, I mean, the, you know, more places for innovation is never going to be a bad thing, especially because the uniformity of things that coming out of the valley is sometimes jury just as somebody who sees it all, you know, you see great bright spots, but then you see a lot of stuff that field is just very similar. So, you know,
we're all better off of
Do you so at least we got a few minutes. Let me shift gears really quickly. I did want to talk about autonomy really quickly. So I know there's something you think about but I how far are we away from true autonomy and vehicles do you think
well, there are autonomous vehicles driving around and Phoenix right now? Yes, exactly. So like if you say and appear like how far away well today. Right. You know, yesterday last week last, let's say at at Blitz scale, yes. Well, I think the key thing there is actually, how do you get it so that you begin to say, we have scale manufacturing and a ton of them. And we have the right trade off between safety and efficiency. You know, my guess would probably be somewhere around 10 to 20 years. And there's a big range there
Are you factoring in redesigning cities around vehicles?
Some and by the way, I think it'll be unevenly adopted through cities. I think one of the things that would be smart for city planners is to say, look, we want this it'll make it'll reconfigure space, reconfigure parking lots, reconfigure efficiency, so we want to make ourselves amenable to this and this is something we want to attract people doing here and reconfiguring for but you know, some cities will obviously go Okay, well, we have more space, we were naturally configurable. We can actually do the, you know, take take some of the risks on on the development side of it, and so we may be the first adopters to it. That's part of I think, what's going on in Phoenix. But I think it's going to be,
I think its scale. You know, there's some vehicles you might see even five to seven years, but I think it's really 10 to 20.
Yeah. I mean, there's there's also some argument that the, the real answer whatever to the problem, especially in dense urban environments is autonomous public transportation coupled with some sort of last mile, you know, still like scooters or something like that, which certainly would be a different roll of the dice. Then let's reconfigure cities around the same amount of cars. But it's all drive themselves.
Yes. And I think shaping that's broadly would be a smart space design, which you say, look, all these very big vehicles, most of them tend to park at the edges and then the smaller vehicles around that now what part of what you need to do them there is that still a major reconfiguration because you'd want to be very careful what which cars you had on the inside what the safety coefficient would be right? Because like, you know, cars and scooters that's potentially you know human danger hazardous
Of course yeah cool well look I had which had a lot more time but the books excellent I should all check it out if you have any interest in companies getting larger responsibly as well which is a huge concern of mine so thank you so much for coming we appreciate it
pleasure and an honor