Reid Hoffman: Better Decisions, Fewer Mistakes

Few figures have shaped the way we think about business over the past 20 years more than Reid Hoffman. The co-founder of LinkedIn and former PayPal executive is also a wildly successful venture capitalist, author and podcaster, but he didn’t get to his place as a Silicon Valley giant without making plenty of crucial decisions. On this episode Hoffman discusses lessons learned from decades spent as a hands-on operator and investor, including what he knows about scaling that others miss, the three principles of decision making, how to constantly evolve your learning pattern, and why the best leaders adapt to the crisis at hand. Hoffman is perhaps best known for co-founding the professional networking site LinkedIn, which he started in 2003 and later sold for a reported $26.2 billion to Microsoft in 2016. Prior to founding LinkedIn, Hoffman was one of the first employees at PayPal, where he served as an executive vice president. He is also a partner at the venture capital firm Greylock Partners, an investor in Airbnb, the author of a series of successful business books including Masters of Scale, and the host of the podcast of the same name. Want to hear the entire episode with Reid Hoffman? Become a member today! Members get early access, hand-edited transcripts, member-only episodes, and so much more. Learn more here: https://fs.blog/membership/ Every Sunday our Brain Food newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/ Follow Shane on Twitter at: https://twitter.com/ShaneAParrish Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  We go through life making decisions. Should we date person X or Y or get married to them? Should we stay here or should we move? What job should we choose? What college should we choose? One of the things that I think is a general thing for all, every professional, and then especially all leaders to really orient on is how do you make decisions fast and well is one of the central things you're doing when you're doing maybe all jobs, certainly all white collar jobs, certainly all white collar leadership jobs.

• 0:49Shane Parrish?

  Welcome to the Knowledge Project Podcast. I'm your host, Shane Parrish. The goal of this show is to master the best what other people have already figured out. To do that, I sit down with people at the top of their game to uncover the useful lessons you can learn and apply in life and business. If you're listening to this, you're missing out. If you'd like special member only episodes, this full episode, access before anyone else, transcripts and other member only content, you can join at fs.blog/membership. Check out the show notes for a link. Today, I'm speaking with Reid Hoffman. Reid is a partner at Greylock, the co-founder of LinkedIn, and is widely considered to be one of the best business strategists around.

• 1:32Shane Parrish?

  Reid is on the board of Microsoft and was on the board of Airbnb for a decade. I wanted to talk to Reid because it's rare to get an opportunity to talk to someone in detail who is both a hands-on operator, investor and director. We talk about a lot of things, including the rituals of good board meetings, the principles of decision-making, namely speed, simplicity and empowerment, frameworks to narrow options, how he thinks about opportunity cost, lessons about scaling that other people miss, understanding people's alpha tendencies, how he's learned to control his impulses and a lot more. It's time to listen and learn.

• 2:18Shane Parrish?

  I think the place that I want to start is you've been involved in some of the biggest sort of like scaling companies that we know of today, either through investing like Airbnb, hands-on sort of like PayPal and LinkedIn. What have you learned about scaling that most people miss?

• 2:37Speaker 00

  I'd say the classic thing is how you have to be constantly evolving your learning pattern. That what got you here won't get you there. And it's across a wide variety of fronts. It might very well be in, well, certainly in how you organize your management. And so, for example, you grow from everybody being an agent, an actor, you know, doing direct work to a few people doing management and direct work, to some people just managing, to people who are managing managers. And as you get through different levels of scale, and each of those changes a whole bunch of things within the organization. It changes, you know, communications and reporting structures. It changes nimbleness. It changes whether

• 3:19Speaker 00

  or not you're single-threaded or multi-threaded, you know, so all these things. But it's like, it's what got you here won't necessarily get you there. You need to be learning the new game. That was the internal management one. But in addition to the internal management, you begin to look at things like, well, okay, well, what is your go-to-market strategy? Are you, are you a sales-based? Are you internal sales, external sales? Are you a channel-oriented? You know, if you're doing a sales force and growing the sales force, how does that work? If you're getting to multi-threaded and multi-products, how does that work? You know, all of these things go into kind of like, you're constantly learning as individuals, as leaders, but

• 3:58Speaker 00

  also as organizations. And that's probably the thing that is the, the most central thing. Actually, one other thing I would say is, The part of growing that kind of learning curve is not just who you hire and who you bring into the organization. Obviously, that's critically important, but also how do you build the network around you? Like, for example, when you think about financing, financing is a way to bring in networks of support and knowledge that those networks can can expose you to, you know, key learnings, key ways to ask questions, key people to collaborate with, key people to hire, and that that's actually part of what you're doing when you're doing things like financings

• 4:39Speaker 00

  or even necessarily what kinds of conferences you might be choosing to go to. Those that kind of learning curve and the fact that you you may have to unlearn and relearn in order to do something is probably, you know, the kind of the key foundation by which a lot of other things in scaling is built.

• 4:58Shane Parrish?

  Are there sort of common mistakes that you see CEOs of the companies that you're invested in now tend to try to make or make repeatedly that you wish everybody would sort of learn these lessons from somebody else rather than firsthand?

• 5:15Speaker 00

  The probably the most common mistake is where do you get the cadence of hiring? And the fact that you need to be hiring and adjusting. So like usually when you're moving very quickly and changing your level of scale with a number of employees is kind of a tempo in this. Usually you're going to need to hire in some external people in the senior roles in order to really make that work. And that's usually pretty uncomfortable and you have to make this decision about like, well, what's the right level of scale? Person, what experience do they need to be bringing in? How do I manage internally, like, you know, the person who used to be my head of product or my head of engineering?

• 6:00Speaker 00

  Now, I hope is still working here and is still really capable, but now may no longer be the head of product or engineering. And how do you navigate that? And so that tends to make everyone. Much slower, much less, you know, how do you trade up on that? People tend to naturally want to promote from within versus higher. And even though you might have very good people and very knowledgeable people, there's a bunch of legitimate reasons why you want to promote within. They know your particular culture, they know your particular way of playing the game. You have an efficiency of how you talk to each other in it. But like, you know, for example, the people who are religious about like, well, we only promote from within.

• 6:42Speaker 00

  You know, then have major blind spots and they're not learning from the really amazing people that can be getting. Cause there's many, many more smart people and diversity of experience outside your organization. Now, if you're not also from promoting from within, then, you know, that creates a different kind of cultural malfunction. And so the usual answer is you need to be doing some of both. And if you're not doing some of both, that can be a challenge. And that's kind of gives you a sense of, you know, like what kinds of errors could be happening here. It's like, I'm only doing this or I'm only doing that. And you actually have to be learning it as the, as the game changes.

• 7:17Shane Parrish?

  And what about scaling yourself? I mean, I think I read an article in prep for this that, um, you know, I think it was really old, but it was about a decade ago. And you said you were operating at 60% effectiveness. What have you done to bridge the gap? How do we scale ourselves?

• 7:32Speaker 00

  You know, to some degree, the answer is easy and the execution is hard. Easy is you try to shift things you're doing to being covered by the people. It's like you scale organization, you hire people, they have, they now have new responsibilities at work. So, you know, I grow my own organizations to help me execute well. So I, you know, kind of recently just did a whole bunch of, of, of, of Dolly image and NFT stuff. And, you know, without a, you know, really excellent team of six people who are frankly doing, you know, putting more hours in. Each of them that I was into the thing, we wouldn't have been able to get such an amazing

• 8:14Speaker 00

  set of projects out. And so that, you know, kind of going through people and, you know, kind of growing the organization. Another one is you kind of look at, you know, what are the, you know, skills you hone and do? And how are you learning? How are you making decisions? Well, how do you operate, you know, better, faster? And, you know, what are the things you need to be doing? And obviously, in combination with the first one, in terms of delegation and collaboration. And then, of course, what tools do you use? You know, for example, you know, one of the things that I do in, you know, kind of Microsoft OneNote is I have a, a list of all of the people that I interface with, that I keep a running agenda with. And so like, for example, say, I'm talking with you and it occurs to

• 8:59Speaker 00

  me that there's a really interesting way of thinking about kind of what are key things for AI companies of the future to do. I might put a note in to my, you know, Sacha and Adela list and say, okay, here's something, here's something I should talk to him about. Or if I encounter a company that I think he should pay attention to, I'll put that in the list. And then that allows me, you know, by using this tool and, and the kind of a, because by the way, again, simple as well as speed and empowerment, it allows me to, to operationalize very well, you know, kind of how do I play a strongly beneficial catalytic network agent?

• 9:41Speaker 00

  And don't just rely upon, you know, my memory as a way of doing this.

• 9:45Shane Parrish?

  Well, I think that's super powerful, right? Getting it out of your head. And so you don't have all these threads in your monkey mind, trying to remember all these things and just having a system of organization. I think Jamie Dimon does the one page thing, where he just writes everything down on one page of paper. And he puts it in his pocket. And that's how he sort of keep tracks of what everybody owes him.

• 10:05Speaker 00

  Yep, that's the, the, the writing is really important. Like, one of the things that, the funny thing is, is people will frequently say like, Amazon is a six page written report and, and Microsoft is a PowerPoint and so forth. And I actually think the answer is. These are all tools and you should use all of them, right? Sometimes you should write like a six pager on something. Sometimes you should write a PowerPoint. Sometimes you should just have a list of bullets, right? Uh, and it depends on, you know, what the, what the cost return is and what the ritual should be.

• 10:40Shane Parrish?

  Uh, go deeper on that a little bit. When, when do you think PowerPoint's more effective? And when do you think sort of like writing it out? Uh, like, can you tie those things together for us?

• 10:48Speaker 00

  So I think it's, what's, what's the level of depth? That you should invest in creating detailed media objects to accomplish your goal. And like when you're writing, you might write in part because you have to have thought through it in depth yourself. It's generally speaking, you know, you'll find when you're writing,

• 11:14Speaker 00

  you're kind of, you know, you've got your hands deep in it. You're thinking about it, questions will occur to you. As you try to phrase something, you realize that it may be more murky or some undiscovered decisions or risks in what you're doing. So that's one part. Another part of it is you want detailed pickup by other people. So of course, one of the reasons why you tend to, uh, have, you know, kind of a, you know, writing and reading of things is because the reading is someone can read it in a lot of depth and, and kind of pick something up. So that would be why you get to, you know, should you write one page, six pages? You know, 50 pages is the way of doing it. But by the way, of course, writing takes a whole bunch of time.

• 11:55Speaker 00

  And if you said, hey, I'm going to like, for example, write down everything that I'm going to do in depth, then you're going to really slow down and not do a number of things that you probably need to do. So then you go, well, when should I, when should you use PowerPoint? Well, probably if what you're trying to do is get it like an, an overview of a broad area, trying to get a, uh, quickly get to, it's a faster process, a moderate speed, you know, kind of moderate understanding of things. So you can make a decision and execute on something. It's a good way to, to formulate a, if what you're trying to do is, for example, Get a quick conversation going where you're soliciting

• 12:37Speaker 00

  FIDAC opinion, knowledge, data from a number of people. A PowerPoint can lead you through that. And then if you're doing something like, for example, what I was, you know, what I love my CEOs to do in board meetings, which is to kind of say, what's top of mind, you might just have a bullet list. Because the real, most important thing there is to just very quickly share what's most current in the CEO's head on, you know, opportunities, risks, concerns, challenges. And that the speed of what is it right now is one of the most important characteristics. So that's how you kind of look through

• 13:21Speaker 00

  the kind of three of these as a way to which problems do you apply to which of these? And I'm sure there's others too, but like, you know, each of these, you know, levels of depth in, in artifact that you're creating to guide communication and decisions.

• 13:39Shane Parrish?

  In the past, you've said that you, and I'm going to quote, root for better angels on people. Talk to me about that.

• 13:45Speaker 00

  Well, what you want is, and this is part of the reason why when, you know, the, the June Cohen, who's the former executive producer of TED, said, hey, and is the producer, the executive producer and CEO of, of Masters of Scale, said, hey, we're, let's turn the tables, let's interview you. The episode for me became, um, make everyone the hero of their own story. And I think that people are really have tons of potential that they usually don't realize, uh, potential in capabilities, potential in, in kind of quality of

• 14:25Speaker 00

  person and character in terms of being able to, you know, kind of make the world better and a better place, be more compassionate, be more, I think there's a ton of potential there across all people. And so when you say, what are you trying to do in the world generally, in projects that you're leading, in impact that you're trying to have and people around you, it's, you're trying to help them.

• 14:50Speaker 00

  You're trying to help people realize more of that potential. And so that's kind of rooting for their better angels. So like, for example, you know, a very frequent conversation topic I'll have

• 15:01Speaker 00

  is people say, well, if they're doing that, that's probably because they're like selfish and narcissistic. And by the way, this is where people are complicated. The answer is, yeah, there's probably some selfishness and narcissism there. But the story they're telling themselves probably isn't a narcissistic. They're probably telling themselves, you know, this is better for the world. This is the right project. It's like when you have two executives who are competing for which risks should an organization take? Which project should resources be put into? They're not telling themselves, I'm only competing because if it puts it into mine, then I have a possibility of promotion. I have a possibility. They actually genuinely believe theirs is the right one. That's part of the reason they've been working on it.

• 15:44Speaker 00

  That's part of the reason why they've been refining it, putting their, you know, massive number of hours into it. And so part of what you want to do is you want to give people the opportunity, as much of an opportunity as you can to be their better selves, to be, to where they're realizing that, you know, kind of rising above, you know, kind of a simple narcissism or a simple very narrow self-interest and making decisions that are better for the group because ultimately, in many cases, this also helps them become better people that helps them become better leaders. And so you want to be creating that possibility and that realization of potential as much as you can. And that's part of, you know, rooting for their better angels.

• 16:28Shane Parrish?

  Is there a story that comes to mind when you think of make everyone the hero of their own story in terms of how it's amplified the effectiveness of that person?

• 16:37Speaker 00

  You know, probably.

• 16:40Speaker 00

  You know, he- here would be one, which is so, you know, I brought Jeff Weiner in to be the CEO because Jeff's one of the great scaling leaders of our, you know, of our, kind of our era and in the technology space and, and Jeff knows a whole bunch of things about scaling organizations that I, you know, simply learned from. It's one of the things that in general, you know, try to work with people, even employees, who you learn from. Because if you're, if you're hitting that, that good of a bar, you're, you're at least in a good space. And yet, uh, one of the things that Jeff came to me and said, hey, I'm finding your co-founder,

• 17:21Speaker 00

  Alan Blue, to be disruptive. He's not fitting in the, the scheme which I'm setting up. And, you know, it's up to me to scale. And so I said, well, look, I think it's that you don't yet realize both Alan's strengths and then the value of having, you know, kind of founders still in the mix. Um, and so I want you to trust me on this. And I want you to give Alan kind of a, a bit of a minister with a kind of a, a diversified or broad or, you know, kind of a fragmented portfolio and see what you get from it and give it some real time in order to do that. Uh, and if, you know, six months from now, you come back and say, look, this is really just still not working, then, then we can have another conversation.

• 18:06Speaker 00

  But I want you to do that. And this is part of, you know, and then, uh, that was kind of giving, you know, Alan the chance to go and kind of show what he could do in this new organization that was different and than the kind of scaling organism that Jeff was trying to create. And, you know, about three or four months later, Jeff came back to me and said, you were totally right. Like he's been really instrumental in, in creating some of the frames of thinking about like LinkedIn as marketplaces and what like some of the metrics would be for success. And several of the different leaders in product and engineering are finding him in a, an essential person to be talking to in the strategy. And so, you know, I'm really glad you pushed me on this, um, in order to do that. And, you know,

• 18:49Speaker 00

  and by the way, I, I offer this as one, you know, Jeff also taught me a ton too. So this is not, this is, this is a, an instance, but that's an instance where it's like, look, give. Uh, Alan and Alan, by the way, still works at LinkedIn and is is facilitating everything from like the LinkedIn Cities Project, which is how does LinkedIn help cities, um, you know, kind of economically plan for the benefit of of the health of the city and the citizenry, like which industries are growing and which which job functions are growing and what should the city be doing in order to help that. And he's still there doing it. And that's actually, in fact, one of the things that's really, you know, kind of important when you get to this longevity. And this is part of having, uh, you know, done the right enablement

• 19:34Speaker 00

  so that Alan could show the kinds of things he could do within this new scaling organism that Jeff was building.

• 19:42Shane Parrish?

  Does that relate to people's and to borrow another term that you've used previously, alpha tendencies? And if so, how so? Talk to me about understanding someone's alpha tendencies.

• 19:52Speaker 00

  So we're, we're tribal creatures. We're pack animals, you know, Aristotle, we're citizens of the polis. Polis is this really interesting word. It comes from, it has all these things. It's political, it's police, it's polite, right? All of these things kind of come into the, this, this, that we're, that we're creatures of the city together. And part of that is that people have different, um, leadership instincts about like, I must be in charge. And that's kind of your alpha tendencies. And, and sometimes people have like, just like, I must be in charge of everything. Sometimes they're, I must be in charge of this important thing. And so those are kind of alpha tendencies. And one of the things

• 20:35Speaker 00

  that when you're composing an organization, understanding where alpha tendencies are and how they will cause someone to behave and not behave is really important because, by the way, if you put someone who doesn't have really strong alpha tendencies in charge of a project, that person, generally speaking, won't drive the project as hard. That might be a good thing, right? But generally speaking, you know, like, for example, the only people who become CEOs have very strong alpha tendencies. The only people who run for president have very strong alpha tendencies, et cetera, because, you know, there's so much, uh, difficulty going and functioning in those jobs. You have to have that as kind of a driver. And

• 21:16Speaker 00

  so then you try to understand that as you compose your teams, as you compose your organizations, as you scale your organizations. And, you know, some of that is very strongly.

• 21:27Speaker 00

  Virtuists, like as an investor, I look for people who have very strong, big ambitions. Because, you know, doing these startup companies is so hard, you have to have that, you know, willingness to lose an arm in order to succeed, kind of thing. And, you know, wanting to be the person who built this really big thing. But on the other hand, you also look at it if you're like, for example, someone has a really strong alpha tendencies and they're not going to like working for the person they're working for, that could be disruptive.

• 22:00Speaker 00

  And then sometimes you're in a case where I call it repressed alpha, which is you, the person doesn't realize their own alpha tendencies and it kind of comes out in various forms of passive aggressive. And then you have to manage that too. And that's, that's one of the reasons I find it's a useful lens in thinking about human nature, people, organizational composition, you know, how ecosystems of people work together.

• 22:25Shane Parrish?

  It, it sounds sort of very biologically driven, right? Like we all have biological sort of programming to fit somewhere into a hierarchy and status and how we see ourselves and how driven we are by that.

• 22:37Speaker 00

  Yes, and I don't know if it's, you know, it may be too simple of a variable to easily map to, you know, kind of like, I don't think we'll discover it necessarily be interesting, you know, if we discovered a certain set of genes or, or expressions and phenotypes that led to being more alpha, but I think it's, you know, obviously, you know, part of what happens is how do you respond to circumstances you discover in your childhood and other circumstances? How do your adults model around you and all the rest? But yes, I do think there is a, it, it's because we're, you know, living beings, biological beings that, that, that naturally ties to this.

• 23:13Shane Parrish?

  You've had over a thousand board meetings between Microsoft, Airbnb, LinkedIn, PayPal and more. And one thing that you said recently is that successful board meetings don't just happen by accident. What are the rituals of these meetings that make them successful?

• 23:29Speaker 00

  Well, it's a really good question in part because, you know, I actually think most people don't realize how boards are more of a kind of an apprenticeship, kind of professional gig versus anything else. And understanding how to do a board well only comes with a lot of repeat practice, which mostly, you know, very few professions, Venture Capital is one of the few that does. The kinds of things that I think are very important for a good board meeting are that you've got a combination of the governance questions, which is roughly is the company kind of on the right track relative to its position and opportunities and everything

• 24:13Speaker 00

  else and and is, you know, kind of operating at the level of of excellence that it can relative to its industry and talent and all the rest. And then the other one is, how do you help the company? Now, as you get more to a public company, it becomes more governance and and somewhat less help, partially because, you know, like when you get on a board of something like Microsoft, you know, it's a huge company. And while I, you know, personally will go meet with product groups and do other things and, you know, kind of weigh in on certain kind of technical technology, strategy decisions, completely in service to Satya, you know, the governance is a higher function. Now, in governance, you need to

• 24:54Speaker 00

  be able to understand what is the actual circumstance. Like, too often, people will be dependent upon the press, like, does the press good or bad? And actually, that that maybe is only, at best, very lightly correlated with whether the company is doing well or poorly. It might be having bad press, but actually, the company is doing what it should be doing and all the rest, just because of the circumstance. The company could be getting great press or or something else and not be doing the right thing as well. So it's like, it's not that. It's kind of the question of, you know, what is it, where is its impact on, you know, society? Where is it relative to competition? Where is it having relative to technology? You know, is the right blend of talent and thinking outside, not just

• 25:37Speaker 00

  inside the company, kind of really important. And all of those kinds of things that get to a good governance thing, which frequently, when people are trying to to simplify this, they go, well, is it a certain percentage of revenue growth, an operating margin or profitability and so on? And those actually, again, are Kind of not necessarily well calibrated with a three, five, 10 year horizon. You know, they, they, they're not zero calibrated, obviously, but, but like, but you're really thinking about was it the three, five and 10 year? And, and this, by the way, begins to get to the more subtle questions about board governance. That most people don't realize is you say, well, we're, we're here for the shareholders. Well, are you here for the day trader shareholders?

• 26:20Speaker 00

  Are you here for the shareholders who are going to be holding for 10 years? Are you going to hold to, are you here for the shareholders who might be buying next year? Right. Like, what's that balance of, and how much risk do these shareholders want to take? Right. Like, are you going to say, hey, we're going to actually put it all on, on double zero and roll the dice because the opportunity is so huge? Or are we govern, governing so that there is very little in the risk category in order to make this work? And so those, those kinds of questions all go into boards, which then get into rituals around. You know, like, how do you identify the risks? What do you, what do you talk about that's top of mind for the CEO? You know, do, do you bring executives in or not? And in what fashion and pattern? How do you talk about the strategy?

• 27:05Speaker 00

  Anyway, that was probably a much longer answer than you were expecting, but it's partially because this well goes very deep.

• 27:11Shane Parrish?

  Not at all. I, I love the nuance and the detail. I actually want to dive in a little bit deeper on that. Two things stood out there. One, you used the word ritual intentionally. What is it about that word? Why did you choose ritual?

• 27:24Speaker 00

  Well, a couple of reasons, maybe three reasons. One is because part of the expectation, kind of like, you know, team play, you know, whether it's basketball or everything else. Is to get into a set of reflexive, you know, kind of play, all our rituals. So that you're aware of, like, for example, it's like, well, we're going to do, we're going to open up every board meeting with kind of a SWOT analysis. Strength, weaknesses, opportunities, threats. And we're going to do an update to where we were last time. And that's what we're always going to make sure that we do, because then we can be well set for that. Could also be the, like for example, one of the rituals that I actually particularly

• 28:06Speaker 00

  like and try to, you know, kind of nudge my, you know, CEO of the various companies I'm on the board of to do is to have a section that's kind of like just revealing what's top of mind. What problems are you thinking about? What strategies or opportunities are you thinking about? What are the things that you're most wrestling with so that we have some sense of both your mind and also how to help? And by the way, that can be much more, too often, people spend too much time preparing for board meetings where the real question is, is the, the, the right balance of cost to reward in governance and helping the company, right? Not, not infinite. And so, so like the CEO thing. And then the, the third is, you know, part of, when I think about the pattern of, of kind of work generally,

• 28:50Speaker 00

  I think rituals is a good format. That's one of the reasons why one of my portfolio companies, Coda, you know, kind of, kind of, it's, it's work the way you want. It's redesign you, it's, it's supposed to having to adopt the workflows that are imposed upon you by your productivity software, design it for you in a very easy way. And that's, you know, design the rituals you want. And so that was, it was kind of all of these combination of things that made me choose the word ritual.

• 29:17Shane Parrish?

  Walk me behind the scenes a little bit. What happened during a crisis at some of these board meetings? Is it standard operations? Is it different? What, what's going on during something like COVID-19 or financial crisis?

• 29:30Speaker 00

  Well, there's a couple of things that are going on in crisis. One is you also, it's a good place where you get a sense of, you know, is the CEO and the management on top of it? So for example, if you walk into a board meeting and, and there's a crisis and you're not presented in a way that's, we're, well, there's a crisis and, and, you know, we're doing a briefing for what the crisis is and kind of what our preliminary responses and thoughts are.

• 29:58Speaker 00

  Uh, what our analysis of the challenges are, then you, you know, have an issue. So if you walk into something and people are like, yeah, COVID pandemic, whatever. You're like, no, no, the whole world's changing because even though maybe in your particular thing, by the way, obviously COVID had some tailwinds for some digital businesses. Cause then when we all had to kind of retreat home and work through our computers, you know, it's everything from obviously, you know, Zoom and Netflix and games all kind of like, you know, suddenly massively increase in the amount of time that they are. But even then you say, okay, got to understand what that is. And you can't necessarily predict that as a new normal forever. That's, that's the form of crisis you always hope for.

• 30:42Speaker 00

  But then there's obviously like, even when you say, well, the business, it hasn't really shown up in my numbers yet, but like industries are collapsing, supply chains are collapsing. Levels of stress with, with society is going through the roof, right? Uncertainty abounds. And so how does that all play? So you, you should have something of a, we've got a, there's, there's a big event. This is how we look at it. This is the questions we're asking. And so part of the thing that you do as a board member is you bring in the, uh, like for example, one of the, I think the personal objectives I always have that I also recommend to the board members is to say, well, make sure that you bring at least one really important question that the company may not be thinking about,

• 31:23Speaker 00

  and bring one new thing from the outside world that could be very helpful to company. And that's kind of the minimum contribution per board meeting. Because if you're not, you know, kind of doing that, then you're not proactively thinking about the company when you're outside. You're not bringing what you can uniquely bring. And so when it gets to crises, you could say, well, like for example, if it's a pandemic, it could be the, we may, we may need to respond much harder earlier. Cause one of the things that's generally good practice, business practice, if you think something is trending in a direction, like a business is trending towards collapsing, you know, cut it off early, right? Like it's part of how you survive and thrive in businesses is to make judgments early on this stuff.

• 32:07Speaker 00

  So you might say that might be the thing, or you might say, actually, in fact, it seems like the world. Is, you know, kind of on fire and blowing up. But actually, in fact, we can, we can navigate the following way to make it into one opportunity. How do you convert the, the business to the new reality? And so like, for example, one of the more delightful microcosms was a restaurant just opening. You think they're hosed. They made it, they turned it into a takeout windows. Right? They went, okay. People are still gonna wanna have good food that they don't have to prepare themselves. They're just not gonna come into the restaurant. So how do we, how do we operationalize for that in a really good way? And, and that kind of pivoting. And that might be another thing you might bring in.

• 32:48Speaker 00

  And so those are the kinds of things that you look at when you're looking at, you know, how to help, you know, kind of both the governance and the help navigation on boards when you encounter things like crises.

• 33:00Shane Parrish?

  Was there a difference between how the companies performed and how CEOs sort of reacted to that initial sort of news about COVID and the world changing? And, and what I'm thinking here is the people that were quick to adopt, my hypothesis would be that they performed better and their companies performed better over the next sort of like 18 months. Whereas people who were slower to adjust to a changing reality or even denying that reality, that would also be a heuristic that it probably didn't perform well. But I'm curious, you have way more aperture into this than I do.

• 33:34Speaker 00

  Cause like part of what you're, you're measuring is how well is someone assessing what the possibilities are? And so, for example, in the early, you know, pandemic was, you know, people were like, oh, this will be a month and it'll be gone. You're like, well, maybe, but by the way, what if it's not? Like, cause part of what you have to do is think about like, what are the possibilities and probabilities? And then navigate to both surviving and thriving in a broad range of those. Now, you can't do for everything. So for example, you say, well, maybe nuclear war is gonna start next week. Well, okay. If, if that's gonna happen, then, you know, you, that, that's not part of our, you know, it's legitimately not anywhere near our scenario planning.

• 34:19Speaker 00

  And so you go, okay. What's the, what's the set of things you need to be doing? And, you know, part of it is also like, where do people look at? You know, kind of like also like one level of crisis is, okay, how will help affect customers? How will affect the revenue? How will affect ongoing operations? By the way, this is one of the things that board members who are on, you know, multiple boards can be helpful on in ways that are spreading of knowledge. Is, you know, so well, in addition to all of that in operations, we also have a, like this is mammothly stressful and disruptive to employees. You know, there's questions around, um, okay, how are they navigating childcare? You know, a bunch of employees usually have families.

• 35:03Speaker 00

  You know, what is the question of a like kind of resetting to that? And then how do you, how do you help do that? So for example, some companies started looking for what are the resources? They could go hire and deploy to help their employees. And then it's like, oh, okay, great. Let's, let's make sure that those resources are in various ways identified and shared across different companies as a way of doing that, as a way of thinking about it, as a way of making it work. Right? And so you get that kind of level of, of additional depth because, you know, you're initially going to think about like, does the business survive? And that obviously affects jobs and all the rest. But then you start thinking about like, well, boy, we now have a, you know, a mental health question that's been amplified for all our employees. So what do we do?

• 35:46Speaker 00

  Well, maybe we should go, you know, engage Lira Health as a way of helping with those kinds of issues too.

• 35:52Shane Parrish?

  One of the things that you, you mentioned earlier was sort of make judgments early. And that relates to three of the principles that you have around decision making, which is sort of speed, simplicity and empowerment. I'm wondering if you can explore this a little bit more in detail with me.

• 36:06Speaker 00

  Yeah. So one of the things, and I'll come, come to the, those three principles. But one of the things that I find. Is useful as a understanding frame for everyone is that I think all companies are in the process of becoming technology companies at different speeds because technology is changing industries. And so there's the obviously like what is usually referred to as technology companies are technology companies that are like redefining the borders of software, reinventing new kinds of technological hardware, et cetera. And then it kind of bleeds back in, but I think even like, like manufacturing companies are becoming technology companies by sensors and, you know, robotic lines and all the

• 36:48Speaker 00

  rest and, and, and, you know, Hollywood, you know, is a technology companies through CGI and streaming and, and distribution. So it's like, it's a general thing. Now, one of the things about technology is it picks up the clock. The technological clock is accelerating decade by decade. And so the, the timeframes in which you need to operate and need to make decision are accelerating. Part of that is like, one of the things that, uh, when I, when I kind of go through the entire world, there's basically two places that embody this fighter pilot terminology called an OODA loop, observe, orient, decide, act. It's how fast you make these decisions through this kind of this, this framework, both as

• 37:33Speaker 00

  individuals in a society. And it's Silicon Valley in China. And I think that's where all technology companies are in the process of happening. And so then you begin to say, whatever your particular frameworks are, um, and you know, there's, there's, there's some very good frameworks and long RACI and DACE and so forth for distributing decisioning within the organization. And that's part of the empowerment side. And then the speed and simplicity parts of it, speed, we've kind of already covered as kind of like one of the things that generally speaking. Making a decision faster is always better, right? Like unless you, you have to evaluate the decision a little bit. Sometimes say, well, an extra X days or whatever, you know, makes it 10% better is worth it on this

• 38:18Speaker 00

  decision for some particular reason. But like, for example, one of the things I learned very early days in PayPal was when I'm making decisions at startup speed, even confronted with very large decisions. Do you buy the company, you know, this company? Do you, do you shut down this division and so forth? You go, what would my decision right now if I wasn't able to take any more time in order to solve this decision? And you go, okay, well, my decision would be X. Then go, okay, well, specifically what I learned or who would I talk to that might change that decision? Cause if you don't actually end up with a good set of answers, then you said, well, let's make the decision now, right? And then when you, when you think, well, maybe I could talk to so and so, or maybe I could

• 39:00Speaker 00

  get this information, you say, well, what's the cost and time of getting that information? Is it better to make the decision now? That's obviously all plays into speed. And then in simplicity, one of the things that I've learned by, you know, kind of working at these, you know, organizations that are either at scale or getting to scale is simple plans are all that work. Simple plans are all that kind of, you know, simple things are, are the thing that can, can most easily spread without distortion within an organization. And so you want to have a certain simplicity of, of kind of how you're doing it, even if you are, you know, kind of being a little overly simple. That's the better side to err on for scale application. And then it's that's, that's kind of a, a way of making it.

• 39:45Speaker 00

  And one of the things that I think is a general thing for all, every professional and then especially all leaders to really orient on is

• 39:55Speaker 00

  How do you make decisions fast and well is one of the central things you're doing when you're doing, you know, a wide variety of essentially, you know, kind of all, maybe all jobs, certainly all white collar jobs, certainly all white collar leadership jobs.

• 40:12Shane Parrish?

  Can we dive into that a little bit more? Like, how would you teach somebody to make decisions fast and well, or faster and sort of better at the same time?

• 40:22Speaker 00

  So there's a couple of things. So one, like, for example, one of the things that I value in people I work with and hire is being explicit learners, which is you try to learn something in a way that you can explain it to other people as a tool and as a principle. And so, you know, a little bit of like when I was learning how to make decisions much faster at PayPal, I said, all right, well, what I will do is I will get into the ritual of confronted with a major decision. I will see if I can make that decision right now. Because what I'm doing is I'm training my way away from the discomfort of, oh, God, I haven't thought about everything. What if I'm wrong? You know, how could I make this big decision so quickly? Away from that, but not in a

• 41:05Speaker 00

  way that you say, well, the decision's made when you do it. But you're thinking about, you know, concretes about like, well, you know, who else would you talk to? What other information or data could you get? What other things could bear on this decision? What other kinds of risk analysis? So that's one ritual that helps you with that. And then, you know, obviously, you should start by doing the trying it, not immediately going to, I'm going to be making that decision in, you know, five seconds from when it happens. But then also, part of what you begin to do is kind of learn a set of questions. There's kind of, there's a whole bunch of different stuff around decision making. So one is like, well, how, how much of this is a one way door or a two way door? Like,

• 41:47Speaker 00

  if you make this decision, is it recoverable from? Because if it's catastrophic and expensive, then, okay, well, maybe we should be a little bit, have a higher degree of certainty, a higher degree of likelihood and evidence in what we're doing. Questions around

• 42:04Speaker 00

  How how much can you experiment with decision? How much can you try it? Like, is there experimentation that can that can do it? It's like the one way two word two way door, but it could be not quite getting through the door, but testing it yet. Like, you know, is there a set of tools there that you learn to do these things? And then, of course, you learn a bunch of stuff from decision making science, which is trying not to have sunk cost bias, you know, trying not to, you know, kind of be diluted by, you know, blind spots and so forth. Like, there's most of the decision science stuff kind of shows you how you make easy, like, maybe bad failures, but you slip into failures of decision mode when you don't even know it. And so how do you bring those kinds of things in?

• 42:46Speaker 00

  And so you try to bring all of that in to essentially decision making. It's like, it's the kind of thing that when you think about, you know, what should be the advanced courses in high school? You know, because the natural kind of way that academia, you know, which is kind of, you know, all starts with how do you train professors? What's graduate school? How do you train people with graduates undergraduate? How do you train people with undergraduates high school? And you go, OK. But that's not the primary arc for most people. Um, and so like, for example, when you say, well, should I have calculus two or not? Right? As a way of of of prepping for this path? The actual, you know, kind of question that you could actually get to that would be a really good thing

• 43:30Speaker 00

  to have in all high schools is decision making. Right? Like, how do you? How do you? How do you think about making decision making? A good way, because, you know, obviously, we go through life making decisions. Should we, um, date person X or Y or get married to them? Um, should we stay here? Or should we move? What job should we choose? What college should we choose? What things should we major in? And there's a whole set of things that go into that. All of those things go into decision making, where being thoughtful and learning and iteratively to be better about it is really fundamental. So anyway, so that's, you know, that's, uh, I myself, I'm a student of this stuff because of that purview of how it applies to everything.

• 44:14Shane Parrish?

  One of the underappreciated aspects of decision making that a lot of people don't cover is sort of opportunity cost. How do you think about opportunity cost?

• 44:23Speaker 00

  Well, it's funny because my my primary business of technology investing is a case in point of this. People normally assume. That like we say, well, what's your, what's your regret? And they presume that your regret is you invested in company X and that failed. And actually, in fact, the more important thing is you missed company Y. So when people ask me, you know, like, what's your regret as an investor? It's like, well, I was presented Pinterest three times and misunderstood it and didn't invest in it. Those things are the huge regrets because it's the, it's the opportunity cost for it. And part of, of course, the reason why opportunity cost is hard for people to think about is it's the possibility.

• 45:05Speaker 00

  And you might change your possibility landscape based on your action. You might, you might do things, you know, like, for example, going and meeting someone or possibly considering something or, you know, a decision, whether or not you take a meeting or not as an investor. And obviously, given that there's no way to reliably get it to a hundred percent because it's a big, wide world and everything else. It kind of confuses people. And then they simplify. And so what you, what you want to do when you're thinking about opportunity cost is say, well, like in terms of personal life, think in terms of one, two, three, five years of what you're doing. Thinking about like, you know, is the thing that you're possibly exploring doing or doing,

• 45:47Speaker 00

  the kind of thing that that path would make you happy about when you look back at one, two, three, five years. You go, yep, this was a really good path. I was, you know, glad I was doing it. You kind of look at, you know, do I have some room for serendipity and discovery and curiosity and learning? And one of the things my first chief of staff, Ben Casnoca, also a co-author of my book Startup View, says about me, he says, look, one of the things I, he says, I learned from you is that you always, every week, try to, to do something that's, that's a little bit broader aperture than just my firm work commitments. It could be. Taking a meeting, as a friend of mine recommended it very strongly to me.

• 46:31Speaker 00

  It could be spending an hour and glancing at a book that's very different. It could be spending thirty minutes listening to a poetry podcast. That little bit of of kind of experimentation opens up not just your creativity and your mindset, but also what you may be thinking about as your opportunity landscape. Because that's how you can discover things that are massive changes that are really important.

• 46:56Shane Parrish?

  And how do you think about it when it comes to sort of positioning size versus like maximizing the opportunity available, but also leaving optionality open for what might come in the future?

• 47:08Speaker 00

  People can sometimes be overly concerned about optionality. Now, optionality obviously is good because that's, you know, for opportunity and so forth. But like one of the smartest things that my father told me when I was a kid about decision making, it may even been the thing that made me really start focusing on studying decision making, was, you know, essentially he said, look, one of the difficult things about making decisions is it reduces opportunity in the short term. But that's the only thing that really creates great opportunity in the long term. So if you don't make decisions, you try to live too much in a kind of a liminal opportunity space, you might be just kind of like missing very big opportunities and not creating what the really big opportunities are.

• 47:52Speaker 00

  And so, so you do want that kind of optionality. Now, part of optionality is being willing to make changes. You say, well, okay, so I've been working in the tech industry and it's been fun and lucrative and all the rest, but like what I really want to make sure that I'm, you know, kind of participating in is some of the ideas that I've been thinking about my whole life. So when I, you know, am asked to give the commencement speech to Vanderbilt, I go and give it on friendship because that's actually one of the things I've been thinking about a whole lot. And I've been thinking about like, how do we think about that? And so. So part of what that means is, you know, I'll go and spend the time doing it.

• 48:33Speaker 00

  And it doesn't necessarily mean that I have to have been building the optionality for it or anything else as much as I've been thinking about it and preparing. And so when something rolls in like, hey, would you, would you give the commencement speech here? I could go, okay, now I'm gonna go spend thirty hours working on a commencement speech versus ten, because I'm gonna go do this new area. And so anyway, those, that's a, let's kind of a, call it more of an impressionistic color to your question, which is, you know, how do you bring in the notion of optionality without overly committing to like, I must maximize optionality at every available minute? Because maximizing optionality, frequently you have to make decisions and commit to

• 49:17Speaker 00

  something and try it for at least a while to see how it plays out.

• 49:21Shane Parrish?

  Yeah, you sort of have to keep all your options open. And then when something comes, you go all in. So cast a wide net. And then when you, you find something, you dive into it and then sort of rinse and repeat, I guess. Is that an accurate sort of?

• 49:33Speaker 00

  Well, it can be if you have it, but you can also be thinking while you're doing your thing and really committed to doing it, you could be thinking about what are the things that could be important in your future and then kind of ready for them when you, when you trip across them.

• 49:50Shane Parrish?

  Oh, go deeper on that. And it sounds like positioning for the future.

• 49:54Speaker 00

  So, yeah, so like, for example, way back early in my career, I was the project manager, the product manager for a virtual worlds product called Worlds Away for Fujitsu Software Corporation. And probably ideally, I would have, in just looking at that, worked at that another year or two, really kind of fully exploring virtual worlds, you know, kind of honing the product management skills and so on. But then two things kind of came along. I knew that I wanted to create new kinds of social products, you know, kind of social products are one of my central themes of my own personal career, because even PayPal has elements where it's a social product.

• 50:39Speaker 00

  And I knew that I wanted to be doing that. And then what happened is a guy who had founded, you know, the E3 Gaming Convention, and then also the Entertainment Magazine for, you know, Electronic Entertainment Gaming Magazine or else, came and said, hey, I want to do a startup. I was like, oh, well, here's a good co-founder. The capital markets are good for doing internet startups. I should go run and do this. And so I left a little earlier. I did, you know, I'd done, you know, two years of intense work at Fujitsu. But like, I left earlier than I was expecting, because it was like, okay, here's an opportunity. And I knew that I had been wanting to build kind of social products. And so it wasn't

• 51:23Speaker 00

  that I was now kind of like, you know, on vacation at the beach. The world is a complete opportunity set. It was, I was paying some attention to what kinds of things could play very well in a future opportunity. And when something came along, I made the adjustments to dive into it.

• 51:41Shane Parrish?

  So it's not sort of blind positioning. It's more like a conscious positioning?

• 51:44Speaker 00

  Yes, exactly. And, and you know, the way that you do it consciously is you think somewhat yourself, you talk to people who know you well, you talk to people who know the market and industry as well. You know, it's the kind of thing that's good to have, like, you know, go out to lunch or dinner every so often with people you think are really interesting around, who might help inform what this future possibility set looks like, optionality set looks like. It's like, for example, one of the pieces of advice that I give entrepreneurs is, too often what they do is they go, okay, now I need to raise money. So now I'm going to call Reed and say, now I need to raise money. It's like, well, the really best way to do this is to, with a number of, not just one, but a number

• 52:26Speaker 00

  of different, you know, possible funders, is to establish a connection with them early. So they get to start getting to know you, say, here's what I'm building, here's what I'm doing. So then when you come back, it's like, okay, well, how much do you, how much have you stayed on plan? What have you learned? And I now know you and trust you better. So it's kind of the, the building up for that opportunity of financing. Don't just walk in the door, but actually, you know, build something of a trust relationship before you jump into it.

• 52:59Shane Parrish?

  You're said to have the gift for being the opposite of impulsive. How do you teach this? And are there rituals that you use to sort of center yourself in the moment? Or walk me through this.

• 53:13Speaker 00

  Well, it's interesting. I wonder if I should teach it more.

• 53:22Shane Parrish?

  Hey, there are a few questions left in this episode that are for supporting members only. If you want to listen to the rest, head on over to fs.blog/tribe and sign up. We cover learning to be less impulsive, the books that have influenced him the most personally, stress, and what success looks like. For a complete list of episodes, show notes, transcripts, and more, go to fs.blog/podcast or just Google The Knowledge Project. Until next time.