EP 62: Keith Rabois (Partner, Founders Fund) Lessons from Peter Thiel & Reid Hoffman, and Why He'd Never Invest in a Remote-First Company

Keith Rabois is a prominent Silicon Valley investor and entrepreneur. He is currently the CEO and founder of OpenStore, and a partner at Founders Fund, a venture capital firm co-founded by Peter Thiel. Prior to this, he served as the COO at Square, a mobile payments company founded by Jack Dorsey, and was also part of the so-called "PayPal Mafia," a group of individuals who co-founded PayPal or worked there in its early days and went on to become successful entrepreneurs and investors. Throughout his career, he has been involved in the founding and growth of many successful technology companies, including Yelp, LinkedIn, and YouTube. In Keith's second appearance on the podcast, he discusses topics such as his dislike for OKRs, his aversion to investing in remote-first companies, and his experiences working with Peter Thiel, Reid Hoffman, and Jack Dorsey. (0:00) Intro (1:14) Welcome back, Keith (5:35) Hating OKRs (10:03) On making decisions (14:09) Not believing in remote work (17:33) Social Issues in the Workplace (19:00) What is the role of a VC? (22:08) Thinking about what can go right (29:35) The "why you" in a potential investment (34:28) Fitting the founder to the story (37:59) The most successful founders are trending older (43:21) The firm brand at Founders Fund (47:57) Lessons learned from Keith's only five bosses in his career (55:48) Thoughts on AI (59:36) Artificial Intelligence in China (1:03:23) What is your most contrarian view today? (1:06:56) On Elon & using Twitter Show Notes: https://twitter.com/rabois https://www.youtube.com/watch?v=6fQHLK1aIBs https://delian.io/lessons-3 Mixed and edited: Justin Hrabovsky Produced: Rashad Assir Executive Producer: Josh Machiz Music: Griff Lawson 🎙 Listen to the show Apple Podcasts: https://podcasts.apple.com/us/podcast/three-cartoon-avatars/id1606770839 Spotify: https://open.spotify.com/show/5WqBqDb4br3LlyVrdqOYYb?si=3076e6c1b5c94d63&nd=1 Google Podcasts: https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5zaW1wbGVjYXN0LmNvbS9zb0hJZkhWbg 🎥 Subscribe on YouTube: https://www.youtube.com/channel/UCugS0jD5IAdoqzjaNYzns7w?sub_confirmation=1 Follow on Socials 📸 Instagram - https://www.instagram.com/theloganbartlettshow 🐦 Twitter - https://twitter.com/loganbartshow 🎬 Clips on TikTok - https://www.tiktok.com/@theloganbartlettshow About the Show Logan Bartlett is a Software Investor at Redpoint Ventures - a Silicon Valley-based VC with $6B AUM and investments in Snowflake, DraftKings, Twilio, and Netflix. In each episode, Logan goes behind the scenes with world-class entrepreneurs and investors. If you're interested in the real inside baseball of tech, entrepreneurship, and start-up investing, tune in every Friday for new episodes. Executive Producer: Rashad Assir Producer: Leah Clapper Mixing and editing: Justin Hrabovsky Check out Unsupervised Learning, Redpoint's AI Podcast: https://www.youtube.com/@UCUl-s_Vp-Kkk_XVyDylNwLA 🎥 Subscribe on YouTube: https://www.youtube.com/channel/UCugS0jD5IAdoqzjaNYzns7w?sub_confirmation=1 Follow on Socials 📸 Instagram - https://www.instagram.com/theloganbartlettshow 📱 X - https://twitter.com/loganbartshow 🎬 Clips on TikTok - https://www.tiktok.com/@theloganbartlettshow About the Show Logan Bartlett is a Software Investor at Redpoint Ventures - a Silicon Valley-based VC with $6B AUM and investments in Snowflake, DraftKings, Twilio, and Netflix. In each episode of The Logan Bartlett Show, we sit down with the people behind today’s most important startups and extract the tactics, lessons, and frameworks they’ve learned the hard way. Conversations span hiring to GTM, product, growth, fundraising and everything in between - collectively forming the ultimate playbook to make you a better CEO, investor or board member. Tap follow and enable notifications to stay ahead of the game.

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

• 0:05Logan Bartlett?

  Welcome to the Logan Bartlett Show. I am your host, Logan Bartlett, and on this episode, you're going to hear a conversation that I had with Keith Rabois. Keith is most known as a investor at Founders Fund, which was founded by Peter Thiel. The firm has made a number of investments, including in companies like Palantir, Stripe, Airbnb, Facebook, New Bank, Andorl, among a bunch of others. Before that, Keith was at Coastal Ventures, and prior to that, he was the COO of Square alongside Jack Dorsey and a part of what the so-called PayPal mafia with Reid Hoffman, Max Levsky, founders of YouTube, Peter Thiel, among a bunch of others. Most recently, Keith has also stepped in as the CEO of Open

• 0:47Logan Bartlett?

  Store. In this interview, we touched on a bunch of different things, including why he hates OKRs, why he never invests in a remote-first company, lessons he learned from working under Peter Thiel, Jack Dorsey, and Reid Hoffman. One minor disclaimer, in the second half of the episode, the audio quality cuts out due to some production issues. Really disappointing because it's a really good conversation, but we've done our best to impact it using a bunch of different tools so that hopefully it's palatable to actually listen to. The quality is good throughout, so I trust you'll enjoy this episode with Keith Rabois. Keith, thanks for doing this. A pleasure to be back. I want to do stuff different than what you normally. I feel like in listening to some of your other podcasts, you get a

• 1:29Logan Bartlett?

  lot of like, politics questions these days, like woke-ism and all that. I'm not going to go down that rabbit hole too much. What I want to know is, so you've created a bunch of interesting, concise, thoughtful frameworks. I would like to listen to your YC, which everyone said is hot operating, 2018, 2013. Three of them that stood out to me, Annihilation of Barrels, Two by Two Matrix of Delegating Versus Consequences, and then growth rate of a deploy versus growth rate of a business. I thought those were You've been in the CEO seat now at Open Store for how long? Two years. Have you changed any of those or any other frameworks that you've had in the past as you've been back in the apparatus?

• 2:09Speaker 01

  Now again, those three frameworks resign into answer like three very common follows, very common questions I receive from founders. So I'm going to take out, why are things not accelerating? Why is our funding velocity slowing down in fact? First framework. Second framework, how do I know when to take decision, when to delegate? Cost of question for a CEO to a board member, to advisor, mentor, and senior. Third question, around how do you know which place someone had an upgrade? So when you know what to upgrade, when you hire, slowly personally promote. So I basically tried to address all the three common issues I get from CEOs. So I don't really have a third or fourth. The fourth question, and I don't know what the current fourth question is, but when you have called the question, I try to find something I can write as a baseline.

• 2:54Speaker 01

  And if you use that with CEOs, so they can be a lot of pre-digesting versus custom advice every single client.

• 3:00Logan Bartlett?

  Yeah. And Delian also did a really concise post on his blog about a bunch of things related to this updated graphics. I recommend everyone go look. I sent it to keep.

• 3:10Speaker 01

  I think it's version free.

• 3:11Logan Bartlett?

  Yeah. And being a people centric investor, I've reached out about wanting people that spike in some regard, but they need to be the hero for the story or whatever it is. Are there questions that you actually are able to ask to assess this or is it a total intuitive thing? How do you think about fitting the founder to the story that in that case, like how do you know what they need?

• 3:31Speaker 01

  So there's two different comments. One is, I think I'm looking for an extraordinary trait. The reason why is the chance, if you think about what's the likelihood that someone starts a company and reinvents the world or an industry in the proverbial garage with like their college roommate?

• 3:46Logan Bartlett?

  Sure.

• 3:46Speaker 01

  Rounds to basically zero. So unless you have a trait that is so extraordinary that the probability shift off rounding to zero, you should not invest. So that's why I need a top 1%, top 10 basis points, something spike, or I'm not going to invest. Then you want to ask a question. The second question is, does what the person spikes on relate to the skills that are required to build this particular company? Some of these traits are transferable, like if you can recruit better than anybody else on the planet, like if you can assess people, close people, that will apply to any company, whether you're building SpaceX or Facebook. Some skills don't translate, like for example, if you're the savviest technologist in the history of the world. There are some companies where you could, like let's say you were doing a database company, a new novel architecture for database.

• 4:30Speaker 01

  Sure, that's a perfect company to fund for that kind of founder. They want to do a photo sharing app. I'm not sure they can really leverage that trait. So you do ask that, but that's usually the second question, not the first.

• 4:40Logan Bartlett?

  And when is domain expertise a good thing versus a bad thing?

• 4:43Speaker 01

  So mind you, it's never a good thing. I don't fund people with domain expertise. I do like them to be able to answer the Balaji and the Chris Dixon blog post that summarizes it, Intellectual Maze question, which is, Balaji, when he's teaching startup engineering at Stanford, had this great paragraph that explained how the most amazing founders can walk you through the roadmap from where they are to super success and know how to avoid the pitfalls, trap doors and navigate. And when you hear that clarity of a roadmap, it's extremely rare. It happens once a year or so. That's a reason to invest, maybe independent of the traits. But the traits that are exceptional plus the intellectual roadmap is like a home run. It's like instant investment. Here's your money. Do not pass go. You don't have to meet my colleagues. Here's your money. Please, please, please do not take any more meetings.

• 5:27Speaker 01

  That rarely happens. That can be based upon some experience. So for example, one of the founders we work with in Miami, before he left Uber to start his company, had been a warehouse supervisor, before he went to Uber. And he started a labor marketplace that connects workers to light industrial warehouses. So the fact that he'd started his career out of college as a warehouse supervisor wasn't stifled, but it's the other traits about this founder that make him extraordinary and a top 1% founder in the planet.

• 6:02Logan Bartlett?

  And is there, if not in the founders, at some of these companies, you need domain expertise brought in so that you don't fall in.

• 6:09Speaker 01

  So you can borrow it. This is the trick. You can always call up people with domain expertise and ask them questions. They're actually pretty happy to talk to you usually. And then you just say, why can't this work? So the question I always ask when I do diligence, like when, let's say I invest, occasionally invest in some pretty deeply technical things like autonomous driving or genomic sequencing. So when I call up experts, what I'll ask them is, Tell me why this can't work. I don't want to know whether it can work. I want to know metaphysically, point to something that will make this impossible to solve. And if they can't articulate a specific blocker, then I'm pretty comfortable backing a world-class founder to try to solve it.

• 6:45Logan Bartlett?

  I've heard you say that the most successful founders are trending older than they were in the past.

• 6:51Speaker 01

  Yeah, we've observed at Founder's Fund that there's about a five-year shift on average of the most successful founders in the, let's say, median age over the last five years. We have no agreement internally on what the root cause of that shift is.

• 7:05Logan Bartlett?

  Do you have a theory?

• 7:06Speaker 01

  I actually don't have a great theory. I've been walking through some proposed hypotheses, but I think most of them are confounded by the actual data. So, for example, some people think it's cultural. There's different influences, et cetera, et cetera. Some people think it's like this entitlement and woke-ism and all this other stuff. I don't think that really drives. Some people think that the businesses are more enterprise, which requires more experience than, let's say, maybe a consumer. I don't think that's actually true. I think most of the logical hypotheses are defined by the actual data. So I'm not at all convinced of a theory that works. And so it's more descriptive than prescriptive for me right now.

• 7:40Logan Bartlett?

  Now, you've stepped into more of a firm management, as we touched on earlier, and developing young investors, setting firm strategy, all of that. I think that was, at least Delian said, with KB you were more IC-oriented, sort of eat what you kill. And now it seems like you've taken on more of a firm initiative setting, is that?

• 7:57Speaker 01

  No, I wouldn't say that. I don't, I wouldn't agree with that. I think that one of the keys in venture is grooming more and more talent, because it's a 10-, 20-year journey. And you need to replace yourself. I don't think venture capitalists age very well. Like, there's a point at which you improve, and there's a point at which you start decaying. And we can talk about why and where. But so I think you always need to be consciously aware of how do you get more talent into your firm? And how do they learn by us most to be world-class investors? So at KB, I hired several people, Delian included. I recruited Evan Moore to KB like three times to try to add to the talent at KB. So I don't think that's accurate. You know, maybe just because of my profile,

• 8:40Speaker 01

  I may get more inquiries from other up-and-coming investors that want to join us, and they may route to me more frequently. So I may interview them or assess them more. But I don't think it's a conscious strategy.

• 8:50Logan Bartlett?

  How do you think about setting a founder's fund strategy for the next whatever it is and influencing where you're headed as a firm?

• 8:58Speaker 01

  Well, the way we generally do it is the GPs debate a fair amount. You know, we meet, let's say, every quarter, we do an offsite. But like the GPs will debate, what do we want to do differently or better, or what do we want to amplify or not? So that's basically how we work.

• 9:13Logan Bartlett?

  And decisioning, how do you actually think through making an investment decision as a group?

• 9:17Speaker 01

  The historical way we've worked at Founder's Fund, which is pretty different than most VCs, including at KV, we have voting thresholds. So for a different size checks, you require a different level of support from different colleagues. So let's say you wanted $10 million. I translate to our voting rules and know how many people need to approve that. And we'll introduce the founder to the requisite number of people, or the people I think are differentially likely to approve. At the KV, we would do more like a traditional founder, sorry, partner meeting on a Monday. Team would come in and present, and then we'd have a dialogue debate after and decide whether to approve an investment, you know, what terms.

• 9:53Logan Bartlett?

  What characteristics have you found in the good young VCs that you've been around or you've worked with?

• 9:58Speaker 01

  Well, there's not that many of them, by the way. I think one of the fictions of the 2019 to 21 era was ventures easy. And so people thought that entering venture early in your career was attractive, lucrative, and potentially easy from a lifestyle perspective. And it's none of those things. Ventures are really hard business. It's to be successful in terms of driving true returns and distributions to the LPs and to yourself and your colleagues is pretty rare. It's about the equivalent of being an NBA All-Star and to be a consistent NBA All-Star is pretty rare. And so I think now there's very few people that are young investors, co-investors, that are actually truly driving distributions for their LPs or for themselves.

• 10:41Speaker 01

  So I don't know what the formula is. I wish I did. It is something we actually discuss, like what's the formula for a future great VC? But it's a little bit like trying to predict who the next Steph Curry is. Steph Curry didn't look like the Patrick Ewing's and Elizah's and Moses Malone's, nor did Charles Barkley, actually. And you know, so you're trying to figure out where the sport's going and try to project what you want to hire, recruit, train for.

• 11:06Logan Bartlett?

  And so when you bring in someone like Sam Blon joined recently, which he was a CRO of Brex and Zenefits before that, right? And so When you're hiring in an operator that hasn't done investor before, like, are you doing the same assessment of where they spike? Is it more of a holistic liberal arts assessment?

• 11:25Speaker 01

  There was a couple of dimensions to hiring, Sam. One was he had a pretty significant angel track record. So that is a good proxy. It's not a perfect proxy for venture, but it's relevant. Me, as a byproduct of that, he also had referenceable CEOs who are in our portfolio that we respect deeply. Let's say Parker at Rippling, for example, that worked with him very closely. So that's a good proxy. Like, would you differentially take money from this person? That's the answer you want to hear from founders is, yes, I would prefer to work with this person versus the rest of the world. So like, having a repertoire of people you've served very closely with that are very close to us, that we deeply respect, is a good proxy. So angel investing plus CEO respect are pretty important predictors.

• 12:07Logan Bartlett?

  What do you think about the firm brand, Founder's Fund specifically? How much of it is something that is set at a top-down versus this totality of the people that work there? Are there elements of both? Or how do you sort of think about it?

• 12:21Speaker 01

  I think we'd like it to be maybe set a little bit more top-down, but what it's become is kind of a bottom-up evolution. So I think that the brand now stands for being courageous, having conviction, being direct. I think we can add some things on top that are conscious, intentional. But right now, I think that's the manifestation is, people want to work with Founder's Fund because when we believe in something, we'll support it. We don't care what other people think. We will fund things that other people might not want to fund. And we will take, you know, the proverbial contrarian stance that later becomes a consensus view. Think Andorl. So, you know, my partner Trey co-founded the company Andorl to propel the United States forward in defense technology by using the classic tools of technologists

• 13:06Speaker 01

  and then allowing the United States to compete in the world. At the time, nobody else in Silicon Valley would have funded this company, period. Now, because of some of the changes in the world and the success of the company, there's lots of investors that chase after the company, but that's years later. So we're looking for areas where, at the time, other investors have blind spots, intellectually, ideological, maybe by founder trait, like you can think about Parker that way. And then we'll take a conviction-based courageous investment and then later the company and the founders become successful in everybody else's view.

• 13:40Logan Bartlett?

  Speaking of contrarian, you guys hired a crypto partner.

• 13:43Speaker 01

  We did.

• 13:43Logan Bartlett?

  Which it's been amazing to me how many people were so dogmatic about crypto investing and then pulled back versus actually leaning in. Like if you believe this stuff, this should be the best time to invest, right?

• 13:55Speaker 01

  That's the internal thesis. There you go.

• 13:57Logan Bartlett?

  So how did that actually come to be? And because crypto, you guys held Bitcoin for a while. That was public and but you weren't as involved in other.

• 14:06Speaker 01

  We followed the historical view of founders fund going back to I think 2014 even was mostly the alpha in crypto could be obtained by buying Bitcoin directly and had the liquidity advantages go in and out, you know, opportunistically versus obviously the company. We don't do that. Even if we wanted to, we probably couldn't. So fundamentally crypto investing in Bitcoin was a very successful set of investments and maneuvers by really Napoleon and Peter for the most part. Over time, we developed some views that there might be alpha in specific companies and that we weren't perfectly set up to capture that alpha. So we wanted someone

• 14:47Speaker 01

  who would help us if there is alpha in crypto oriented companies. How could we make sure that we would capture disproportionate share of that alpha?

• 14:56Logan Bartlett?

  What do you think? A lot of money's been raised over the last 2019 to 2021, 2022, whatever you want to call it. A ton of venture firms popped up. A bunch of people raised a bunch of money. What do you think happens to all those new venture firms that were founded?

• 15:09Speaker 01

  I think they're in trouble. There will be some breakthrough. I mean, I've looked at the list of like what I consider to be the top venture firms, you know, who do I compete with for real? Who produces returns that are real?

• 15:21Speaker 01

  About half are new over any decade, about half are the same. So there's always been a velocity of change, like half the funds right now that are pretty good, I suspect were created post 2005 and the other half have been around for 50 years. And so I think there's always some refresh rate and variability in venture, but it's not, it's not going to be easy to break through and raising too much money is definitely not the formula. As you know, we announced a year ago a $1.8 billion venture fund and then we decided to cut it in half and make it an 800 million dollar venture fund. So we're voting with our feet that the opportunities are not going to be vast, that too much capital is not a good thing for either founders, companies, LPs, or GPs. And so we, we literally

• 16:06Speaker 01

  slashed in half a fund that was already raised.

• 16:08Logan Bartlett?

  And how did, I, I expect more people are going to follow suit with that. I think they have to.

• 16:13Speaker 01

  I think LPs definitely, it definitely resonated with LPs.

• 16:15Logan Bartlett?

  They were appreciative of it?

• 16:16Speaker 01

  Oh, of course. Like we're going to produce significantly better returns for them. And, uh, you know, because we don't rely upon management fees. At the end of the day, we are very light on the management fees and compensation and we have significant potential and upside and value creation, just like a healthy startup should. And so LPs like the alignment where we're only going to make real money if we produce real carry, which produces a function of real returns to them.

• 16:42Logan Bartlett?

  Well, uh, I want to, I want to go through some quick hitters here. Uh, so I'm going to transition a little bit, but I, I think you've had five bosses in your career. Is that right?

• 16:51Speaker 01

  Uh, yeah.

• 16:51Logan Bartlett?

  Here's the list I had. Peter Thiel.

• 16:52Speaker 01

  Peter Thiel, Reid Hoffman, Max Levchin, Jack Dorsey, arguably Vinod.

• 16:56Logan Bartlett?

  That's the five I have.

• 16:57Speaker 01

  He wouldn't describe himself that way, but yes.

• 16:59Logan Bartlett?

  What, uh, can we go through each and, uh, well, I guess first, what do you think? I mean, those are all opinionated people, big personalities. What do you think as a compliment to those people? What do you think you do particularly well that, that's allowed you to sort of resonate with big personalities and opinions?

• 17:13Speaker 01

  I think the most important step early in my career was to implement their ambition and their vision. I didn't have an alternative ambition and vision. It was like make them successful by using the skills, traits, characteristics, levers I knew how to deploy. So I think that's being a compliment to a very strong willed visionary founder type that's required. I think secondarily is to understand what

• 17:38Speaker 01

  Absorb their brain as much as possible. So I learned this actually as a law clerk of all things. My first job at a law school was to work as a law clerk for the public court judge in Texas on the Fifth Circuit. And the way she sort of explained the job to me on day one, my first professional job in life was, "Your job is never to let me make a mistake." And I took that very seriously, and I've always taken it very seriously. My job is not to let the person I report to make a mistake, whatever I have to do. However, I have to persuade them. I have to go find new data points, marshal different arguments, figure out how to, because a mistake by the leader is potentially catastrophic, certainly has asymmetric downside. So I always blame myself when the decision, the outcome, isn't what I wanted. It's not Peter's fault, or it's not Reed's fault, or it's not Max's fault.

• 18:23Speaker 01

  It's mine, because I didn't persuade them correctly. And so I think taking that with me allows you to pair very well with visionary, ambitious founders.

• 18:30Logan Bartlett?

  We've talked about lessons from Peter. I want to go through quickly best lessons you learned from some of these folks. So Peter, I think we've hit on a few, but anything in particular that we didn't touch on?

• 18:39Speaker 01

  Oh, yeah. I mean, I basically quote Peter every day.

• 18:41Logan Bartlett?

  Yeah.

• 18:41Speaker 01

  And they're often remixes, to be, to be fair now. I've taken a lot of his views and slightly remixed them to make them my own. But like, just like in music, a remix can be arguably better. Sometimes it's worse, sometimes it's better. So I'm hoping I'm getting the Glantis remix of Kygo, not the, not the worst version. But, uh, so yeah, Peter taught me, you have to find undiscovered company, undiscovered talent. That's how you scale companies. Be the weakness of general managing. You want people who are excellent at their craft and you want to promote them. So a lot of philosophies that I apply all the time, the benefits of focus, allocating time. People systematically undervalue their time and happiness is another Peterism from 23 years ago. So I apply these literally daily.

• 19:21Logan Bartlett?

  This, did, did he, are those derivatives from some other? I mean, everyone's sort of remixing some concept for standing on the shoulders of giants. But what, what has allowed him to come up with so many different frameworks and ideologies?

• 19:33Speaker 01

  I don't know. I actually think most of them are fairly original. Uh, maybe they're pithy succinct distillations. Peter's really good at taking a lot of data points and describing it, describing a lot of data points in a really succinct, powerful explanatory, you know, equation.

• 19:50Logan Bartlett?

  Simplifying, uh, complex things is one. If someone can't explain it to me, it probably means they don't understand it to the extent they should.

• 19:56Speaker 01

  That's always true. Like, I also learned at law school, I had the benefit of taking constitutional law with some really good professors, including Charles Freed. And he basically said, "All complicated arguments are wrong." Right arguments are always simple.

• 20:08Logan Bartlett?

  Reid Hoffman.

• 20:10Speaker 01

  Reed taught me the benefit of two things. The decision-making framework that I mentioned of not falsely equivalating using pros and cons.

• 20:19Logan Bartlett?

  Don't weight everything equally.

• 20:20Speaker 01

  And then in negotiations, specifically the dimension of time. So when you're negotiating, most people focus on economic terms, other pieces of the puzzle. But time can be your friend or foe. And how do you use time to affect other terms is something that's very subtle, but very, very powerful.

• 20:37Logan Bartlett?

  What about Max?

• 20:39Speaker 01

  Max taught me a couple of things. The bottom of how to use metrics and KPIs to really drive outcomes. Secondly.

• 20:47Logan Bartlett?

  By the way, maybe talk about dashboards and how that relates to that.

• 20:50Speaker 01

  Well, that's another whole topic. I gave a speech on, the first I was invited to present to the Coastal Ventures CEO Summit before I joined as an exec, was to talk about dashboards and how to do dashboards properly, which doesn't sound scintillating, but I turned it into a talk that hopefully kept most CEOs' attention. But anyway, so I'm a big proponent of dashboards in that you want to orchestrate the dashboards as CEO or COO by yourself. Like literally go to a whiteboard and write out the business equation and then make the dashboards reflect that. And you use that to drive decision-making across the organization, down to every single person, including CSRs. And if you don't do that, you can't expect them to make wise decisions. You're going to just get frustrated. Anyway, Max taught me the benefits of tenacity. Max is one of the most tenacious people on the planet. Also subtly taught me the benefits of fitness.

• 21:35Speaker 01

  Like when I was working at PayPal, we'd work really hard, but Max would go for like a three-mile run basically every day. And I remember looking up to the co-founder, CTO and saying, if he has time to run, I'm going to run. And I'd also try to shadow him. The problem was in shadowing Max on a run is he easily runs like a six-minute mile, like very easily. He can run 430 probably. I can't. It wasn't the best, but it was aspirational. But yeah, Max taught me also the benefits of certain technologies that I didn't have an appreciation for. Once in a while I can spike on, there's a new technology which has certain characteristics that can lead to a breakthrough in business. And I didn't know how to do that kind of analysis in my brain. And he taught me with one specific illustration on flash in 2003.

• 22:19Speaker 01

  And then I applied it later to other technologies. Which led to your investment in YouTube, right? It did specifically led to the investment in YouTube. Max told me to look for something based on flash in 2003 in May 2005. I found a career, Javed Karim, who had co-founded YouTube. And the first question I asked him was, is it coded in flash? He said, yes. I was like, we're off to the races. Jack Dorsey. Jack, so Jack taught me literally how to do design driven thinking. So I've been an Apple fanboy for all my life, literally since like eighth grade. But there's a difference between like reading about Steve Jobs and Apple. And actually understanding what design driven thinking really means.

• 23:01Speaker 01

  That every deep crafting, every single detail, paying attention to every single detail. And how to scale out organizations. So that's the most important thing. The thing that makes Jack so powerful is he actually is a first rate designer. A damn good technologist and a first rate business person. And that that combination of all three people, maybe it doesn't exist. Max is actually a first rate business strategist and a first rate technologist. Even that Venn diagram is extraordinarily powerful. By the way, this is the other founder answer. The third founder answer for me is combining two things you don't see together. So a first rate salesperson and first rate technologist. I invested that almost never happens. Like I remember this first rate technologist, first rate business person. Description of Max, Reid Hoffman articulated this to me.

• 23:45Speaker 01

  January of 2001. That that's what was going to make Max special is like, there's five. He's like, there's five people all of Silicon Valley who have that trait. And what about Vinod? So Vinod is a technology visionary. He can immediately see a new technology. And feel like almost intuitively, all the ways it can be levered to change business equations. And it's extremely powerful. But the most actionable piece for me, because I'm not a technology driven investor. Was when he's on the board of Square. He pointed out to me this adage, the team you build is the company you build. And you can get distracted in everything we do around products, technology,

• 24:26Speaker 01

  but it all comes down to the team and that adage is the most important succinct way to communicate it. It's always about the team you build.

• 24:34Logan Bartlett?

  Well, because we talked about the node and we talked about YouTube and you would have a unique opinion on this as a former lawyer and IP licensing rights. What do you AI these days? It's, it's, I guess, what is your perspective on AI these days? And also there's a fair use debate going on about all the training. Do you have an opinion on that?

• 24:52Speaker 01

  Well, the decomp is actually, so let's talk about the YouTube example. This is a really good illustration of the question you asked me about why me? So I was able to do the IP analysis in my brain for YouTube. And then literally walked Quay's outside counsel through the analysis on behalf of the company.

• 25:09Logan Bartlett?

  Which is what everyone was scared about.

• 25:10Speaker 01

  Everybody was scared of YouTube because of IP and I had been partially an IP litigator. And so I knew how to do the analysis and was comfortable like taking risks. It was a probably ballistic assessment, but I mostly got it right. There's one little thing I screwed up, but fortunately.

• 25:26Logan Bartlett?

  Background musics?

• 25:27Speaker 01

  Yes, background music. Yes, definitely. The separate licensing scheme that doesn't work like the rest of IP law, which is really annoying. But I sort of forgot about it and that's why YouTube had exposure there. So this is kind of recursive, but I had a very specific reason. I also had worked with all three of the co-founders at PayPal. So I had unique people and intellectual IP background that allowed me to make a diligence assessment without having to call some external counsel that has the wrong sort of risk appetite. So that was a good illustration. On AI, my question on AI is not, is it transformative? Not is it revolutionary, blah, blah, blah. It's like, where's the value creation? Cause that's what I do for a living is try to find things that are going to create, going to capture the value. People use metaphors like mobile.

• 26:10Speaker 01

  Well, you know, most of the mobile value is captured by Apple. So if OpenAI wants to ship a device or Microsoft that's powered by AI, I can see that capturing a lot of value. Some people use AWS as a metaphor. Okay. Well, all of the large institutions captured value in cloud computing.

• 26:28Speaker 01

  Well, that may mean that startup funding in AI might not be that great. But the way I approach AI as an investor is I'm looking at products. I'm always looking at products. What's the value proposition to a particular set of customers? AI is the magic wand that enables you to deliver a value proposition that would have been impossible before. And so I want to find founders who want to create unique products. And they know how to use the tool of AI to deliver a unique product experience or an economically affordable one that would have been actually impossible. Think your proverbial why now slide. The why now slide is I can use AI to do X, Y, or Z, but the X, Y, and Z are completely independent of AI in the sense of the customer experience. Customer doesn't know this is AI X, Y, or Z. So that's what I'm looking for personally when I invest. From an IP perspective, it depends exactly what you're using for what.

• 27:13Speaker 01

  Like you'd have to give me a specific like this company's going to do X.

• 27:16Logan Bartlett?

  I guess an interesting one. I mean, certainly we're seeing it play out in real time with Grimes and Drake and all that stuff, which I think is pretty clear. Like, I feel like that's pretty. Now, the training on top of Reddit data or Twitter data or whatever, a bunch of things that are controlled by a company in some way, but is being used to then train on top to answer questions that are abstracted away from the underlying data. I guess, is that a fair use thing?

• 27:42Speaker 01

  I think there's a strong argument for fair use there. The weakness in the argument, insofar as there is a piece that's the weakest, is if they're training on the entire corpus, typically fair use works better when you're taking a snippet of something. And when you're using the entire collection, you can run afoul of some of the ingredients in the analysis. But I think more people would get on the, would be comfortable on the fair use side because you're abstracted away so much. That said, there is a concept of a derivative work. And you've got to be very careful that depending upon how it's used, it could be closer to a derivative work versus a new work. So anyway, it's more complicated. I think you're right. The music stuff is actually pretty easy.

• 28:22Logan Bartlett?

  Do you think there's an existential risk that we face as a country with artificial intelligence in China?

• 28:27Speaker 01

  Yes, so.

• 28:28Logan Bartlett?

  I knew China would get you.

• 28:29Speaker 01

  The biggest, the biggest competitive threat. From a existential threat to the United States in my lifetime is with the CCP. The biggest arc of that competition is going to be through AI, both for economical leverage and for military application. It has actually a combination of both. And we are behind in several dimensions. A, they have a bit larger training set, just more people, less privacy. More data makes things a lot easier. You don't have to have as good a mouth if you have a lot more data, like Order 92, 2009, more data, trade that for math. Secondly, they absolutely have better chips than people realize. So you need compute power, computing capabilities. They have some pretty cutting edge chips that have not been appreciated. I didn't really appreciate until relatively recently.

• 29:14Speaker 01

  Third is the organizational structure that leads to success in AI may be driven by some brute force, like large organizations with brute force. That's not the typical Silicon Valley style management. So we may be at a competitive disadvantage there too. Those three things are very dangerous because if we lose this war, the United States is going to be very much in jeopardy.

• 29:36Logan Bartlett?

  You said a year ago when we sat here, Miami Tech Week, San Francisco is the next Detroit. We've seen some reinvigoration with artificial intelligence energy in the last few months. Have you changed that opinion at all?

• 29:48Speaker 01

  No, San Francisco is the next Detroit. You can look at crime statistics, vacancy statistics, homeless statistics. I see the governors sending in federal troops or sending in the National Guard or something, which actually sounds like Detroit. The only thing that would make it more Detroit is riots to the National Guard. It would actually look like 1960 montages. So no, it's getting worse, not better. I think you can see some trends in the South Bay that might be a little bit better. I think there is a bit of resurrection around energy, about company building that's real versus entitlement versus woke in the pockets like Mountain View and South. So maybe slightly more optimistic there. But of course, that's also a lesson of history. San Francisco as the epicenter of technology wasn't really a true story until at least 2010.

• 30:33Speaker 01

  All of the technology companies that people remember were built in the South Bay, not San Francisco. And it's only like the modern Square, Twitter, Airbnb that were SF phenoms in that relatively recent era. So I think it's an anomaly anyway that San Francisco is equated with technology.

• 30:53Logan Bartlett?

  How is Miami trending these days? I've seen people on Twitter claim that there are certain people moving back to San Francisco.

• 30:59Speaker 01

  Yes, so every time I see someone tweet that someone moved back from Miami to San Francisco, I'm like, name a single person, and they never cite a name. Like, I'm like, I don't know a single person socially, professionally, that moved from the Bay Area that's went back. Single person. I'm happy if anybody tweets a name, that'd be great. I do know people who've come here from New York and been back for whatever set of reasons, and maybe some other geos, but I don't know anyone in the Bay Area, which it'd be like, yeah, it's like, do you want to like set for the next 10 years and be in misery, or do you want to be happy? When people move to Miami, they are inevitably happy. So for example, 60% of the Thiel fellows are in Miami this week for their reunion, 10-year reunion. And most of them actually had not been to Miami before. I went to aggregation a party sort of thing, Saturday night, and talked to a lot of Thiel

• 31:42Speaker 01

  fellows, probably talked to 40 Thiel fellows. My uniform takeaway was, wow, they're being blown away by Miami in the first 24 hours that they're on the ground, and I've already persuaded about five or six to cancel the return flight. That's pretty good for, you know, two days in Miami.

• 32:00Logan Bartlett?

  Yeah, no, for sure. I mean, listen, I love coming down.

• 32:02Speaker 01

  That's my metric for Tech Week, by the way. So what fraction of people here come as the magnet is Tech Week, and what fraction canceled the return flight?

• 32:09Logan Bartlett?

  What's your most contrarian view today?

• 32:11Speaker 01

  It's a great question. It's actually, I don't have a good answer, and it's very embarrassing. I got asked this at the Thiel Fellow event, and I'm super embarrassed by this. All my views that I've had are out there in the public domain, and I think most have been validated by history. You know, the idea that remote work was fiction, I think, is more conventional. The idea that, you know, the coronavirus was, you know, not a byproduct of some bat biting some, you know, random person in some wet lab is almost surely true, you know, which Bloomberg dismisses as a fringe. Theory only a year ago. The idea that, you know, the markets were overinflated. It were on the precipice of a 1999, 2000 collapse. Has obviously been true and proven.

• 32:56Speaker 01

  So I have to come back with new ideas. The more interesting version of this is how do you get these new ideas perhaps? And so what I tend to do is I like to read books, like real books. And by reading books that other people don't read. Do you spark, you encounter new anecdotes, new data points and new ideas? And then there's kind of combining your brain often when I'm sleeping in the middle of the night. To be a spark and that spark is something that creates the next contrarian idea.

• 33:22Logan Bartlett?

  What's the single most impactful book to you over the last, whatever 30 years?

• 33:27Speaker 01

  To me is a little bit different than the single most impactful book. I highly recommend upset at stress. It's all about why the benefits of stress, the challenges of stress are good for you. Physically, emotionally, health, you know, financially and from a health perspective. It's very counterintuitive, but I already believe those things. The book is just a manifestation of evidence that I can give to other people. The most impactful to me. That's a really good question. Most books that really resonate with me are manifestations of things I already sort of believed. Professionally, high output management. For the first 15 years of my career in technology. I reread it at least once a year and always learn new things.

• 34:09Speaker 01

  Always wound up underlining new sentences because I appreciated them differently based upon my new experiences. So that was probably pretty influential, actually.

• 34:18Logan Bartlett?

  Speaking of contrarian views, what's the biggest misconception of open doors business today? What would you say to short investor or people that don't believe in the business?

• 34:26Speaker 01

  Well, some people think it's unprofitable, which is ridiculous. Like if you look at, it's in live in 52 markets. And with the blip of maybe one quarter when interest rates spiked all in the same quarter. The company's been. Profitable for 22 of the last 23 quarters, I think, or something like that. And in 47 of the 52 markets, the inventory looks pretty good right now. I mean, they're going to do an earnings on May 3rd, so people will get the latest update. But I think there's some misinformation, actually, truthfully, out there. Secondly is I think that people don't understand. I think it's actually been good to go through kind of the housing crisis. Once the company gets through it and shows that it can navigate it well, I think it'll get disproportionate credit.

• 35:10Speaker 01

  Square went through something like this, Tesla sort of went through something like this. Amazon went through something like this 30, you know, 23 years ago. A misappreciated business. Eventually, you know, the metrics line up, people have to, you know, realize and recognize reality. A top-down perspective on Open Door is simply, it is impossible to fathom that in all of the trillions of dollars of residential real estate that goes on in the United States, that the largest market cap company is going to be at $10 billion, which is roughly where Zillow is. That just doesn't make any sense.

• 35:41Logan Bartlett?

  You're a frequent user of Twitter. Are you friends with Elon? How would you characterize? You used to work with him.

• 35:47Speaker 01

  He was on the board when I was at PayPal. I considered working with him at SpaceX back in the day in 2003.

• 35:53Logan Bartlett?

  So you've known him for a long time. What's your opinion of Twitter right now?

• 35:56Speaker 01

  I like Twitter. I use Twitter. I think, you know, as I said on stage recently at a conference, he's making all the right enemies. So I use the Lincoln adage to judge people. You can judge someone by who their enemies are. And since all the people are most wrong in the world and most evil hate him, he's doing a great job.

• 36:13Logan Bartlett?

  How do you use Twitter? Like, what is your intent besides, besides, you know, you do a good job of using your platform for companies and whatever, but...

• 36:21Speaker 01

  The original use of Twitter for me was just like accustomed to New York Times. Like, I used to read the New York Times on Sundays. And so I created the right people to follow in sports, politics, and technology. And I would then be able to, you know, wake up in the morning and track what was going on in the fields I care about. And so that's how I used it. I didn't actually use it as a broadcast mechanism for a very long time. Then when I joined Square, I started using it for customer feedback, meaning I read every single tweet about Square for two and a half years. And I'd retweet some to, you know, help the company. amplify its message and story, which actually helped raise venture capital, truthfully. This is before it became cool to do this and like so VCs weren't quite as savvy about this. But that's how I mostly use it. And then I would typically only use it for a broadcast around sports.

• 37:03Speaker 01

  Because I was a big sports fan. And so I figured that was safe, you know, running companies. I could talk about sports less controversially. It wasn't until I became a VC that I started using it more to proselytize. And I used it to proselytize because I realized I had a platform. I had a lot of followers. I had over a hundred thousand followers. And I didn't want to wake up at the end of my life and say, I have this platform. I had the ability to influence people remotely that I'll never meet. And change the world and impact their views and not have taken advantage of it. And it was actually refreshing. At the same T L fellow party, I had a couple of T L fellows come up to me and say, thank God you tweet what you do because it's helped reshape my brain around X, Y, or Z. So that totally justifies the effort to proselytize ideas. But mostly it's because I know I have the potential to impact people and I don't want to regret living my life without having

• 37:48Speaker 01

  been able to try to influence people. Have you ever regretted anything you've tweeted? Yeah, I mean, mostly because of the distraction. Meaning like I think most of what I tweeted or all of what I tweeted is accurate, but or wouldn't have tweeted it, but there are times when either you slightly missay something or you step into a landline and then the rest of the day you kind of have to respond to it. And like, look, I have things to do. I have a company to run and Invades Smiths to make meetings to take. And so, once in a while, I'm like, oh, shoot, you know, is it really worth like three hours of distraction? To have done this for whatever upside? You do meet founders this way. Founders are really happy about your willingness to defend their company. Every company struggles at some point and having VCs, people with, you know, presence on Twitter

• 38:30Speaker 01

  that are willing to defend the company when the company is under pressure. I did this with respect to DoorDash when people are like, oh, DoorDash is never going to be more successful than it reads, or DoorDash is never going to make money. So like leaning in and, you know, helping crystallize the true story can be very valuable to companies. But the distraction isn't always worth the cost. So I've been more guarded sometimes now about like, oh, this week I'm really busy. I don't have time for two extra hours on like Twitter debates. Yeah. One that I wanted to ask.

• 38:59Logan Bartlett?

  And we can answer if you want, but you overlap with Bob Lee at Square.

• 39:03Speaker 01

  Yes.

• 39:04Logan Bartlett?

  And he had moved to Miami.

• 39:05Speaker 01

  He did.

• 39:06Logan Bartlett?

  How will you remember, obviously tragic events that were still sort of unfolding? What would you like people to know about Bob Lee as a person?

• 39:13Speaker 01

  I'll give you some unique, I'll give you like unique insights, like obviously, you know, lots of other people will comment that knew him better, you know. But two Bob anecdotes, one Miami one is to show you how Miami was really tracking. He literally moved here and texted me after he signed the lease. Like I had nothing to do with moving him here. He just texted me like, I signed the lease in Edgewater. So that's when I knew Miami was really working was like Bob moved here proactively without my involvement and texted me after the fact. Okay, second, a kind of better anecdote was Bob Lee actually hired Delian. The engineering team at Delian, when Delian interviewed as an intern had rejected him. The recruiting team actually sent him a rejection note.

• 39:54Logan Bartlett?

  This is at Square?

• 39:55Speaker 01

  At Square. And Bob personally overruled the team. And so they had to call Delian after they sent the rejection and say, you know what? We didn't really mean that. So Bob had this spike and spidey sense for real talent. And otherwise, you know, my life would probably be different if I had Metallian. Delian's would probably be different. So one person going out on a limb because they had confidence and conviction about someone totally changes the world.

• 40:16Logan Bartlett?

  If you had the culture to any of those, any new or different things that you sort of found and needed stepping back in after what?

• 40:24Speaker 01

  Eight years, not like, yeah, like almost 10. It's a little bit like, I feel like Michael's already quoted Marty Lee's, maybe he's spawned. Yeah, yeah, trying to come back to play with company. So yeah, your muscles actually would be definitely the eventual populist, develop a lot of bad habits. You may get, you may learn some new things, but you also sacrifice a lot of insights, a lot of memories, a lot of skills. And it's taken about a year or two for those muscles to be developed. I think for general, I agree myself for quarter and first year best base, I got a B plus of a quarter. Usually it was below that of myself grade. Last Q4, me as a B plus, Q1 this year definitely a minus.

• 41:06Speaker 01

  And maybe this quarter I'll find that it paid because it adapted after.

• 41:10Logan Bartlett?

  What was like running a YAPD, sort of stepped right back into it? And what required of redeveloping those muscles?

• 41:15Speaker 01

  Easy to entertain a pirate, assessing people, closing candidates. If you're essentially doing that as a peace center, it's very similar. You're assessing entrepreneurs, you're helping men assess executive candidates. I interview a lot, 10, 50 percent by tribe, calendar, you see interview candidates for portfolio of companies, providing feedback to founders, sometimes helping close. So that's skill that they have to actually be ready in a maybe in a crib. The performance management of getting people to do things at a faster tempo, increasing the fall and working together, you know, they have different views. That most type of skills really become difficult when you take your sort of foot off the gas.

• 41:55Speaker 01

  The 10% of pace, creative problem solving took me the first year to recreate that ability. At the end of last year, where I've been pretty good at the creative problem solving. But then also like venture capitalists might use that skill once in a while. But really, leading by example, is completely gone. Like eventually you're not leading by example, you're not going out looking at yourself. You're probably underworking every cloud, whatever. Sadly, you'll have a large team here that are leading by example. So there's just a lot of differences. Actually, watching some of my best authors has reminded me more than that. Familiarly, this is probably the best way to rebuild these skills of watching that that's 1% of hours of different trades.

• 42:37Speaker 01

  And trying to imagine putting myself back in their shoes rather than try to recreate myself. You know, back when I was in my prime.

• 42:44Logan Bartlett?

  Yeah, that's interesting. And do you remember the other like operating things that I've heard you talk about? I sort of want to go through some of these points to elaborate on them. One of which is you hate OKRs.

• 42:54Speaker 01

  I do hate OKRs. The biggest reason, this is a lot, and there are one or two things that changed since 2013. What is about outputs versus inputs? I used to be more on the side of measuring outputs, make high alpha management. My enduro that you watched in the voice, I'm not sure it's mostly focused on outputs. I'm shifting to mostly value inputs and looking at the outputs as a byproduct. That's been a 10 year journey.

• 43:19Logan Bartlett?

  Do you think venture, I mean, because in our job in a lot of ways, it's hard to actually impact the outputs once you decide on the inputs. Do you think venture sort of drove?

• 43:27Speaker 01

  It can drive and it may have reinforced it subtly and subconsciously. The biggest drive was a square was more input than output driving. Set me there with the presentation I watched by Jeff Bezos, where he was explicit on all these ways to why you need to drive by inputs, why you need to engage people, why inputs are not outputs. And it really locked in my brain that he was basically right. So I had to recreate all that news and then try to furgonize my 13 years of running stuff. But Bezos has years of a little bit of square and a little bit of extra.

• 43:58Logan Bartlett?

  And so what was Bezos' point or what's the reason why inputs should be a focus more now?

• 44:04Speaker 01

  The biggest reason is that I want people to create fundamental breakthroughs. Now the creation in startups is feasible and that's usually an upfront for a tech breaker. If you ask people to drive the route out through what cares, they will only give you and sign up for things that they know how to do. Breakthroughs by definition, we start, you don't know the answer. And so your best people, if they think they're being measured by outputs, will then reason have and say, I'll bet it's the column that's really pushing it where I don't know the answer. I don't know how much time it's going to take. I don't have the line of sight of the solution. But that's how you create iconic companies is by the best people, not the worst people, sign it up and say, I'm going to solve this problem, whatever it takes. That was the most insightful comment because it resonated with me instantly.

• 44:49Speaker 01

  So we use this at Petaal, Peter had a different way of framing this. At Petaal, he had a focus point where everybody was assigned one day and one thing. Only wouldn't talk to you about anything else you're working on. His way of communicating the inputs and breakthrough to a board was, I'm only going to allow you to look at one challenge, and don't talk to me to solve that challenge. So you bang your head against the wall for days, weeks, months, I suppose, longer, and so you solve that problem. So even if you used OKRs at the end, or I'll put an end to measure the success of the initiative, you weren't allowed to get distracted, and you didn't have a choice for what you raised your hands for. Because Peter basically decided what he thought the most important realms of the company were. So it kind of works through different mentality.

• 45:32Speaker 01

  So it's really combining a little bit of Peter's focus theory with Bezos's theory, and then the venture world where you have to drive late, which still have a choice.

• 45:40Logan Bartlett?

  On the goals point and the focus, did you all push back on, like, only one thing within a company? Every single, exactly, you pushed back?

• 45:49Speaker 01

  Yeah. In Peter, most things Peter was hypocritical, because he enforced it more than I. Yes, I know. No, we all tried to push back, and, you know, he did worse. Peter was the biggest decision. It's very difficult, the process is reset by, I applied it successfully on it three times for 30 years. So we all adopted it. And then actually, over time, I've built a theory of why I believe it's actually a superior wage job company, which is, this was a part of his logic when I grabbed by him two years later, I kind of agreed. So everybody has this kind of list they use, and click on the one you write down, list of things to do. And there's this psychological satisfaction passing things off. You usually put the list in order of four digits, but then you cross things off that they're a least of four columns.

• 46:34Speaker 01

  Company nearly about is about solving the most important columns. And so you want to take away the other things off that list. So you don't count the psychological satisfaction of solving the other challenges. And if only solve the A level problem, and that's all you do. And once in a while, someone comes through to devise a solution to that A level problem, and then your company's going to work.

• 46:55Logan Bartlett?

  I had all the, for me, I've internalized that as the can man board problem, which is on a can man board, each item shows up the same size, but none of these was proportional in their impact at all. And so it feels equally satisfying pressing the checkbox, but it doesn't mean that that's equally the path to the end.

• 47:13Speaker 01

  Selfies is another way of making decisions that Reid Hoffman taught me in 2002 and three, that I think most people totally misunderstand, including people close to me, where I was thinking years on, can you hear this? So I want some people to make decisions by creating lists, pros and cons. So Reid convinced me in 2002 that that's a horrible way to make decisions, because we make a list, you're assigning implicitly equivalent weight to each of the factors. So I never make a pros and cons list on any decision, and I hate what people do that. And yeah, so you have to first go off on a different methodology, but it's people waiting, artificial people waiting, that these typical economic techniques lead to very mediocre results.

• 47:52Logan Bartlett?

  Interesting. One of the things I heard you say, I think it was in the YC talk, was actually the quality of office space and food can be a good thing to just get out of the way and focus on like the quality that you want it to be. Why do you think that's the case?

• 48:07Speaker 01

  Well, I think basically you're creating a cult. So there's another Peterism, but basically any good startup is a cult. And a cult has unique ways of doing things versus the external world, unique will be structures. This is like, what do we believe and nobody else will be is a secret in some year to one vocabulary. And to reinforce that, you want people to enjoy and choose at the margin just that time of the office. So by making the office better, by making the map for stations to reflect the cult. So if you're a design driven company like Swer, you want everything, every detail to us to be perfect. If you want reflective behavior, for example, let's say a venture capitalist, you might want, you know, orcs and like, you know, landscaping out the windows, because there's actually research that that fosters creativity. So depending on what you want and what a

• 48:52Speaker 01

  different layout. If you want lageration, then you want it open office, you want to cause traded work, because like what you need to do requires tons of good study. You don't want an alcoholist. So this all very top out, what kind of company I tried to build, why, and then make that visible plans, reinforce the behaviors to train.

• 49:09Logan Bartlett?

  And the food side of it, isn't that you believe in all the perks associated with the office, but it can be distracting if you don't have what people want?

• 49:18Speaker 01

  I think there's see that's one. Really good engineers, really good designers are world-class at what they do. They're sort of like athletes. And you want people who are athletes to consume the best possible nutritional content as it needs to be performance. So by improving the quality of food, you get better performance. Secondarily, there's disruption, just like what's called a global of like, what do I need today? Where should I go eat? Where do we need? That causes disruption from shipping. So you want the velocity of shipping is the most important thing, but you're a master of ground. The most across the thing about ground is the velocity of product. The product velocity is a function of people not getting distracted by our visual thing. By simplifying decisions that people don't spend time going to get a sandwich, people

• 49:59Speaker 01

  don't spend time hearing how much of what we're asked, but you're providing the food that they can consume quickly, easily and healthy in a healthy, just way you're maximizing the performance at that fast stage, it compounds. How would you internalize that stuff for open store? Where are your honestly now? Where are some of these things? Well, we're actually moving privately about a week to our ideal office. One large open floor plan all together, all functions. It's taking a while to get the right off. It'd be, you know, building doesn't always work at the same velocity and speed on a startup, but we're finally getting the proper office. So I'm super excited. I think it's going to reinforce a lot of behavior. But we always been moderately conscious within the choices.

• 50:44Speaker 01

  We work in person. We don't allow them to work. I don't allow receiving to be the night tend. So there's a lot of reinforcement in learning. You know, one, we have sort of payers. I tell a lot of people to take a laptop sit on a meeting. I tell the focus concentrating debating, not like on a ticket. I need to some old noise from keyboard is shocking. It pulls efforts and it's a lot of like. So I think you have to design all this stuff, you know, from the first principles of practice, one, I try to create, well, culturally I try to create what visible principles have I tried to re, what visible principles am I using to reinforce behaviors along? Do you not believe in a remote work? I don't believe in remote work for startups. I would not feel like a company, now we're still, they're probably not feel like a company collectively as based on rope. Then why is that? Well, I think.

• 51:29Speaker 01

  If you've ever built a company, I don't actually, I don't believe anybody's ever built a company successfully, believe their role work, first of all. The reason why is another theory is that is basically have to build a company on undiscovered talent. People are ruining their career in that large companies, they Google based on whatever, they don't know how to process these people. Because you all are competing, so the cops, you need to find people that they're not going to want to attract, and they need a little company. When people are really in their career, really in their craft in any career, they learn by osmosis. The way you learn by osmosis is you need to be shadowing people for unstructured learning. Take away the unstructured learning, people cannot advance beyond a wisdom of their years.

• 52:08Speaker 01

  Secondly, you need to know promote, the way you figure out how to promote, give them opportunities, not watch them very soft subtle cues that don't pop up by the zoom call. So you need to hunt, you can't build a company with undiscovered talents and give people internal promotion opportunities if you're using any version of role work.

• 52:26Logan Bartlett?

  And then the other thing is, there's this element of osmosis, right, that ultimately comes from being able to observe how people interact and.

• 52:33Speaker 01

  Yep. So as a leader, I used to always try to try to have a guest, the promoter build, ask to sit in the bill. But the office side, we kind of look to the left and look to the right, and they don't let me very subtle cues. And now give me a pretty good signal, I can now see that I'm a leader for both, create challenge with more complex opportunities. Another reason why their role work kind of is disruptive is there is collaboration that leads to sparks. So we also always saw a new product out in February called Dine. We're asking, I devised the product on February 1st, we've lost in March, six weeks later.

• 53:09Speaker 01

  The three puzzle pieces that led to the product, one was a conversation at an offsite, sparked by my P P of engineering. Second was preaching from the head of revenue, but didn't like the first version of the idea, chewing on his negative feedback. Third was sparked, solution was sparked by two other things, a spontaneous bludgeon of data action I had with one data scientist at night. Where he asked me a question about where we're taking it off asymmetric press. And then last was nature area review, deep dive into it. The four things combined to be the insight that led to a brand new product that's been a focal point in the company for the last two months. That would narrow out, none of those were fakes, probably the couple of zoom call.

• 53:54Logan Bartlett?

  What do you think about moving individual contributors to managers? Do you take your best ICs either out of sales or in steering or whatever it is into manager?

• 54:03Speaker 01

  A hundred percent of the time. This is another thing I learned from Peter. Peter taught me the first week I was at K-pop, they don't believe in general managers, which stuck me on at the time and this is 23 years ago. Believed in probably the single best person is either engineer to run whatever the craft is. So that's my philosophy. The greatest passive X is going to be writing apps. That allows you to agree with undiscovered talent because they know that the person who's leading the function is pretty delicate at what they do and they can absorb self-syndication, also they spare on solving. The person who's leading the function can solve the problem with their server hands if they need to. And then third is you avoid demoralization. People hate when they work for somebody who doesn't know what the hell they're doing.

• 54:43Logan Bartlett?

  What about, so we talked about like things that can be distracting within the office. And one that has been on top of my veranda, the companies you work with is social issues broadly speaking, right? I think some people characterize it as woke-ism and certain companies have sort of been further out of the curve on this versus not. Where do you think within open store or the companies you work with? Like what is a social issue versus when did it start to see a global into a social issue that should stay external to the company versus something that's actually a patfall to the business or the people?

• 55:15Speaker 01

  I think it's actually very easy to tell. If the company, if there's a self-issue that's going to interfere with some business metric, that it's perfectly appropriate for the company to focus on. If it's not going to interfere with some PDI, then it's totally inappropriate. We like to say founders thought you bring your work cell to work.

• 55:31Logan Bartlett?

  And so if there was some discriminatory law in Florida, for example, right on transgender or gay rights or black or whatever it is, something, would that become an open store issue?

• 55:42Speaker 01

  Probably not. And in fact, I would assume because Florida has a melting pot. People have a refreshing different perspectives. There'd be people on open store with completely different views on all of those topics.

• 55:53Logan Bartlett?

  Interesting. So it's just what's happening outside, even if it impacts you on the inside.

• 55:58Speaker 01

  It's a force it and yes, it's not going to that clearly. That's an absurd philosophy. We wouldn't fund a founders thought companies founders that have that philosophy. They can go take money from other people.

• 56:08Logan Bartlett?

  Interesting. Switching gears to investing, what do you think of the role of a VC?

• 56:14Speaker 01

  Great question. I'll spear on, new for that day now. My personal version of it, which is not for everybody, is I think my role is to fuel and propel a founder who has incredible potential to achieve his or her ambitions by giving capital and serious that sign here.

• 56:35Logan Bartlett?

  And so how does it manifest itself? Like, what do you actually do in that practice?

• 56:39Speaker 01

  Actually, usually it's responding to questions. So really good founders are trying decisions executed constantly. But they have questions that they want, either intellectual framework on how to resolve this trade-off, so short trade-off. Or sometimes there's experiences they haven't had yet, like they're hired their first CFO. Which they'd be looking for, how to assess the CFO. They may be an MIT Brown's affiliate engineer who's never met a CFO before. So helping them try and wait to solve a new problem, best re according to the business's success. And for how to navigate called much triumphs. Easy questions, they've already resolved by definition. I always slap every child I do a while one with a founder, because two or three questions in,

• 57:21Speaker 01

  it's all the hardest damn questions in the world. And I'm laughing because they're so damn hard, they wouldn't be asking me because they're so good at it. They would have decided everything, but it's easy.

• 57:30Logan Bartlett?

  How was it hard for you to shift that two by two matrix of consequences versus delegating decision, like you talked about? One of the things I've seen when people come in after having success is they're very opinionated about, well, here's how we did it. Laying their exact framework or how past experience sits on top of the company itself. But ultimately, you don't get it. Make a decision, right? And you're sort of an advisor to that. Was that difficult with for advising companies or was it kind of natural?

• 57:57Speaker 01

  I think that was very natural. I think benefit of being how I want different companies, you know, so it helped build a leading square on different companies. At the advantage point of being on two or three other boards, like things y'all have consumed, for example. And just see how different each of those companies were with different challenges, different people, different cultures. Led to me to believe that there's not a one size fits all answer ever. There are trade-offs that can be solved, the grass is always greener. And my job is to communicate those trade-offs so the founder can make a wise decision based upon knowledge and the benefits of history, but I'll never, almost never.

• 58:36Speaker 01

  And the example is really music. I know they have ever told about it, you have to do X. At one time, David's really, he's thinking of something most subtle, but need detail. I think he ever listens to this, he could all die laughing. But my conversation is always around, here's how I think through that problem. Or here's some of the things to look for that might be going wrong. You know, if you go X, like here's the early warning signals, and you buy one of reverse course. But I'm very rarely prescriptive. I may be more prescriptive by judging a candidate. But they ask me each interview, I tell them, I've got a strong allergy or strong enthusiasm, and I'll communicate that. But on the business strategy, execution, the pacing, all of that, it's really, it's no company.

• 59:18Logan Bartlett?

  It seems like you think about what can go right. You're a people-centric investor that thinks about what can go right in certain situations. Have you, one, is that fair? Or did you, have you ever been surprised by an outcome, like in your wildest dreams, it outkicked what you expected? And you're what can go right presumably what go right, Gray, where it was insight and learns.

• 59:38Speaker 01

  You did right there in your athlete to my words. I'm like always reminding herself to ask that question. Because when you meet an early stage helping trigger, I'm mostly focused on early stage, best day, really called seats, here's A, here's B. There's so many things that they were wrong. It's not very difficult. They've actually defined things to total all.

• 59:55Logan Bartlett?

  That's a good trip. Being a scenic sound smart.

• 59:57Speaker 01

  Yeah, it was very easy. There's lots of things current free, but there's lots of things that can backfire. So you have to manage it. You have to course correct yourself and retrain your way to imagine, well, if this were to come together, is this going to be a company of consequence? Because not every company will be a company of consequence. It will not be iconic. It will not do work technically in all of plots. So you need to think about what's the upside potential against the risks that something go wrong. And then one is the strategy for minimizing or addressing the risk of the things that go wrong. Does a founder understand the potential problems default? Do they have a probabilistic approach as likely to work? But you want to start with what could this be when it grows out? What's the potential? It's a knaffy. You know, if you look at like an athlete in high school, you want to imagine not just like what limits about athlete,

• 1:00:42Speaker 01

  but could they need the next, you know, mental disorder or something? And so it's a lot. Like that, I'm sure guys. Also, being a lawyer is really not training for this because we agreed at the law school, it's issue spotting. So when you take an exam, if none of them are in law school, they identify all the things that can go wrong in the scenario and then you kind of resolve it and you get massively penalized for missing issue. So you don't want to do that as venture capitalists, as early-stage investors. So start with, what would this be? Yes, what's a viable? Like after you got chaotic founders, like when you realize someone has ridiculous potential, sometimes they use surprise on the upside. But that's where you're, you're making a conscious decision that the linearization of this business probably only looks like yes.

• 1:01:23Speaker 01

  But this founder is very special. Even if most people would take it to a billion dollar out mill, there's just times we thought it would take it and that's worth me funding. So we actually did that relatively recently in Miami, classic camera. I invested a finalized company worth a natural strapulation of the business is a flat under billion to billion dollar company, which typically would not affect capital management, but it is acceptable. And there's a shot he can pour in the heat out into an outsized success.

• 1:01:51Logan Bartlett?

  How did a petty pass that along to one of the things when people are early in their career, there's a natural bias to not run fucking prey. No, like, honey, I don't want a big zero to go up on my scoreboard as my first deal, but it's a, it's a tension because that's ultimately the venture is a game of outlaw kind of, or power law distributions. How do you encourage that with people within founders wanting to be able, willing to take that?

• 1:02:14Speaker 01

  Was really complicated dynamic. We got, I think to meet early-stage investor that's good and they have to be bullied to lose money. And that's easy to say, the more success you have, the easier it is to say. But unless you start with that dynamic, I think it's really hard to have success. And so it's like, which comes first? The confidence to be totally comfortable losing money. Actually, I actually did like for a while during the volatile era, let's call it 2019 to 2021. Where not enough companies are supporting a family. And I thought that that might mean I wasn't taking enough rest. Now, I think it was partially propelled by people propping up companies with a lot of money, excess capital. I could play the crisis and then that's changed. But I was nervous. It was like, um.

• 1:02:56Logan Bartlett?

  Thanks, I need to re-farm enough on the risk crew.

• 1:02:58Speaker 01

  Yeah, I wouldn't have been given enough rest for being too constrained, worried about what other people think determinatively. It's just not a idea. So one way I, of course, glad that I mentioned this on a podcast before, is I like to fund things that I run through my algorithm of would half my friends who are VCs lock down? A lot of tests looks pretty well because it's pretty suited. Like I imagine you laughing at a company where you read, I just led them about, yeah, yeah. And so if I think half of the smartest VCs I know will laugh, but I know I'm taking square.

• 1:03:25Logan Bartlett?

  How does that actually play out within founders' funds, like from a decisioning standpoint, right? You're here, you're here, uh, have all the credibility in the world, so I assume not too many people laugh at you.

• 1:03:35Speaker 01

  They still do. I mean, I've been here four years, but I still occasionally filter myself and maybe two or three times I did a KB. It was my fault, not my career's fault, but there were times where the amount of partners meeting led me to either be less aggressive or more aggressive sometimes. And I still wound the decision every time the KB, but it does affect you, even if you don't want it to and even though it should be. Um, stereosaral is useful, but you could also get con into it, stereosaral. Like, so I, one of my heroes, for example, was Barbara Thatcher, and she had this quote, and I always hear that, but I saw a lot of she, it's like, I don't read the papers. They invite deterring. And you got an insurful picture, so I mean, too many other people like deterring. That's not what I wanted to do.

• 1:04:19Speaker 01

  So for example, uh, I was pretty, I had some very highland dick shit on Dorn House. It was very controversial at the time at KB globally, uh, lots of people like. There's this company that does this, this company that's at the college that we're on the line, I'm so weak out, excuse us. I would not have enough conviction to pull the trigger and just shut everybody up other than Joey got work for me. Like if I didn't have that little Delta asymmetric information I could just rely on, that would have made my career, I would, I would, I would listen to too many people. Um, there was another time like fare was starting, uh, everybody was like, oh my God, you're, you have to reach out, blah, blah, blah. Really well, come on, Amazon, Amazon, and had Max dot worked for me, I would not have been able to make that investment.

• 1:05:03Speaker 01

  They were so incredible, like K D of a C pro that the Delta Max and Jav, two of the four co-founders had a, not only worked at Square, but worked for me, were directly hired for me, were, you know, directly reported to me. I was like, no, these people have made this work and you guys are all in the end, it's like, and you know, you need to have that conviction. Um, sometimes, but this kind of, it's what actually I was a little too, let's say, aggressive and I started bringing Joe Farnham here, let's say, K D. And people would be more enthusiastic than I expected. So it cuts both ways, but you've got to be careful about like not listening to each other.

• 1:05:37Logan Bartlett?

  And, and do you find it's harder or easier to take that level of risk now that you've seen all these successes along the way? Just, I can, I can imagine the one way it's like, hang on like my money will speak for itself regardless of this goes to zero. The other way is like, does this actually live up to those other companies? I don't know. I don't know if this is really going to be a fair or a door dash potentially. And so I could pass on, you know, potentially great outputs.

• 1:06:02Speaker 01

  I hope not. It's where the real leverage to her is you get so consumed with board commitments and other, but then it's, you don't have time to take these fresh provocative meetings. So like, you know, I, I gauge myself by to make the right decision, the increases, they'll all the time. Now, the government's outside because that, that, that doesn't really help. And I think my biggest weakness is in filter of which meetings to take. You can't take every meeting that you get introduced to. And I made some mistakes on which meetings to not take in my career, both as people, as like powerless. But as you get more busy and more established, you enter power, it's harder to take incremental random meetings from some founder and a lot of field. But those are the ones that often take best.

• 1:06:45Logan Bartlett?

  Now, one of the things I think you're very conscious of, and this is something I think a lot, a lot about as well, is the wind you and a potential investment and, uh,

• 1:06:56Speaker 01

  It's something that I've found people can delude themselves into thinking like, hey, well, of course me, right? And I think you're very conscious of, hey, there's other investors out there. Why would I uniquely do that? She talked for time to think about that and not delude yourself. Let me first say is, let me say that the reason for the awards is most venture returns are me over our best. So you don't want to have another venture capitalist who's your research towards that other venture capitalist either in your fund or whatnot. It's a shitty asset classic sound, right? It's not very good. So like being the door is not what you want to do. So one way is to create output is to say like, what is special about this or me that's going to lead to the probabilistic distribution being different than the normal distribution? And so I always want the answer to that question to be, why me? Or why do I have those fair

• 1:07:41Speaker 01

  advantage? So in the fair authority case, both of the founders, yeah, it works with me. I should have made that call there. Everybody else would have applied. Like if I can't, I shouldn't be there. Now, when I meet a random founder, let's for coffee. How do I have a competitive edge versus you? That's not so easy to imagine. So I ask myself very seriously, why am I getting a better call than low the offense? Because if not, I'm going to produce the same returns as, you know, you or collective mass and collectively do not see the B Cs. And so unless I have the answer, I know I'm going to rest in the middle of the bell curve. And I'm like, oh, so yes, it can be out of personal relationship. And the first is I can make the call. And that would fall of these traits better. That's

• 1:08:23Speaker 01

  a very good answer. It could be in some vertical perhaps where I have depth of knowledge, but other than that, custom ways to sort of get burned my knowledge in some weird ways. But there should be a really damn good answer for your baby in the middle of the altar. And that does help. So I'd heard you say you've never done the damn analysis. Is that actually true? It's actually true. And why is that the case? I think markets are either too big or large or too small. They're too big or large. They're a trillion dollars, two trillion dollars is the use of. Especially where you're investing. Yeah. Yeah. So it's freshly early. I think I should get later reviews about a bold to do this. But what I'd watched you is through the stage investing.

• 1:09:03Speaker 01

  Definitely, I think you're fooling yourself because extraordinary founder will create buckets of opportunities you can never imagine. So the last thing you want to do is constrain yourself, you know, when talking to an end of one founder. And the third of all, the best in us that are often in non-concussion markets where any town is like a silly call and show. Like, what's the town for Instagram? But I mean, I wouldn't even go and do that if I wanted to do it. But like, for example, when I had some town concerns, where the team has outperformed any other classic, let's say, town analysis. I was the first investor, first seed investor in Shabla. Sure, not be the town in company.

• 1:09:45Speaker 01

  I don't think you could have talked to Ray the town of Shabla with any care about else. Maybe you could have said, there's this many bikers, but that's if the first market was actually pretty small. Runners, bigger market, definitely. So maybe, but then nobody's paying for these things at the time. So what's your town? Like, you really do need about founders, I think, in early stage, and they will take you to price. That is, that makes sense. Also, there's a price, okay? You have very much of a billion dollars. You make sure there's 10, 100 billion, a billion dollars there. I was a bit of a man, right? Actually, people misunderstood the potential of family pretty massively, when Julia Kevan started the company. And basically, nobody externally really appreciated the company until they get a hundred billion

• 1:10:29Speaker 01

  dollars gross ticket sales, which is without a bar. But once you get a hundred million dollars gross ticket sales with up four or five employees, the B C's, I mean, self B C's, Chu particularly, appreciate that if there's a hundred million dollars of loyalty, and it sells a four or five we book, could tap into. It must be going somewhere. There's always four or five people who are not even able to get to that level of scale. So sometimes you are using like data points, this time to market, four months to market, four people get you here. Well, there was me some afterburners. So to excel that number B for that data, there, you can convince me the data about, well, there's a there, there, where they just dropped, so it's not there. People did stop that as I was crushing all these independent retailers.

• 1:11:12Speaker 01

  And I also had one slide that was incredibly valuable to me, where he showed Coach 2008 actually innovated bookstore with Roger Crowe. So I was like, okay, well, bookstores are right. I've got sound as all of it, but I can draw it as a totally false narrative. So I needed one data point to walk in my brain that we have as all this toy, everything is just false. So I do want those data points, but I'm not doing a top down 10. Well, Keith, thanks for doing this. Thanks.