How to Win by Being Right and Contrarian: Lessons from Zappos to DoorDash

Alfred Lin shares strategies for navigating startup challenges, building resilient teams, and creating long-lasting value. Lin explores lessons from companies like Zappos, Airbnb, DoorDash, and Amazon, offering actionable insights on topics like hiring for potential, managing crises, and fostering innovative cultures. Learn how first-principles thinking, customer focus, and disciplined growth can transform challenges into opportunities, even in the face of unprecedented disruptions. Lin is a partner at Sequoia Capital. He represents Sequoia on boards like Airbnb and DoorDash. From January 2005 to December 2010, he served as Chairman of the Board and Chief Operating Officer of Zappos. He has a Bachelors in Applied Mathematics from Harvard and a Masters in Statistics from Stanford. Newsletter - The Brain Food newsletter delivers actionable insights and thoughtful ideas every Sunday. It takes 5 minutes to read, and it’s completely free. Learn more and sign up at https://fs.blog/newsletter/ -- Upgrade — If you want to hear my thoughts and reflections at the end of the episode, join our membership: ⁠⁠⁠⁠⁠⁠⁠https://fs.blog/membership/⁠⁠ and get your own private feed. -- Follow me: ⁠⁠⁠⁠⁠⁠⁠⁠https://beacons.ai/shaneparrish⁠⁠⁠⁠⁠⁠⁠⁠ -- Watch on YouTube: https://www.youtube.com/@tkppodcast (00:00) Intro (03:20) Personal Journey: From Taiwan to Entrepreneur (04:51) School Days: Lessons in Creativity and Discipline (06:21) Infinite Games: Shaping Life's Philosophy (08:12) Core Values and Life Principles (10:09) Work-Life Balance and Family Insights (12:13) Inputs vs Outputs: Daily Routines and Priorities (13:56) First Order Issues: Problem Solving in Business (18:46) Early Career: From LinkExchange to Zappos (44:01) Facing the 9/11 Crisis (44:24) Building a Profitable Company (44:50) Creative Financing Strategies (45:55) Customer Service Focus (48:53) Handling High Return Rates (53:31) Zappos' Unique Culture (55:47) Holacracy Management System (56:53) Maintaining Growth and Culture (58:37) Avoiding Complacency (01:10:21) Crucible Moments (01:13:28) First Principles Thinking (01:14:17) Navigating the Pandemic (01:27:37) The Essence of Company Values (01:28:04) Pros and Cons of Remote Work (01:29:52) Building Company Culture in a Hybrid World (01:33:11) Investment Strategies in Changing Markets (01:37:37) The AI Revolution and Its Future (02:01:56) Balancing Standardization and Customization (02:04:44) Working Backwards vs. Forwards (02:10:53) Defining Success: The Importance of Process 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

  One of the things that we talk about at Sequoia is you can't just be better. You have to be different, too. Whether you want to be conventional or contrarian, you have to be right. If you're right and conventional, it's probably a less interesting solution. But if you're right and contrarian, you probably won't be able to make a lot more money because nobody's going after that opportunity. I often find that it's interesting. There are people who just want to be contrarian, but if you're contrarian and wrong, that's not a great situation. I try to put things in these two by two matrices of right and wrong and conventional and contrarian.

• 0:44Shane Parrish?

  Welcome to The Knowledge Project. I'm your host, Shane Parrish. In a world where knowledge is power, this podcast is your toolkit for mastering the best, what other people have already figured out. Today's episode will transform how you think about building and scaling transformative companies. My guest is Alfred Lin, one of Silicon Valley's most successful operators turned investors. After meeting Tony Heish at Stanford over a pizza arbitrage scheme, Alfred went on to help build and sell Link Exchange to Microsoft, then scaled Zappos from startup to its $1.2 billion acquisition by Amazon as the COO and CFO. Now he's one of tech's most influential people.

• 1:25Shane Parrish?

  Like a lot of outliers, Lin struggled in school, preferring to hack solutions together than follow instructions. Sound familiar? That changed with one of his teachers who made him realize the importance of enduring impact over short-term gains. Whether you're building a company, scaling operations, or making complex strategic decisions, Alfred breaks down the frameworks and mental models that have guided him through multi-billion dollar outcomes. We explore everything from his unique approach to company culture and hiring that helped make Zappos legendary, to how he evaluates opportunities at Sequoia, to the crucible moments that shaped his decision-making philosophy. This conversation goes deep into specific practices around scaling, competing with giants, and navigating technological disruption.

• 2:10Shane Parrish?

  While revealing the deeper principles that have guided him through multiple successful chapters in tech. His insights on building enduring impact over short term gains are more relevant than ever as we enter the AI era. And of course, we talk about AI. It's time to listen and learn.

• 2:34Shane Parrish?

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• 3:16Shane Parrish?

  You've had a remarkable journey from entrepreneur to investor. And I want to know more about this story, but I want to start with some of your early life experiences that changed you and impacted you in the future.

• 3:31Speaker 00

  I guess I was born in Taiwan to two parents who were both commercial bankers. And in early age, from what they tell me, I was always a little, I saw the world a little differently and did things a little different. The story that they like to tell about me being different was when I was about two years old. There's a new dresser that was delivered to our apartment in Taiwan, and I figured out a way to get to the top by pulling out the first drawer, crawling into it, then pulling out the second drawer, pulling it, crawling into that, and then getting all the way to the top. And when I got up there, I thought I could fly, so I jumped off.

• 4:12Speaker 00

  And so they left telling that story because they rushed me to the hospital and they were very concerned. Whether there was any permanent damage and things like that. And my mom kept bringing me back to the hospital again and again. And the doctor said, don't worry, I think he's fine. I think he's fine. And eventually he said, well, is there going to be any problem with, you know, his development? He's like, well, he's either going to be a genius or he's going to be an idiot. He's one or the other. I mean, so that's, that's how my parents would describe me. High, high variance and high beta. And throughout school and throughout life, I was very much like that. I liked to hack things and not do the work until one day.

• 4:57Speaker 00

  And this was in, you know, in high, in elementary school, I just tried to not do the work and hack my way through things. And got suspended a few times, one of which was just coming up with a creative idea of taking chairs from the second floor to the first floor. I went down a slide instead of following the teacher's directions. I got suspended for that. And so I didn't ever really like school that much because it was so rigid. Until, until I used to hack my way through things. And one of the teachers that I had, Mrs. Einstein, had this way of teaching where she would put up a problem. She would then have us try to solve that problem or do the assignment and try to understand why she put the, the reading up there.

• 5:42Speaker 00

  And I would always bet with her, if I knew the answer or if I knew the conclusion of the lesson, then I wouldn't have to do the homework. She let me get away with that once or twice. And then she said to me once, you know, you're, you're very smart. I've seen a lot of people waste their talent. So do you wanna, do you wanna start first or do you wanna finish first? And I think I retorted back saying, well, I like to start first and finish first with the least amount of work possible. And then she said to me, that's a great answer for a sixth grader. But what happens in life when there's no finish line? What are you gonna do then? And that sort of put me back.

• 6:26Speaker 00

  And I didn't quite understand it until maybe now that it's the whole concept of having an infinite game and thinking through. Not something, some finish line, some goal, but just think about what you want your enduring impact to be and what you want to do and what you want to accomplish. And when the world doesn't give you a finish line, we all have the same 24 hours in a day. What do you want to decide to accomplish in that 24 hours? We have an unknown number of years on this planet. What do you want to get accomplished? That sort of shaped the way I started thinking about the world.

• 7:00Shane Parrish?

  Did it hit you then at the time? Or was it something you reflected on later?

• 7:04Speaker 00

  I think it hit me then, but I didn't think I, I don't think I understood it then. And so then that led to a number of explorations on what I did want to accomplish. Why was it important to think about this concept of like infinite games? How do you win an infinite game when there are no set rules? You're making the rules for yourself in an infinite game. And the rules change. You get to change some of the rules. The world changes some of the rules. How do you, how do you navigate that? And then you quickly realize it's not about winning. In a finite game, chess, there's a winner, there's a loser.

• 7:47Speaker 00

  In an infinite game, there are a lot of different people in the world. They play the game differently. And in some ways, they're all trying to get on with the world and trying to do the best they can. But some people are more successful than others. And the reason they're more successful, I think, is because they really know what their, their values are and they really know what impact they want to have on the world.

• 8:14Shane Parrish?

  What are your values?

• 8:16Speaker 00

  Over the years, I've, I've thought through, and this has changed over time, but I think the, the values for me are when you, when you want to accomplish something, it's about the inputs. It's about the process by which you go about getting the outputs. I think it's very, very important to have that. And I value that clarity of input eventually leads to output and focus on the inputs. I value a consistent compounding and just getting every single, getting up every single day and just making small improvements every single day and compounding that. I value.

• 9:00Speaker 00

  Honesty and truth and just being very direct with people. I don't try to sugarcoat anything.

• 9:13Speaker 00

  I value.

• 9:16Speaker 00

  I value people for who they are. My father, um, I learned this from my father where he's, he told me once because I was like, oh, okay. I'm just so much smarter than everybody else because I'm a little cocky little kid. And he said, well, actually you can learn anything from, you can learn many things from

• 9:38Speaker 00

  every single person on this planet. I think I was probably six or seven at the time and he was, uh, he'd show me all the different people that he learned from and that the collection of these lessons from many, many different people is what you become. And that was a pretty important lesson. So I value people for, for who they are and trying to learn as much as I can from each individual person. I value family and friends.

• 10:09Speaker 00

  Pretty important to me. He talked a little bit about work, life and work, life balance from, from, as you said, for many of us, it's work, life integration. And if you don't have some grounding with people who see you for who you are, call out when you're not, you're not being a good person or you're not doing the things that you said you were going to do.

• 10:32Speaker 00

  What is there in life besides that?

• 10:36Speaker 02

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• 11:05Speaker 03

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• 11:35Shane Parrish?

  How do you want somebody to call you out in those situations? Or how do you call out other people?

• 11:40Speaker 00

  The way I do it is try to be fact-based and just give examples specifically of what has been working and what has not been working. And that tends to work pretty well. And there are times when Rebecca, my wife, would say, hey, this is not working for us. So what do you want to do about it? You can try to keep going the same way down the certain path. Or we can try to change it. If we don't like something, we just change it. And it's just much easier to have those kinds of conversations. My son, a few days ago, was being quite negative about his school.

• 12:22Speaker 00

  And, you know, he's 13, he's going to be 14 this year. He's starting to be like me when I was younger and think that he's smarter than the whole rest of the world. And he said, hey, Atticus, do you want to be, do you want to have a negative attitude? Because you'll spin into this negative spiral. And by the way, if you have a negative attitude, the world just looks worse. When you have a positive attitude, the world just looks better. And we played this, let's use yes and for a bunch of things and let's create options. And then you're going through the no but situation and it doesn't work. So let's try to just change your attitude about some of these things.

• 13:06Speaker 00

  And I thought that was quite an interesting conversation where just by simply changing the framework, he became much more positive.

• 13:15Shane Parrish?

  When you talk about inputs versus outputs, what inputs do you think about in life?

• 13:22Speaker 00

  Well, I think the inputs I think about are, you know, that it depends on what I'm trying to get accomplished. But if the inputs are just thinking about hard work, how do I get up every day? Do I want to stay healthy? Do I get up every single day and work out? I hear that you work out every single day because instead of trying to figure out which days you're going to work out, it's always a negotiation with which days. And some days you don't feel like exercising, you just work out every day. I have the same philosophy. You just get up every single day and do the things that are important. So the inputs I have is I get up every morning, I work out, I look through, I read through my email, and I try to think about what's the most important thing that I have to get right today? What's the most?

• 14:08Speaker 00

  And, um, and think about first order issues. What is the first order issue that I have to solve? What is the first order issue of a company that needs to get fixed? What is the first, what is the thing that I need to do to influence an outcome for, um, for a founder? And, you know, that's very, very clarifying. Often we can create a very, very long to do list, and then you've got to pop up a level and just look at the to do list. What's the most important things I have to get accomplished? Because if you just list all the to do's, you probably will not be able to get to all of them. And the most important thing might be the last one you list. And so you can't just go down that list and do them one by one.

• 14:50Speaker 00

  Often it's by popping up a level where you sort of look at the whole list and it's like, okay, well, most of this is not important.

• 14:58Shane Parrish?

  Is that what you mean by first order issue? I think you mean something a little more nuanced.

• 15:02Speaker 00

  Some people talk about the most important thing. And I think, I think about first order. If I get this problem, I have a problem on my hands. If I get to the first order issue and get to the root cause of that, usually that helps solve that problem. And there are other issues that are not first order. And that concept is quite important. We also sort of navigate that into other situations where, um, where they are crucible. So as an example, like you have.

• 15:41Speaker 00

  You have situations where the website's not working fast enough. At Apples, we had a situation where the website's not fast enough. Is the first order issue that we have too many pictures? Well, we want the pictures. We have lots of photos. We want to show those photos. Is the first order issue that we need to

• 16:00Speaker 00

  trim the number of search results? Well, customers want longer search results. It's like, no, it's none of that. We need to figure out how to make the website go faster. And so we start caching the the search results. We start caching things. And so you start developing the technologies that solve the speed issue. But the first order issue is that we need to solve this with technology, not with a bunch of either or solutions. That's an example that I learned a long time ago. Another situation is the distribution at Apples was not flowing well. And we couldn't figure out which process was broken. Was it the picking process? Was the was the ordering process broken? What was broken about it?

• 16:45Speaker 00

  And we went and just looked through

• 16:50Speaker 00

  the flow and the flow was broken. And so there was too many handoffs across all of these different discrete processes. And so we had to sort of pop up a level and figure out what the flow of from when a customer orders something, when it gets through the distribution center, how is going to be picked, packed, and packaged and shipped? And when you look at that from a flow perspective, you start thinking about new solutions that allow there to be much better flow throughout the distribution center than than to batch things for picking, batch things for packing, batch batch things for for shipping.

• 17:35Shane Parrish?

  That's what you mean by first order. I want to get into more of your experience, not only at Apples, but being on the board of some of the companies that everybody has heard of today or being involved with. But before we get there, I want to come back to the school for a second. Are there any other experiences that you had during school with teachers that might have impacted you?

• 17:55Speaker 00

  You know, earlier on in junior high school, I was I was suspended from the computer lab because I built, this was very old, so they're a Radio Shack TRS 80s, so we call them trash 80s today. And there was the computer lab, you know, you had to rent time in our computer lab to use the computer and I built this game and the central server at the time was literally a floppy drive where all of us saved our programs there. And one day, a bunch of the students in the computer lab all found the game that I programmed and then started playing with it.

• 18:37Speaker 00

  The teacher and the principal just happened to walk in and saw that we're all playing this game. And I was told that computer lab is valuable time and you should be doing something much more productive than producing a game. So I was no longer allowed to work in the computer lab. And the computer lab teacher was Mrs. Petosa and she also ran the math team and she said, "Well, I'm sorry, the principal wants you out of the computer lab, but you should join the math team." And I joined the math team there and one of the things I was very good at was math. And she told me that if you want to be a leader and you want the team to win, it's not good enough for me to just solve the problems. Figure out how to get the rest of the team to perform.

• 19:22Speaker 00

  And so I started teaching the rest of the math team. Some of the reasons why I was able to solve some of these problems more quickly than they were, they're very talented, but I had figured out tricks that they had not figured out. And they had taught me tricks that I had not figured out. So we got better and better by riffing off each other. And so I learned the value of teamwork by just being thrown into a situation like that.

• 19:48Shane Parrish?

  You started a company before you joined Zappos. What was that?

• 19:51Speaker 00

  I started a bunch of things. I started a lemonade stand when I was younger. Those were not interesting. I started a lawn mowing service in junior high school. I did it myself and realized it was not fun. It was too hot in New York City. So I got the contracts and then asked some of my friends from school if they would do, help me do the work. I had a few odd jobs here and there and it was just never... As fulfilling as working at a company that from the ground up. When Tony Hsieh left Oracle to start this company. That was originally called Internet Marketing Solutions because they were building websites. He asked me to join that company. I said, no.

• 20:34Speaker 00

  Then they found out that they couldn't get any of anybody to go visit these websites. So he connected all of them and that became Link Exchange. And I joined that company soon after Sequoia invested in that company. And it was a banner advertising exchange that was one of the largest banner advertising exchanges in 1998, 1998, 99. We sold that to Microsoft for $265 million and that was quite the experience.

• 21:01Shane Parrish?

  Did you know at the time we were sort of in a bubble? Or how did you think about it back in the late 90s?

• 21:06Speaker 00

  I mean, we had a business, we had $15 million in revenue. You can kind of tell that we're in a bubble when someone would be wanting to buy a company that had $15 million in revenue for $265 million. But also, you know, it was the third largest acquisition at the time. So I think when you're in it, you don't realize you're in a bubble, but popping up like the numbers don't make sense.

• 21:32Shane Parrish?

  Yeah.

• 21:33Speaker 00

  So that's why I think it's valuable to have people who are slightly outside of where you work to keep you accountable. It's like, hey, how's this? How does this work? Just by simply asking questions, you get into a situation where like, wait, I can't explain that question. I can't answer that question, six, something. I can't explain it. Maybe that person's question has more insight than I would have expected.

• 21:59Shane Parrish?

  What are some of the lessons you learned from Link Exchange?

• 22:02Speaker 00

  Boy, that was so many. There are many, many lessons because it was the first time we're doing anything that was at scale. And

• 22:15Speaker 00

  You hear this all the time that that you should hire, you should hire slowly and make sure you really, really understand who you're hiring for. And you know, often when someone's not working out, you should, it's probably time to let them go. And we always gave people too long and, and I think the company's velocity didn't, couldn't go any faster because we didn't hire as well as we could have. We didn't let people go when they weren't working out. And those are very, very important things to get right. I often sort of think about the velocity of a company, velocity and I measure that in two ways. This, you use the word velocity, velocity as opposed to speed, because speed is just how fast you're going.

• 22:59Speaker 00

  But velocity, velocity also has direction and think the combination of the two is quite important. But the whole speed of a company generally doesn't get any faster unless you're pushing. And the best companies, they keep pushing. And otherwise you're just going to go slower and slower and slower. You know, I think building a real business is really important. Many of the companies that were founded in 1999, in 1998, 99, 2000, they were not real businesses. They had lots of eyeballs. They had lots of users. But that's not really enough. And at Sequoia, we often talk about the fact that we own shares in a company.

• 23:43Speaker 00

  We don't own shares in the founder. We don't own shares in the product. We don't own shares in their go to market strategy. We own shares in the company and that company needs to have a business one day. My partner, Pat Grady, loves to say that free cash flow equals freedom. Because eventually a real business generates real free cash flow.

• 24:05Shane Parrish?

  And the freedom being that?

• 24:06Speaker 00

  The freedom that allows you to not have to raise money, the freedom to allow you to invest in new areas, the freedom to continue to grow because you can invest in growth and invest in new novel technologies and new product lines, the freedom to

• 24:23Speaker 00

  not worry about the quarterly

• 24:26Speaker 00

  sort of pace of having to do more and more sales. You just, you, you generate free cash flow and it just generates a lot of freedom.

• 24:33Shane Parrish?

  Let's go back to the push-pull thing for, you know, you said companies don't generally increase velocity without force. How do you think about the difference between adding force or removing obstacles?

• 24:47Speaker 00

  That's a very, that's very, very insightful of you. I think many times applying force is what

• 24:56Speaker 00

  what leaders try to do, which is to apply a forcing function and make you make a choice. And often I think removing obstacles are just as important as, as applying the pressure to keep going on and on and on. But often, you know, when you apply force, you realize where the obstacles are. Because you, you butt against that obstacle and then you realize, okay, I keep butting against this. Maybe I have to figure out a way around it. And I, you know, my job as a board member is to help you identify obstacles and help you remove it. But sometimes you just need to be pushed against it.

• 25:38Shane Parrish?

  Is there an example that comes to mind when you say that where you push and it helped you identify an obstacle?

• 25:43Speaker 00

  Maybe in the early days of Airbnb, I think people forget it was much more of a listing service. And it was less of a marketplace. And if you sort of take the definition of a marketplace, you have to complete the transaction. And you just not only have to complete the transaction, you have to remove as much friction as possible. And so Airbnb in the early days had a calendar, held the money, paid out the money. But there was this big friction, big, big friction. And it was because there was not enough trust between the host and the guest. And so the early days of the removing of that friction was to get connected through Facebook Connect.

• 26:28Speaker 00

  So you can check someone out and check out their Facebook pages and who they are and to see if this is an authentic person. But even that, checking that out took 24, 48, 72 hours. It's just too long. And you just kept pushing. This is not going to work long term because there's only so many people that can book, travel and wait 24 to 72 hours before they know that they can go there. And, and so it started out, many great companies started out as a fringe sort of activity. And you have to figure out how to make it more mainstream. Often that is about removing obstacles or removing friction.

• 27:13Speaker 00

  But you butt against this and you're like, what's the solution here? And you keep applying for us. This is, this is going to limit our growth if we don't solve this. And eventually Brian and the team and the product team figured out that we needed instant book. We needed to figure out how to instantly book people. Well, you have a whole set of hosts now that are used to not accepting guests just because they booked them. So how are you going to remove that obstacle? Well, you start with new hosts. It's like, let me show you that Airbnb can be trusted. We're gonna, as new hosts, we're gonna send you some customers and you should just book them automatically.

• 27:54Speaker 00

  And eventually more and more of the, of the hosts realized that instant book is just the way to go. And that's an example where you just have to be pushed against that for a bit of time to find the solution.

• 28:08Shane Parrish?

  Was DoorDash sort of fringe too and went mainstream? Didn't they start in like the suburbs or something?

• 28:12Speaker 00

  DoorDash started more fringe than even the suburbs. It started on a, on, on a college campus. And the reason we, we passed on the seed round at Sequoia was we're concerned that the, this is like just something that college students did with their parents' money. And then they started out focusing on Stanford and then Palo Alto and they went to other suburbs. And it turned out that that was a very smart thing to do because everybody was going after the cities. And one of the things that we talked about at Sequoia is you can't just be better, you have to be different too.

• 28:54Speaker 00

  And if it's easy to say and hard to implement, because everybody, and when everybody is chasing after the cities, because conventional wisdom tells you that that's the right thing to do, it's very, very hard to do something slightly, to do something slightly different. But if you just hear Tony and the team talk about their business, you realize that they had way more than just, oh, I'm going and doing something contrarian. They actually had real reasons why the suburbs were actually a better place to start. The value for someone who lives in the suburbs and have to drive 20 minutes to go get their food is higher than someone that can go from their apartment, go downstairs and walk a

• 29:38Speaker 00

  few blocks and get the food and bring it back home. So that was like pretty interesting. The other one was, well, is there enough density around the suburbs? And it turns out, yes, there's, there is density, you just might not think about it. And they had examples where at, in Palo Alto, there was University Avenue and there was California Street. And both of those places, there, that's where all the restaurants were. And so there's density in where you can go to those restaurants and you can radiate out from there. So it was not as random as any, any restaurant can be anywhere and any home can be anywhere.

• 30:21Speaker 00

  And it turned out when you go look and look at the data, small towns all have this. There's the reason why small towns, there's a main street where everything happens. And so then you start realizing that the density problem is not as, not as complicated as you might think. And they won because they were able to take the profits of the suburbs to go into the cities. I often think about that as, you know, there are people who

• 30:49Speaker 00

  Think of the world and they just follow conventional wisdom and there are people who want to be contrarian. Well, in either case, whether you want to be conventional or contrarian, you have to be right. If you're right and conventional, there's probably, it's probably a less interesting solution. But if you're right and, um, and contrarian, you probably won't be able to make a lot more money. Because nobody's fault, nobody's going after that opportunity. Um, I often find that it's interesting. There are people who just want to be contrarian. But if you're contrarian and wrong, that's not a great situation. I try to put things in these two by two matrices of, uh, right and wrong and, and convention, conventional and, um, contrarian.

• 31:31Shane Parrish?

  You know, the term I use for that is advantageous divergence.

• 31:36Speaker 00

  Advantageous divergence. Tell me more about that.

• 31:38Shane Parrish?

  Well, that's it. It's exactly what you just said, right? It's not enough to be contrarian. You have to be right. And so you have to diverge from the crowd, but you also have to be correct.

• 31:46Speaker 00

  Yeah.

• 31:47Shane Parrish?

  It sounded like it's kind of the Walmart strategy, right? Where it's like, we're going to go in this area with, which has less competition. We're going to get really good at what we do and then we're going to use the, the money or profits or, and we're going to funnel into maybe the more desirable area. Like when Walmart started competing with Sears, they didn't go into cities and Kmart. You know, they went into the suburbs where nobody was, where the contrast, I think, between their ability and what they were competing against was much higher.

• 32:18Speaker 00

  Yeah. And, and, and I think that that is a, that's what all startups should focus on. You don't want to compete with someone bigger than you head on because they have more money and they have more people. They have more history, wherever they have more, uh, abilities. You just want to compete with them where they're not competing.

• 32:38Shane Parrish?

  Double click on that for me.

• 32:39Speaker 00

  Well, your example about Walmart, where the example about DoorDash focused on, um, the suburbs. There's a example about DoorDash where you want to win McDonald's? Or do you want to win the top 100 merchants? And it's not just about one or two. Yes, McDonald's is one of the largest merchants, but winning a whole suite of them is actually more valuable.

• 33:04Speaker 00

  Google, the long tail, keywords, more valuable than, you know, the head. And most of advertising was broadcast advertising. You start from the top and this is a bunch of like, Long tail keywords. And I think a lot of great companies, whether it's intentional or not, try to do things very differently than what exists today. Apple, they weren't the first to many things. They were, you know, they didn't make the first personal computer. They just made the user, their focus was always about the user experience,

• 33:44Speaker 00

  whether it was the computer, the phone, the watch, everything they do is about having a great user experience. That was not the conventional thing that people thought about. It was about, you know, in the early days of the PC, it was about processing speed and which processor was the fastest, et cetera, et cetera. When the phone came out, it was about the keyboard. We don't use the keyboard anymore.

• 34:06Shane Parrish?

  The Apple thing is fascinating. So is the BlackBerry thing because they really hung on to that keyboard thing. But I remember when they came out with their new, I forget what the device was called. It was like their Apple killer and I used it as a demo and I couldn't figure out how to get on the internet. And I was like, they're done.

• 34:21Speaker 00

  So user experience is so important.

• 34:23Shane Parrish?

  It took a demo to like, figure out how to use the internet. And once you figured it out, it was great. But I was like, oh man, this is so not intuitive.

• 34:30Speaker 00

  Yeah.

• 34:31Shane Parrish?

  Let's go back to hiring and firing a little bit. Was there any moments sort of at Zappos or earlier with Link Exchange where you thought you had the wrong fit, but it turned around?

• 34:47Speaker 00

  That's a great way of asking that question. I would say probably not. In the early days of Link Exchange, we hired and back to like conventional and, you know, we hired the conventional right person. We were looking for a marketing person or looking for a marketing person that marketed to small, medium sized businesses. They understood the internet. They, they fit all the specs that you would have in a job description.

• 35:15Speaker 00

  But they didn't fit the way we operated. They didn't fit the way we val, what we valued. And, you know, it's easy to sort of limit that down to like, they're just a professional marketer and they're mercenary, not a missionary. That's how Tony would tell the story. But at the end of the day, they didn't value what we were trying to build. They didn't have the same values that we had. And which is why when Zappos started, Tony spent a lot of time defining the values. This is Tony Hsieh of Lake of China and Zappos, the values of the company. And it's something that I talked to founders about. If, if you don't have the same mission, you don't have the same values, you don't have the same operating

• 36:02Speaker 00

  understanding of the company. It's very, very hard to work together. And then, you know, you're asking someone to change when they fundamentally don't fit to, to the company and how the company works. That is generally the, the, the issue. Then the other issue on the flip side, on the, on the

• 36:25Speaker 00

  the functional side. Once, when your company is growing really, really fast and you see someone who is growing, but they're not growing as fast as the company. Every single day, the delta between how far the company is moving or how fast the company is moving versus how fast or how far the person is moving. The delta gets bigger and bigger and bigger. So it gets very hard to turn around. And so we have this concept that a lot of people have at Sequoia. We hire for slope, not intercept. So experience obviously matters, but if you just hire for the experience and their slope is not fast, that's going to become a problem at some point.

• 37:08Speaker 00

  And so we really, really ask founders to think about what is the person's potential? What is their slope? And we'd much rather bet on someone with high, high slope and low intercept. Because in startups, in companies that are new, the experience is helpful. But you're doing something different and new and you need to reinvent. Bringing a playbook over from somewhere else is helpful up to a degree. But usually many of the problems that you need to solve are just different. And that's why you hear a lot of founders talk about first principles thinking and

• 37:51Speaker 00

  don't reason by analogy, et cetera. Because you do have to solve the problem

• 37:59Speaker 00

  a different way.

• 38:01Shane Parrish?

  What's the difference between slope and potential?

• 38:04Speaker 00

  It's just, well, slope is just, is, is pretty much the same thing, slope and potential. But having a high, high rate of learning, high rate of, you know, sort of being able to move fast. And so if someone has a lot of potential, they're over here, their potential's up here, that slope, when you draw that line, is pretty high.

• 38:24Shane Parrish?

  How do you gauge somebody's potential? It's like, you might be able to do this job and you might be able to grow into it. But like, coming into it, it's like, they're not going to check the boxes, they're going to look different.

• 38:34Speaker 00

  The future does not look like the past, but you have nothing else to go on but the past. And you can see whether someone moved really, really quickly in the previous situation, where they promoted three times in the same year at a different company that was moving very, very quickly. Do they have a sense of urgency? You can test for some of these things, you can ask about these things. But yeah, you don't know whether they have the potential to grow into the next stage of the company until you, you, you put them in that position. Often, I think the, the challenge is, the company is moving so fast and you're hiring someone that has done the job before and you know that they can do the job for the next year or two. And that's maybe good enough. If you hire someone, you have to let them go on three months, that was, that was in the sire.

• 39:18Speaker 00

  There's almost no reason why that person was not going to be able to do the job for, for three months. They either were not a cultural fit, they didn't have the right skills. If they stick around for a year or two, it's usually because they, they've done the job before and they're picking up a bunch of low-hanging fruit.

• 39:36Speaker 00

  But I look at, you know, Tony at DoorDash, many of the people who work for him have worked for him for a long period of time. He likes to grow people from within, he obviously hires from outside as well. But many of the people who've been around the company have been around for a long time. Amazon, many of the, you know, the, the senior VPs.

• 39:57Speaker 00

  That were around Bezos had been around the company for a long, long time. Now that Jassy's were, you know, they're now a CEO. He's trying to develop people also for a long period of time. If you, if you look at great companies, they're very, very good at developing talent, both from within and hiring from outside.

• 40:17Shane Parrish?

  Is it a red flag if the turnover is too high then? Is it like a sign that people don't know how to hire, right?

• 40:23Speaker 00

  I think it's a, it's a red flag and you look at it and you don't want to. So the, the issue with metrics is people start managing to the metrics. And so if you start telling them, hey, your, your turnover is really high. They start managing to the turnover number. And that's another thing. You have to manage the turnover of regrettable. What is a regrettable turnover? Why you're not able to retain your best people? And if you have unregrettable turnover, then why did you hire these people in the first place? And so if you break the problem down that way, you can find a reason what the issue is with the turnover.

• 41:04Shane Parrish?

  I really like thinking about it in terms of regrettable versus unregrettable turnover. A lot of people, when they're hiring, they sort of, we need this job. I want to know somebody who's done it at the next level because that's where we're growing to. So they're trying to like anticipate where they're growing. And one of the problems that I hear commonly is that people run into, well, that person might've done the hundred million to three hundred million growth, but they had a different team than we have. They have a different system, different resources. How do you think about that when it comes to hiring?

• 41:35Speaker 00

  My observation is that when you try to hire someone that is from a company that is one chapter or two chapters ahead, they tend to work out better. And, and part of that is because they're only one or two chapters ahead of you. If you try to hire someone who you're, you're over here and you're trying to hire someone that's 10 chapters ahead, that usually is a problem because you don't know whether they understand the problem a few chapters before. It's been too far away. On this, on your particular point about the system, I do think that if you hire people who are 10 chapters ahead and they have a whole system in place, even though they took it from 100 to 300 in a product division inside of a large, large company, they probably

• 42:19Speaker 00

  had a lot of guardrails that allowed them to not make a bunch of mistakes. And so you have to dissect whether that operating system works the same way as your operating system. Most startups don't have an operating system. So the thing that you have to sort of assess is how well can this person operate when it's just more nebulous, it's just less clear. Are they going to put the, the operating system in place?

• 42:47Shane Parrish?

  Dive into this story behind Zappos from sort of the initial idea and the early days, just high level, five minute version to the, the exit with Amazon.

• 42:57Speaker 00

  Maybe from the start, Zappos was, this is this weird idea. We, I can't even believe we funded it because that this was a, this was originally founded by Nick Swimmer. He had called and left a message on, on our answering machine. This is how old and back we were going in 1999. And Tony and I were running a seed fund, a venture fund, an incubator called Venture Frogs. And Nick said, hey, I have this crazy idea. I'm a webmaster at Autobytel, which is an auto website. I'm the webmaster there. I think it'd be great

• 43:38Speaker 00

  to just start something for shoes because I went to one store, couldn't find the right size. Went to another store, couldn't find the right color. Went to another store, they didn't even have the style that I'm looking at. And he had already searched the web and found a whole bunch of websites where people were basically trying to sell specific shoes on the internet. And we thought it was the craziest idea. And we almost, I think one of us had our finger on the delete button to that voicemail. And he, then he said that, that you might think this is crazy, but mail order is already 5% of sales in

• 44:16Speaker 00

  the US for shoes. I'm like, okay, 5% still small. But the shoe industry is 40 billion, 5% is 2 billion. And it just wasn't rocket science to understand that.

• 44:31Speaker 00

  Shoot that the internet was going to be bigger than mail order. And so we took a meeting, we decided to make an investment and we funded the company $500,000 at a time. When we were venture frogs, I had to then leave to go work at a company called Tell Me Networks. And Tony joined Zappos relatively early on as an advisor and then became co-CEO and eventually CEO. But the most important thing back then was because it's an e-commerce company. And we were going from 1999 to 2000, it was growing from 2000 to 2001, I was like, oh, we have a situation. And the day after nine 11, the company had zero on sales, zero.

• 45:15Speaker 00

  You went from whatever it was, which was small to zero. And that was the first crucible moment, using the term, because Sequoia uses terms crucible one, what we're going to do about that. So shook the company and we basically went back to basics and want to build a company that was profitable. And so we ran, so Tony ran the company at breakeven and continued to grow the company for a long period of time. Until Sequoia came in in 2004, 2005 to make the first investment. Most of, and so most of the company was financed from a small seed round. Tony invested $10 million of his own money, but most of it was financed through being very creative.

• 45:58Speaker 00

  Figuring out how to get merchants that we, we, we ordered from to give us credit and to increase the credit line. We had a, eventually got a, a line of credit from Wells Fargo. But the company burned very little cash. And for a company that went from zero, when we sold the company, it had $1.6 billion in sales.

• 46:22Speaker 00

  That really didn't have a lot of equity financing was pretty incredible. You hear about companies raising hundreds of millions of dollars to get to 1.6 billion in, in GMV or, or in sales. And here's a company that basically raised $10 million. And it probably was undercapitalized, but it really did highlight that you can build a company

• 46:50Speaker 00

  by having CAC be profitable on the first order, by being focused on customer service and not focused on marketing.

• 46:59Speaker 02

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• 47:27Speaker 03

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• 47:57Shane Parrish?

  Talk to me a little bit more about that because you didn't have a huge budget for marketing. You had to get, you know, within the first month, you basically had to pay back yourself for marketing. How do you think about that? Not only back then, and then what's different now? In a world where there's a lot more money and maybe all the players aren't rational about how they're spending money to grow.

• 48:20Speaker 00

  Back then, we thought that that was a, you know, we probably thought it was a curse that we couldn't raise more money because you probably would rather run the business a little bit looser so we can grow a little faster, et cetera. But being tight led us to find solutions that was, again, non-obvious or divergence, to use your term. And the divergent idea we had was if we can only spend money that was profitable on the first order, we needed other ways to grow. And the focus was to become much better at customer service. We noticed that it was much easier to keep a customer and ordering, getting that customer to order more than it was to acquire a new customer.

• 49:05Speaker 00

  And then we just went down the line of what we can do for the customer. We, we, we tried to make the website load as quickly as possible. We tried to pick pack and ship within four hours. The solution to pick back and ship in four hours was to solve a operations flow issue and not batch the, the operations, which I don't think anybody else figured out in e-commerce back then besides Amazon. We, we decided to work very, very closely with UPS in particular, and then FedEx and USPS to figure out how to get the shipping rates as low as possible. We started shipping so that it, it was, you know, five to seven days

• 49:48Speaker 00

  ground shipping to eventually overnight shipping so that the customer got it the next day. We figured out logistics, uh, reverse logistics. So we're bringing the shoe to your home. We heard lots of reasons why people didn't want to order shoes on the internet. We knew that before, before we invested and we knew that we needed to bring the, the, the store to your home, have you try it on and then return the things that you did not, uh, that didn't work for you, you did not want anymore. And by doing all those things, um, we provided much better customer service. When we, on any given day, the, the orders that we had, 80% of it was from repeat customers.

• 50:34Speaker 00

  And we grew the business, some with marketing, but the majority was by providing great customer service, having high repeat rates, having high LTV and having customers basically tell everybody else how great that business was, how well they were treated, et cetera, et cetera.

• 50:55Shane Parrish?

  I read somewhere, and this was counterintuitive when I, I came across it. So correct me if I'm wrong, that your best customers returned the most shoes.

• 51:03Speaker 00

  Yeah, that was a very contentious discussion because every, every year the return rate would go slightly higher and then it's slightly higher. But we kept growing. So one way to look at it is, well, it's not really hurting us. And then the other way is, well, the return rates are high and the most expensive process in the distribution center was.

• 51:28Speaker 00

  Was managing their returns. You had to return shipping. You had to open up the boxes. You had to look at the product and figure out whether it it's ready to go back on the shelf. It's damaged, I need to fix it, or it can no longer be sold again. Because if you put something that cannot be sold again on the webs on the website and make it available and that gets ordered, it's freaking gonna come back and be returned again. We then did this analysis. And this is the type of analysis I really enjoy doing. It's like, let's take our best customers and let's take our worst customers and look at their return rates. And it turned out our best customers, that the highest LTV is returned the most. And like, that that is crazy. How is that possible?

• 52:11Speaker 00

  Well, it turns out because they were they understood how to use Zappos. They just ordered more. Yes, they returned more, but they kept more too. Because they would be willing to try things. If you never returned anything, that means the only thing you buy are the things that you're super comfortable with. You know the size, you know the style. So we were trying to help people open up the aperture, try new things. So we did this analysis on the extremes and compared them and realized our best customers had the highest return rate. So then you say, well, the board doesn't like the fact that we have such expensive return policy and it's costing us a bunch of money.

• 52:54Speaker 00

  So then the solution is not to reduce the return policy and make it less liberal. You want to keep the return policy as liberal as you can, but make the cost of processing as low as possible. And so the first order issue there is exactly going back to first order issue. The first order issue is not the return rate. The first order issue is making the return process as cheap as and efficient as possible.

• 53:19Shane Parrish?

  It's so counterintuitive, right? When you think about it, because you actually like know we're okay with people returning shoes as long as they're buying more. And then they're trying them on at home, which is exactly what we want and sending back what doesn't work.

• 53:31Speaker 00

  Yeah. I think we changed the whole industry and it originally was just a competitive response. We had a liberal return policy in 30 days. Other people copy 30 days, then it was 90 days. Other people copy 90 days and then we made it 365 days. And not everybody can copy that, some did. But by doing that, it would put a stake in the ground. That we want people to try the Zappos experience and have a great experience.

• 53:58Shane Parrish?

  Why do you think it works for shoes but doesn't seem to get as much traction when it comes to clothing?

• 54:04Speaker 00

  No, I think it got a lot of traction for clothing. It was an understood problem by the time we got into clothing that you wanted wanted to have for high returns. You're going to have high returns and therefore you need better processing for for clothing. I think for clothing, for shoes,

• 54:24Speaker 00

  and for a variety of soft goods, return rates are high because you need to try it on and try it out. I'd also point out that shoes, the difference in sizing really does matter. I mean, you wear a smaller or a medium, both could probably fit and you may look more buff when you wear a small and you it's loose fitting when it's a medium or whatever size you you want to use. But for shoes, the difference between seven and seven and a half or 12 and 12 and a half is big difference.

• 54:56Shane Parrish?

  And did you guys do things and I don't, I was never a Zappos customer, so sorry, but like, did you do things where it's like, hey, last time you you're ordering a 10.5 or 11, last time you ordered a 10, we're just letting you know as an effort to like reduce returns, like maybe you hit the wrong button?

• 55:13Speaker 00

  Yeah, we we let people know those things. We also let them know that this brand, you're used to buying this brand. Like ASICS running shoes and Nike fits a little looser, so you might want to up the size. We had this measure of like, does this fit true to size or does it fit a little looser or a little tighter?

• 55:33Shane Parrish?

  You guys also had like an incredibly unique culture. What went into the thinking behind that?

• 55:39Speaker 00

  The culture of Zappos was very special and it was something that we wanted to preserve partly because Tony Shay had this experience at Link Exchange where we didn't define the values of the company. We started hiring people that were conventionally right for the positions in the job. And one day he woke up and realized the company that he had founded and built was no longer the company he wanted to work at. And he wanted to make sure that the company

• 56:12Speaker 00

  That had this special culture that was Zappos kept the culture. In the early days, it was not very well defined. What is the culture of Zappos? Well, you know, that, that was more nebulous in the early days. And then the company grew and people asked, well, what is the culture? We don't have it written down. How do you know someone's a culture fit? Well, does Tony like them? Does Fred like them? Does Alfred like them after the interview? And I don't like the term, the word like. Like could mean so many different things. It was just not well defined. And at some point, Tony decided to just ask the company, what do you think the values of Zappos are? What are your personal values?

• 56:57Speaker 00

  And what do you not like about Zappos? And just parsing through that, we got a lot of responses. And in his book, Delivering Happiness, he talks about the fact that we started with thirty eight different values that you. Yeah, these are all Zappos values and combined them, shrunk them. And we ended up with ten core values. The problem with ten is that there are probably a handful of people that remember all ten. Most people remember the first one or two or three of them. And the first one was, was to deliver well through service. It was the, in some sense, the most important core value. But we meant it in the way not just to deliver well through service to customers, but also to employees,

• 57:43Speaker 00

  to our, our partners, our business partners and to investors.

• 57:49Shane Parrish?

  You had a different management system as well. Talk to me about, was it holistic management?

• 57:54Speaker 00

  Holacracy.

• 57:55Shane Parrish?

  Holacracy.

• 57:56Speaker 00

  Holacracy, yeah. So the management philosophy was, was different, partly because we wanted to hire people that could just self run and self sustain. And so there was an element of allowing people to do what they loved the most and, and pair them with other people who love other things and make it sort of homegrown. I think Tony's perception of his job was that he was to create, his, his idea of creating a operating system for the company was to basically.

• 58:34Speaker 00

  Build a greenhouse was his analogy and he's gonna try to help every single person grow as tall and as strong as possible. And so he very much focused on allowing people to focus on their strengths and hire other people for their weaknesses to supplement them.

• 58:55Shane Parrish?

  Is there an ideal growth rate, do you think? Like, can you grow too fast?

• 58:59Speaker 00

  The, the answer depends. I, I, I think the easy, if you're growing so fast and the customer experience starts to degrade, you're hurting yourself. And so, yes, you can grow so fast that it's just a complete mess. You're losing customers because you're not servicing them correctly. And at Zappos, we were very mindful that whatever customer experience that we delivered, it was the best customer experience that we can deliver at that growth rate. And I think if you ask Tony Hsu at DoorDash or Brian Chesky at Airbnb, they would probably say the same thing. It's like, we want to grow as fast as possible with the constraint that we don't, we want to make sure that there's a great customer experience.

• 59:45Shane Parrish?

  And maintain the internal culture?

• 59:47Speaker 00

  Yeah. And the, maintaining the internal culture is one way of thinking about it. And you may have to grow the culture over time.

• 59:57Speaker 00

  You have a company, it's growing. Do you think the culture that was on day one is going to be the culture that's gonna work, you know, five years, 10 years in?

• 1:00:07Shane Parrish?

  It's not the static thing.

• 1:00:08Speaker 00

  It's not a static thing. Cultures should not be static. Every year you do a strategic plan and a financial plan. You, you figure out what your next year's revenue is going to be. You're hiring a plan, your marketing plan, you have all these plans. You should also have a plan for culture and how to grow that. I think the best companies think about that. Like, how does this, how does our company change? How do we grow up? How do we become one year older and better and faster at the same time?

• 1:00:38Shane Parrish?

  How when you're having so much success scaling, like going from a million dollars in sales to a billion? Do you not sort of get complacent?

• 1:00:50Speaker 00

  I think that

• 1:00:51Shane Parrish?

  Because you were dominating the market at that point in time. You were the leader clearly in that space.

• 1:00:57Speaker 00

  You're talking about Zappos?

• 1:00:58Shane Parrish?

  Yeah, well, in general.

• 1:01:00Speaker 00

  In general, I think for every company, if you read Jim Collins's book, Why the Mighty Fall, it's the first sign is the hubris of much success. And we, you know, at Sequoia, we're just never complacent.

• 1:01:18Shane Parrish?

  But you actively worked not to be complacent.

• 1:01:21Speaker 00

  We actively work not to be complacent at almost every single company to make sure that you're not complacent. Successful companies just think that way. At Sequoia, we talk about you're only as good as your next investment at Sequoia. At Zappos, we talked a lot about about how easy it is to ruin a good reputation. You just, the next order, if that's not good for a customer,

• 1:01:52Speaker 00

  you've built, you've built all this effort to build a good reputation with a customer. And one bad order, on an important order, like their wedding day, and you ruin that reputation. And so I think a lot of companies have different ways of thinking about that. And Brian Chesky thinks about what's the next thing? What's the transformation that we're going to create? What is the next thing for the customer experience that's going to be great? Tony Shu thinks about the next product to power the local economies. What's the next set of people that we're going to help?

• 1:02:33Speaker 00

  And I think, you know, if you sort of go back in the history of any business, you notice that customers are just enormously impatient. They're enormously unsatisfied. Everything that becomes, that is new and novel becomes standard. And Bezos had this line about how customers are just always, always dissatisfied.

• 1:03:00Shane Parrish?

  I want to kind of go deeper on that. It's almost like there's a natural entropy to create more sediment inside an organization. Toby Lukin, our interviewer, used the word sentiment, like you start building up the bureaucracy. And entropy being like, that's the natural result of growth and scale. And then you actually have to apply a lot of energy to make sure that it doesn't happen. What are the early signs that you see that?

• 1:03:26Speaker 00

  Of sediment?

• 1:03:27Shane Parrish?

  Yeah.

• 1:03:28Speaker 00

  Well, there are a lot of examples of this. When you, you know, the reason I always take a snapshot of when I, when I go into a company for the first time, just see how fast they're moving. And then I tell them, you probably, today is a great day. This, hopefully you will move faster than today. And I hold that as a bar. And if you don't have that mentality, it will start to slow down. And so what was the sentiment? Like, the process becomes, instead of making fast, good, fast decisions,

• 1:04:08Speaker 00

  the, the thing that people value is having a good process that slows you down to make sure you have the right decision. You have to make high velocity decisions at scale. And I look for that. Like, are we able to make high quality, fast decisions as quickly as possible? Or do you let the process determine the decision?

• 1:04:32Shane Parrish?

  How do you judge a decision's quality?

• 1:04:35Speaker 00

  You can't necessarily at the, the moment in time. You can think about things at the moment in time as how reasoned, how reasoned, how deep have you thought about the problem? How much research have you done? And you can sort of at least say, well, you researched the problem, you understood it deeply, and you've picked a course, and hopefully that's the right decision. And in hindsight, you can always look back and look at whether those decisions are right or wrong. And I don't think enough companies look at that enough. You know, instead of projecting next year's revenue and next year's strategic plan, part of the strategic plan should be about looking backwards. What decisions did you get right? What decisions did you get wrong?

• 1:05:19Speaker 00

  Why do we need to course correct?

• 1:05:21Shane Parrish?

  You guys also had an element of, I think it was even specific back before it became popular, but getting 1% better.

• 1:05:29Shane Parrish?

  Talk to me a little bit about that and what it meant practically speaking.

• 1:05:33Speaker 00

  There are two things at Zappos that I I I've pushed very hard and popularized. One was the um, one's the power of and because I found too many people tried to figure out ways to do either or and uh, it wasn't like, okay, we're going to

• 1:05:55Speaker 00

  ship product more quickly, but the website is going to be slower. Like those are, you gotta do both. And if you, if you think about the little things that we do at Zappos, it was about just compounding 1% every single day. And I used to write on the whiteboard, one plus, one, one plus 1% to the 365. Because if you take a dollar and compound at 1% every single day, you get this ridiculous result, which is you get $37, $38. And so when I hear about, you know,

• 1:06:34Speaker 00

  making a leap forward, 1 to 38 is a big leap.

• 1:06:40Speaker 00

  And it's on the scale of figuring out what's a 10x idea. It's even bigger than a 10x idea. I hear founders talk all the time about, I only want 10x ideas because that, those are the things that move the needle. And it turns out, just simply compounding 1% every single day, moves the needle even more than a 10x idea.

• 1:07:00Shane Parrish?

  Where do people tend to go astray, right? So you, you have a great core product and I'm just imagining you start building up a team. You start getting out of your focus, like where do companies go wrong?

• 1:07:12Speaker 00

  A number of places. If you just look at great companies, they compound at a very high rate for a long period of time in their core business. Google for a long period of time was search. Amazon for a long period of time was e-commerce. And there's a difference, I think there's a difference between act two and category expansion. So in Amazon, they went from books to music to electronics to a whole bunch of, they just went category by category. But there was the same real, like core business, which is Getting product to the distribution center, pick, pack and ship the products that you want and shipping it to you. And it could be books, it could be music, it could be electronics, it could be shoes,

• 1:07:57Speaker 00

  it could be tools, it could be a hammer, but that's one core business. And I think founders start their company because they have novel and compelling insights into the world and specifically for their company. And they like the new shiny penny. I'm not saying that you shouldn't focus on the new shiny penny that is adjacent to your business. I'm just saying that you shouldn't focus on the new shiny penny that is like way out away from your business. Eventually, all companies need an act two. AWS was an act two. That was very different than the e-commerce business.

• 1:08:36Speaker 00

  But even the way that Amazon thought about their web services business is like, well, we're very good at building distribution centers. Originally, the distribution center that we built was for physical things. And here, we're building a distribution center for electronic things, for bits. Like even the way to sort of think about it was quite interesting. They didn't think this was a, this is a high margin business. They thought of it as like, okay, this will be a low margin business too. And we like low margin businesses.

• 1:09:10Shane Parrish?

  And that was Bezos's famous quote, right?

• 1:09:13Speaker 00

  Your margin is my opportunity.

• 1:09:16Shane Parrish?

  I like the idea of act two. For a lot of companies, act two is the founder steps down, professional management sort of comes in. Talk to me the difference between, as you see, a founder-led company and a professionally-led company. And I use the word professionally loosely because founders are professionals, but I just want people to get the distinction in their head.

• 1:09:35Speaker 00

  Well, there's a lot, there's a lot being said about the difference between founder mode and manager mode. And I would go back to the question, the question is, shouldn't it be and? Shouldn't you want, don't you want to be both? I have a concept of fire and ice. The best companies are both this huge fire. They have this entrepreneurial spirit and they run hot because the idea is so compelling and interesting. But they also have this icy side. It's just cold facts. It's management. It's about getting to the details. And the best companies have both.

• 1:10:12Speaker 00

  It pains me to see that you have to choose one or the other. Because the best companies do have, they figure out how to make sure that both are in this, in the company.

• 1:10:23Shane Parrish?

  What are the different strengths, I guess, then? Maybe that's a better way to think of this question between founder mode and management mode. What are the weaknesses and strengths of each? Like, how do they work symbiotically together?

• 1:10:34Speaker 00

  I would say that there are many different modes of a founder or a manager. Here, the beginning days, you're a creator. You're finding zero to one. You're creating something that the world has not seen before. And the mode there is to be a creator. And instead of calling it a founder, you're creating something that the world has never seen. Once you create that, sometimes it gets into, you know, sort of operator mode. And many founders are fine operating and making their creation better. It's about understanding the inputs and outputs. How do I sort of make the system? How do I make the system better? I create something I need to sort of go to market with it.

• 1:11:19Speaker 00

  How do I systematically make the go to market happen?

• 1:11:25Speaker 00

  And you're trying to just operate the thing in a way that sort of scales the business. And many founders are very, very good at the scale. Then you get to a mode where you need to manage. You're trying to figure out resources, resource allocation. And it's like, should I invest a dollar in the core business? Or should I invest that dollar in a new project? And sort of having a framework on how to make management decisions like that. That's what a lot of companies at scale, the CEO needs to figure out. And then there's just a level of leadership around how do you lead the organization? And think about it from an organizational standpoint.

• 1:12:10Speaker 00

  So some of that is manager mode and some of that is founder mode. But let's just break it down to what it is and not talk about one contrast over the other.

• 1:12:23Shane Parrish?

  Well, I want to go back to something you said earlier about crucible moments. What are they and how do you identify them?

• 1:12:29Speaker 00

  Crucible moments is the term we use at Sequoia for things that are basically very important type one decisions. And I've had to deal as an operator before Sequoia, we didn't call them crucible moments, but I've gone through a fair share of crucible moments. You know, link exchange, do we want to, do we want to sell the company to Microsoft? At Tell Me Networks, when we're burning $60 million a quarter, how do we get through that? And how do we pivot the company from a consumer business that wasn't working into an enterprise business?

• 1:13:14Speaker 00

  These are decisions that change the trajectory of a company. At Zappos, it was what do we do after nine 11? When sales went to zero, what do we do during the financial crisis when credit became very, very difficult? And we were borrowing $60 million. We had $60 million debt. We did nothing wrong, but we needed to, but the banks didn't have the liquidity anymore. They're calling the loan. And how do you, how do you go through these things? At Airbnb, there have been a number of crucible moments as well. One of which started very early on that Brian Chesky talks about a lot, which was the PR crisis with

• 1:13:56Speaker 00

  a guest trashing a host. And that led to host guarantees, but there were many of those. There was a fight to win Europe and a competitor called Windu that copied the Airbnb website pixel by pixel. Or Dora Ash's decision to go after suburbs and not the cities. They didn't forego the cities, but we're going to start with suburbs first. Dora Ash's decision to focus on merchants and selection over speed. And you know, you can have a situation where You can increase speed of delivery by just having a smaller radius,

• 1:14:36Speaker 00

  which then, you know, if you, if I only showed you the restaurants that are close to your home, you'll get them faster, but it doesn't give you the breadth of selection that you may want. And these decisions change the trajectory of the company and their choices that many of the times they're one-way doors. Once you make this decision, you can't go back. And I think they're very, very important to get right. And so at Sequoia, we have a podcast about it, partly because we want to highlight how to, how to founders and the management teams puzzle through these decisions. And then other characteristics about crucible moments is every one of them don't,

• 1:15:21Speaker 00

  doesn't look like the other. So you, you're presented with a new problem and you're trying to figure that out for first principles, how to solve that problem.

• 1:15:30Shane Parrish?

  That's the second or third time you've brought up first principles thinking. What does that mean?

• 1:15:34Speaker 00

  For me, it means start from a blank sheet of paper and you have a bunch of frameworks that you have that help you sort of triangulate the answer. Throw those out. Maybe you need a new framework for this particular situation. You're the king of mental models. To me, they're, they're frameworks. We love them because it instantly helps us think about the world and narrow down the options. Some situations, you want to generate more options and more, more ideas. And in those particular situations, you're on narrow your thinking, you want to broaden your thinking.

• 1:16:07Shane Parrish?

  If we're on a board together and we get a problem, imagine, and it comes up, and how do you think through that in first principles thinking? Like, how would you do that in that setting?

• 1:16:19Speaker 00

  I'll give you, I'll give you an example from, from Airbnb. You know, when the pandemic hit, you can decide to do a variety of things and.

• 1:16:30Speaker 00

  You know, there's all these pressures. There's investors who want you to raise enough capital so that you can you can go through and weather the storm. There are employees that want to know that they're going to be employed. There are hosts that want to know that even though guests can't travel, that they have a nonrefundable cancellation policy, they're going to get the money. You have guests who want to

• 1:17:00Speaker 00

  figure out how to get their money back because they're not traveling. You have a business that went from

• 1:17:07Speaker 00

  a business that was growing 20, 30, 40% a year to a business that declines and you lose 80% of your revenue. There's all these pressures. It's a complete mess. And the solution that you had yesterday doesn't work for today.

• 1:17:26Speaker 00

  Because Airbnb before the pandemic was a lot of cross-border travel. And today, after the pandemic, there is no cross-border travel. How do you think about this problem? Where do you start? It's a mess. Everybody is yelling at you from all these different angles. And Brian, just one of the most important things is to stay calm and look at the problem that we have at hand and figure out what the most important problems to solve first, second, and third. And he had principles that he had outlined. He, you know, we, we used to have these emergency board meetings and it was just always discussing, what's the emergency this week, this week, this week? And then he leveled up and decided to say, hey,

• 1:18:08Speaker 00

  we need principles to decide what we're going to do. And he decided that Airbnb, we have a once in a generation pandemic, one in a hundred years.

• 1:18:23Speaker 00

  That's outside the building. There's nothing that he can do to fix the pandemic. But what he can do is to make sure that Airbnb survives for the next generation. And he had principles by which he wanted to make sure that we're, when we get out of this, we're seen as someone who created Airbnb for the next generation and not, not something that wasn't going to survive this generation. Then he went to work. And he had these great

• 1:18:57Speaker 00

  plans of like, we're going to reduce our burn by doing all the things in this order. We're going to cut marketing. Nobody's traveling anyway. Easy decision. We're going to cut contractors. We don't need, we, we don't have enough work for them. Easy decision. We're going to have to raise money. And we're going to do it in a way that doesn't burden previous investors. So we're not going to raise money at a low valuation. We're going to raise debt. Why do we need to raise the money? To survive the, this crazy situation where both the, the guests and the hosts want their money back. We have $3 billion of capital on the balance sheet at Airbnb. But we, we, we have $3 billion or $4 billion of customer deposits.

• 1:19:42Speaker 00

  We can give all of that to one side and one side will be pissed at us. Give it also host, the, the guests will be pissed. If we give it to the guests, the hosts will be pissed. And we won't have a business when we, when we emerge from the pandemic. So he goes out and raises $4 billion, $2 billion of debt. So two plus our, three is five. We can cover both sides and then take toll of both sides. Okay, we can put, we can pay both sides. Instead of paying it out, why don't you just? Calm down, you'll get this money, you know you can get this money. And let's see how the system works itself out. And so he had to sort of project confidence and imagine your way out of this thing.

• 1:20:27Speaker 00

  And you imagine a solution, which is, okay, well, we're in New York right now, not, not a lot of people want to stay in their apartments in New York. They're traveling upstate. In San Francisco where I was, not a lot of people wanted to be in San Francisco. They went to Napa. And so slowly but surely, and it didn't happen in March, it didn't happen in April, but in May, you found resilience in the business model where people started to travel again, just in their own backyards, in their own country. And that allowed the, the company to come out of that. And the thing that he did last was to lay off employees. He knew that the employees were, were going to have a harder time finding another job during that time, during the pandemic.

• 1:21:12Speaker 00

  And so that was the, he just had these principles of how he's going to go solve this problem. Nobody would have told him to do that in that order.

• 1:21:22Shane Parrish?

  That's an incredible example. Thank you.

• 1:21:24Speaker 00

  And then on the flip side, this is the craziest thing. So because, you know, Airbnb was the poster child of the number one IPO possibility for 2020. And they had seen their revenue go down 80%. And then they came out of that and then went,

• 1:21:42Speaker 00

  went on to be the number, number one IPO of that year in December. And DoorDash, you know, sort of, I had the opposite experience of DoorDash, which was, boy, you know, they were also going, trying to go public that year, but instead of being beaten down by the pandemic, they really accelerated during the pandemic. And also there, Tony Hsu had a lot of principles behind what he wanted to get accomplished. And it was like anything else during the beginning of the pandemic, it was very, very scary. Because around the world,

• 1:22:19Speaker 00

  There are some places that were completely shut down, including restaurants. And if you shut restaurants down because of his experience, having worked in a restaurant with his mom, by his mom's side, washing dishes with his mom, he knew that restaurants wouldn't survive. They had less than 30 days of cash. And, you know, that's less than 30 of cash when they actually are running at full speed. So now they're, they have less, they have less cash. The, the restaurant is, is shut down for a period of time. People didn't know whether they can order food and it would be okay. As soon as we figured out that the restaurant shouldn't be shut down and the restaurants can remain open for delivery and takeout,

• 1:23:03Speaker 00

  he went to full force and making sure that the business could help merchants bridge the gap. You know, this is not something that other companies couldn't have done. But one of the things I, I really respect about Tony and the team is they decided like, these merchants are going to be hurting and we need to help them. And so they proactively went out and uploaded menus from different merchants onto DoorDash and said, hey, I know you guys are hurting. The only thing you can do is delivery. We're here to help you. We've uploaded the menu, your menu. We found your menu, whether it's on the internet or we've got a copy of your menu. We uploaded it, it's ready to go.

• 1:23:48Speaker 00

  Just let us know if we can turn it on for you.

• 1:23:52Speaker 02

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• 1:24:20Speaker 04

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• 1:24:51Speaker 00

  And that allowed DoorDash to grow very, very quickly during the pandemic. I thought that DoorDash was a well run company in 2019. And it was a it was a process by which they they grew very fast. They probably grew too quickly.

• 1:25:10Speaker 00

  Their unit economics wasn't great. They had a few hard fundraising rounds for the C and D. They fixed the the unit economics. So in 2019, it was a wild, wild machine. And I saw this wild, wild machine pushed to another level in 2020 during the pandemic. When they tried, they really did help restaurants when they were in a world of hurt.

• 1:25:35Shane Parrish?

  So the pandemic is a crucible moment for every business.

• 1:25:39Speaker 00

  It was a crucible moment for every business.

• 1:25:41Shane Parrish?

  What differentiated the founders in Sequoia from the ones who took advantage of that opportunity and sort of came out of it stronger and the ones who didn't?

• 1:25:58Speaker 00

  I think we were, you know, I hate to say this and it's maybe trite, but going through the pandemic, we all came out stronger. It was a shared experience. Sometimes when you go through crucible moments in crises, you don't have the shared experience. But to answer your question more, more succinctly, I think the there are people who knew that the crisis was an opportunity. And then there are those who just thought of it as a crisis. And I think it was Andy Grove that says that, you know, good companies are get better and they're defined by a crisis.

• 1:26:39Speaker 00

  Whereas, you know, there are a lot of companies that are destroyed by a crisis. And many great companies.

• 1:26:49Speaker 00

  Were defined and they changed the way they did things in a way that you They found solutions that you would not have imagined when the crisis didn't happen. And I think the founders that are

• 1:27:05Speaker 00

  They realize they're in a crucible moment. They realize they're they need to do something differently. They stay calm. They look, they stop, they look around and they figure out, they look around three hundred and sixty degrees and say, that's the direction of going. Even though the whole world is like revolving around them, it's a complete whirlwind.

• 1:27:27Speaker 00

  And they imagine why they should go into that direction. And in most cases, they had to find a different solution, a different product, a different way of operating. And then scale that in into that direction. Those are the ones that come out really, really successful.

• 1:27:47Speaker 00

  You know, in Airbnb's case, they had to read, they had to change cross-border travel to local travel. They changed to long-term stays. They changed to having experiences. In DoorDash's case, they simply had to sort of do things that they've never done before. There wasn't a new, it wasn't a product change, but they had to imagine a different solution. They're not going to wait until merchants call them and say, negotiate a deal. They said, look, we've uploaded your your menus onto the website into our app. These are our standard terms. Do you want to go or not? That wasn't a product that they had designed before the pandemic.

• 1:28:30Speaker 00

  Often you need to find a completely different solution to, I mean, they seem so simple after the fact. But at that moment is completely unclear that that was the right decision. But that's why you need to stay calm. That's why you need to look around. You need to stop, look around and find the right direction that you want to go in and then accelerate.

• 1:28:51Shane Parrish?

  I think that's really an interesting approach, right? Where you sort of stop, you don't panic. You evaluate what's going on as rationally as you can in the moment, despite everybody wanting things from you and all this pressure that you probably have from investors, but you also put on yourself to take care of your employees, to take care of your customers, to care of your family. And everybody's worried about the same thing. So you're operating in a very amplified environment to begin with.

• 1:29:19Speaker 00

  Yeah. And the Beth's founders are doing this day to day. But here the timeframes are much, much shorter and much, much more compressed. And people's voices are are much louder.

• 1:29:33Speaker 00

  Just recently, Tony said that it's about many good decisions about sequencing. We all know what we need to do, but sequencing it right is is actually what matters. And the sequence of how you do something often determines whether you're remembered or not remembered. In in the example that we talked about for Airbnb, there was a sequence of like, what is easiest? What is the, what is the values that I have for the company? And let's go through the sequence that most matches the values. So Brian wanted to take care of the employees the most. And so the layoff was the last thing that he did. He tried to do everything else before the layoff.

• 1:30:18Speaker 00

  In Tony's case, the sequence was to make sure, because he had a heart for merchants, the sequence was to take care of the merchants. So there wasn't, it's just when you have these well-understood values, it makes the sequencing a lot easier. And often people forget they write down their values for for a good reason. Because when you don't have a playbook anymore, all you have left is the essence of what the company is, which is the values of the company. Often that's the essence of the founder, the values of that founder and how they want to operate. But you forget that because it's noisy.

• 1:30:59Speaker 00

  Lots of people, lots of different parties, wanting your time and your attention.

• 1:31:06Shane Parrish?

  Work from home has become a somewhat contentious topic. But I really want to hear your thoughts on the pros and cons and and how you see it.

• 1:31:19Speaker 00

  Uh, pros and cons. I think it's very, very hard to build an early-stage company remote. And the reason I say that is unless you you've worked with each other before, I I view I view there to be a well of trust that is created when you work together in this, you know, the reason why people who have worked together for a long period of time can like anticipate each other's movements and what they're going to do next is because they've been around each other for a long time. And as you know, that most of our communication is not verbal, there's body language and how you sit, how you react. There's a lot of communications

• 1:32:02Speaker 00

  that we miss through through work from home. And you just can't read it as well on the screen versus in person. Because there's only your, you know, on screen in Zoom, you only have your head, there's the rest of your body that you don't see. And so I think it's quite important for early-stage teams to work together. I mean, they don't have an office, they find a coffee shop to work together at. Why do you do that? You can all work from home, but why do you get together at a coffee shop to work together? It's noisy, there are a lot of people around. There's a reason why you want to do some of these things. And I think, you know, does it mean that every single

• 1:32:43Speaker 00

  day I'm more productive in the office? No, there are days when I'm writing a memo, it's probably better if I sit in the office or I'm at home and just cranking. It's also hard, very, very hard to build culture if you're all separate and apart from each other. There's no ritual. Culture is the values, but how you express those values, they're they're they're your behaviors, they're the rituals, they're the narratives that we tell each other. And those things are just a lot harder to do over Zoom.

• 1:33:17Speaker 00

  So I think, I think all companies should go back to being in the office a certain, a certain number of days a week. It doesn't have to be five. I think that we can't put the genie back in the bottle on remote work. But at the same time, you know, we thought the world was going to be different when we were all online. And it turns out, we actually enjoy seeing each other in person. We enjoy having dinner together. I don't enjoy having dinner over Zoom with someone. I enjoy it when we're, we're breaking bread right off, right next to each other.

• 1:33:51Shane Parrish?

  Do you believe that you can please both sides? And that that's sort of the hybrid model where people are, we're going to work at the office two or three days a week, and then you can work from home two or three days a week. Do you believe in that being effective? Or do you believe you have to pick a predominant one and focus like, cause your operational backend, your company culture, your cadence, they're all going to be determined by what you pick. And if you pick in the middle, you're probably making trade offs on both sides and not getting maybe the advantages, because you don't want to make trade offs.

• 1:34:25Speaker 00

  I think it's best if you take a stance, take a side. Hybrid, I would cribble with the fact that hybrid doesn't work at all. I think you can be in person, you can be remote, you can be hybrid. You just need the systems around it to, to make up for the fact that you're going to operate in this way. Every multinational corporation, when they have multiple locations, was doing some form of hybrid, right? You have some people who are in this office, some people in this office, they're connected through tele, you know, telecommunications, and some, some people are on the road. And like any company that had,

• 1:35:08Speaker 00

  gets a certain scale, the salespeople in the field, they're not actually at headquarters, and you're having an all hands. Those people call in. But when you have an important all hands, you call everybody in. You have an important offsite, you call everybody in. And there are just certain things that should be done in person. There's certain things that are okay to do over Zoom, over telecommunications, over email. I think that there's a different medium to do different jobs depending on the objective is. And you should understand what the drawbacks and the advantages of each one.

• 1:35:49Speaker 00

  At Sequoia, I mean, we take a lot of first meetings over Zoom. And during the pandemic, when we were only doing meetings over Zoom, you just never got the right texture for the company, the cadence of how the company operated. And yeah, we might still take first meetings over Zoom, but we're going to meet the team, you know, at some point in person.

• 1:36:13Shane Parrish?

  And did you analyze your investing during that period where you're meeting more over Zoom versus more in person when it comes as approaching the investment decision?

• 1:36:23Speaker 00

  Yeah, we can make those assessments, but the hard part is the environment is also different. Right? So 2021 valuations were nutty. Was it the issue of making those investment decisions over Zoom? Or was it the environment that drove valuations higher? So therefore the returns are going to be more difficult, more challenged when valuations are higher.

• 1:36:44Shane Parrish?

  Why do you play when the valuations are higher? When sort of like the game is loaded against you in a way? Like, why choose to keep playing? Why not back away and then come back when the odds are in your favor?

• 1:36:57Speaker 00

  Well, historically, valuations have gone up.

• 1:37:01Shane Parrish?

  But if they keep going up, then you're you. How does that work? Like?

• 1:37:05Speaker 00

  I think our LPs pay us to make money during good times and bad times. And here's the thing that is most interesting to me. You can decide to shut down, but then you won't get the texture of those companies being developed. And sometimes it's you gotta keep meeting companies, right? Like, so you don't shut things down. You can decide to invest fewer dollars when when things are hot. And you could decide to invest more dollars when things are cold. But the market is also smart. So when things are hot, it's usually because something new is happening.

• 1:37:47Speaker 00

  And things are cold, maybe it's just not a good time to invest too. If you could identify when it's irrationally exuberant, yes, you'd decide not to invest in the irrationally exuberant situations. But in 1999, which was one of the, if you go back in history and look at megatrends in investing, you know, I'm 52 years old right now. When I was in junior high school, one of the things I did as a business was to build PCs, clone PCs, because the IBM PC XT AT, they were really expensive.

• 1:38:28Speaker 00

  And, and so there is one, that was one megatrend, which is the PC revolution. Then in, then there was the internet revolution, and then more recently, the cloud revolution, the mobile revolution, some right now are in the AI revolution. And the internet revolution, when I first started working professionally after college, was the AdLink Exchange, and then we started investing in 1999. That's when venture frogs started. And if you decided not to invest in that time, you would have missed out on Google, Salesforce, PayPal, Zappos, OpenTable. There are a lot of great companies that were still founded during that time. And paying market prices for those investments would have been just fine.

• 1:39:14Speaker 00

  And you can wait until-

• 1:39:15Shane Parrish?

  Would have been better than just fine.

• 1:39:16Speaker 00

  It would have been better than just fine. You could, you know, but you could wait until 2001, and maybe you could invest in lower valuations. But often, in the public markets, you can, you can wait because those companies are available when the multiples are low. In private companies, just because the valuations have come down, doesn't mean the company that you want to invest in is looking to raise around. Maybe, you know, in 1999, you wanted to invest in, in Google. In 2001, they happened to be public. You could invest in Google, but if they were private, maybe you wouldn't be able to.

• 1:39:53Shane Parrish?

  Yeah. John Bragg said this thing in, in my recent interview with him, that I, I had never fully appreciated, I don't think, which was, he had a reputation for overpaying for all of the land he was acquiring. And I said, why do you do that? He's like, well, if we're easy to deal with, people want to deal with us. And he's like, these assets only go for sale once. And he's like, so maybe it takes 12 years instead of 10 to get our payback, but it doesn't really matter because there's no opportunity 10 years from now to buy it again.

• 1:40:22Speaker 00

  Yeah, I think the, that's an example for us. It's the same as true in the, in investing in private companies. It's still much better to pick the right company and slightly overpay than to invest in something that is cheap.

• 1:40:39Shane Parrish?

  You brought up AI as sort of like the next revolution. Where are we going with AI? Where do you see that? And obviously, the longer we go out in the horizon, the harder it is to predict. So maybe let's start with like, what do you see as the next 12 months in AI? And where do you think we, we sort of like, how do you envision sort of 12 months to five years?

• 1:41:01Speaker 00

  It's funny because I think in the history of technology changes, it's, and then Bill, I think Bill Gates said this, it's easy. We owe, we almost always overestimate what things are going to happen in a year. And we underestimate what's happened in 10 years. Yes, it's harder to imagine 10 years out, but you know, in the business I'm in at Sequoia, we are paid to make investments and to hold them long term. And we do have to sort of imagine 10 years out. I think the next year, you know, these foundation models are getting so

• 1:41:38Speaker 00

  good that you can see certain things being automated that we used to do that we're not going to do as much. But I think, you know, the next step after that is if you think about, lots of people talk about customer service and how we can automate some of the customer service, emails or calls or, and things like that. Okay, let's say we do that. What's next? Well, then you should reimagine the customer experience. And so AI will help us automate some of these things and there's be massive cost savings. But AI should also allow us to reinvent the customer experience. And that's why we're very excited about a company like Sierra. They're not just going to help you automate customer service tickets. They're going to help you reimagine what customer service looks like.

• 1:42:23Speaker 00

  Just similarly to how, what happened in the internet, you could, in the internet happen, we could book.

• 1:42:31Speaker 00

  Things we can book travel on the internet. We didn't have to call a travel agent. It changed the experience. We could search. That changed the experience. It broadened. You know, I had to imagine where I wanted to go and call someone to get me a ticket or to get a hotel. Now I can search. So my, my imagination could be broadened. And that just changed my, my experience of, of travel.

• 1:42:57Speaker 00

  And, you know, the, the airlines didn't allow you to change tickets once you bought them. Because in, that was in some backend system. They didn't want to open up that system. Now we can change flights on the website. Well, the same will be true with AI. Like start with automation, start with new experiences and the experience will completely change over time. And it always takes a little longer. I mean, I remember we talked about autonomous vehicles probably 10 years ago. And today we have autonomous vehicles working in a few cities with Waymo.

• 1:43:31Speaker 00

  People imagine that that would be solved very, very quickly. But where are we going? I think we're going in a world where many of the problems that we have in the past will get solved through automation. Many of the things that, many new problems will get solved through AI. Because they're going to be as good as we are in doing analysis and doing, being creative and things like that. And so I think it'll be a very, very productive mega trend.

• 1:44:01Shane Parrish?

  One way to explore this topic is to ask you what you're looking to avoid with AI investments. And I'm thinking, you know, maybe something that comes to my mind is like, it's a wrapper over chat GPT or something. What are you, what are you trying to avoid when it comes to making AI investments?

• 1:44:16Speaker 00

  So the wrapper is a good example of something. It's just, is just a different user interface on, on top of a foundation model. But, you know, I think we're trying to make sure that something persists. And what if it persists? It has its unique distribution. It's embedded into your workflow. It has true ROI for a long period of time and it changes the, the experience.

• 1:44:43Speaker 00

  Other things I'd, you know, I'd say we try to avoid is. Things that are roadkill along the way of a company like OpenAI or Google or Amazon or Meta. So small refinements into what the model doesn't do well today. That's just going to be roadkill along the way. And then um.

• 1:45:07Speaker 00

  I think we're trying to avoid things that are. That sound good, but they're not good businesses. You know, back to, you know, nineteen ninety nine, there were a lot of things that had lots of usage that not had no revenue. And so right now, there's, there's a different example where lots of, there's a lot of test revenue. But the churn is very high because people don't stick. So there are a lot of things where. You see very, very fast adoption, but the churn rate is very, very poor. Uh, so we're trying to avoid those kind of companies.

• 1:45:39Shane Parrish?

  Do you think Google and Microsoft, like, how, how do you think? You compete with them on a foundational model basis, like they, A, they can scale into enterprise overnight. B, they can spend a hundred billion dollars on, on G P Es. How do you think about that? Are we going to end up in a world where there's like? Only a few foundational models and we're all going to plug into them?

• 1:46:01Speaker 00

  To be honest, I don't know, but I'll tell you this in the history of. Technology. Investing that I've been involved with, if you're afraid of the incumbents, you should just punch out. But in nineteen ninety nine, you could have been afraid for Microsoft because they have lots of money and lots of servers. And yet they didn't win search. Someone else won search. Microsoft. Won the browser war for a hot socket. It was Netscape against uh Internet Explorer. I don't know many people use Internet Explorer today. Most people I know use Chrome. So this is not a static situation.

• 1:46:45Speaker 00

  I think you just have to sort of have an open mind on why you will win. Um, and often the reason why large companies don't win is because they have their own internal issues. That slowed them down. So Microsoft during the internet, it was, it was the. It was the antitrust situation. And that slowed them down. They could no longer bundle I E into. Into the operating system and so they had to break all those things apart. Google has its own regulatory challenges and so does Microsoft. So I don't presume that they're all just gonna win because they have a lot more money and they have more, a lot more capital and they have a lot more people.

• 1:47:29Speaker 00

  And besides, if you thought that, then I would be out of a job.

• 1:47:33Shane Parrish?

  So how important do you see what Facebook's doing then where they're spending, you know, fifty to a hundred billion, but they're making it open source?

• 1:47:40Speaker 00

  I think open source is a very, very important aspect of what has happened in technology. And you have these religious fights between closed and open. And you have religious fights between Apple and Microsoft or Apple and IBM.

• 1:47:58Speaker 00

  Let's go back to and. The world is built on and. And, you know, open source in the internet days, there are lots of things that were built on open source. And some of it was closed source and some of it is open source. And I think the same will be true with AI. There are gonna be things where you just wanna host it on a closed source model because you know it has the breadth of functionality. And there are things where you can only make it work if you use your specific data, train it very specifically for you, and you're gonna use open source models for that. And just like, you know, Google built a great business

• 1:48:42Speaker 00

  that is pretty closed source on open source software like Linux. I think the world of AI is gonna be and as well. There'll be closed source and there'll be open source.

• 1:48:54Shane Parrish?

  I want you to imagine for you're in charge of, let's say, Canada and the US and maybe the UK. And I tell you that we are optimizing to be the best in the world at AI. What are the policies that you think about? How do you approach this problem? And how do you encourage us to be the world leaders?

• 1:49:17Speaker 00

  I'm maybe overly optimistic about human nature. And so I believe that you want to have as little.

• 1:49:32Speaker 00

  Regulation is possible in the early days. Let people experiment, let people try things. And is it all gonna be good? No, but if we had overregulated the internet, it would not have grown to the scale that it is today. And do we have problems on the internet? Absolutely. And so I believe in sort of having regulation that is more open than not, and then slowly close off things that you know is not good or the behavior is not good. Regulators often worry about the fact that if you wait too long, you won't be able to regulate it. I don't know if I believe that. And then on the flip side is, it's always been, I don't know of a time

• 1:50:17Speaker 00

  that has ever worked to fight against technology and to overregulate technology. You could have overregulated the fact that the scribes were gonna no longer have jobs because we came with the printing press. You can go all the way back in time like that. Or figuring out how to have a plow so that you need fewer people to sow seeds because a plow could do the work of three or four people all the way up to a tractor. How have we done trying to regulate or overregulate or control things that sort of make human beings much more productive? That's what we're talking about with technology. And that's what we're talking about with AI.

• 1:50:57Speaker 00

  And then, you know, if you wanna start applying regulation, there's maybe a slightly different framework that I would use, which is you want, you know, as an example, with the combustion engine. Nobody regulated the engine. We regulated what engines can go on the streets, what can go into a plane. You regulated how was applied. But in a lab, and people were, you know, sort of doing research and trying to make the combustion engine even more powerful, being more fuel efficient. You don't regulate that.

• 1:51:37Speaker 00

  You regulate it when it gets in the hands of a consumer.

• 1:51:41Shane Parrish?

  So that was a like removing barriers almost, but like, what about amplifying? What about the push? How do we encourage more? How do, how would you embrace this as a, as a country?

• 1:51:52Speaker 00

  The market is pretty good at pushing. When they see opportunity, the more and more capital goes into it, more people go into school to, you know, in almost every single technology revolution I've been part of, there are two, there are too few people who understand that technology. So when, when there was, when it was the PC industry, there are few people, there are some people who understand mainframes. Very few people understand PCs. More and more people, more and more investment went into PCs, more and more people bought PCs, more people started using PCs, more people started building applications for PCs. And so over time, uh, there was just a lot more people, a lot more investment in that.

• 1:52:35Speaker 00

  People went to school to sort of write software specifically for the PC as opposed to the framework, the, the mainframe. That happened in the internet. Most people didn't know how to build, um, a website. More and more people learned how to program in HTML and Python and wrote and Linux and learn how to use Linux to build. Today, and that happened with cloud and mobile. So today we have probably too few people who really, really understand the technology and its application. But you have so many people going into today because they see the future is going to be powered by AI. And so wait a year or two, I bet you there's plenty of push today. There's, that's why the valuations are high for AI companies.

• 1:53:20Speaker 00

  And wait a year or two, there's going to be a lot of things that are going to be built. In fact, the hot take is that many things will be overbuilt. So maybe we were building too many GPUs for a year or two years out. Maybe there are too many data centers that have GPUs a year or two years out. And maybe those things will get cheap. And when they get cheap, we'll find new applications when it gets really, really cheap.

• 1:53:45Shane Parrish?

  That would be sort of the history of market. Actually, it's interesting that you brought up, don't fight technology. There's a saying in investing, don't bite the fed. It's sort of the same sort of, and then what?

• 1:53:56Speaker 00

  The fed is way more powerful in many respects.

• 1:53:59Shane Parrish?

  Than technology? No.

• 1:54:02Speaker 00

  Well, I think the Fed can constrain or can loosen money supply in a very dramatic way. So it applies throughout the whole economy as opposed to just about technology.

• 1:54:17Shane Parrish?

  Historically, businesses have cycles. We tend to overbuild when we're optimistic. And then, you know, you go through that phase you just talked about. Out of the large technology companies today, who do you think is best positioned?

• 1:54:31Speaker 00

  That's hard. Well, if you want to use don't fight the tape, when I, when I started my technology career, Microsoft was the largest technology company and today they're the largest company. And so they seem to have figured out through their ups and downs, how to stay relevant and stay on top.

• 1:54:57Speaker 00

  I think Google, Google's having some challenges with their own regulatory issues. And Apple, don't ever count Apple out because back to, they weren't the first to come up with the PC. They weren't first to come up with the mobile phone. They weren't, there's so many other mobile phones. They just wait until they can create a great customer experience. And then when they do, they pounce. They weren't the first to come up with an MP3 player.

• 1:55:30Shane Parrish?

  Or a phone.

• 1:55:30Speaker 00

  Or a phone.

• 1:55:31Shane Parrish?

  Well, how do you think of Nvidia?

• 1:55:36Speaker 00

  Well, I've, I think Nvidia is

• 1:55:43Speaker 00

  is a very great company for a variety of reasons. One of which is it went from a graphics processing company to being the way we power all of AI.

• 1:55:58Speaker 00

  And they fought for so long about this idea of parallel processing. Where the CPU worked a certain way, the GPU worked a different way. And the GPU is now shown to be more powerful. But after we sort of got to the edge of Moore's law, the GPU is winning out because they can process things much more efficiently. But I worry about that they've only had one leader in their whole cycle. I worry about what happens when Jensen decides not to be at the head of Nvidia.

• 1:56:37Shane Parrish?

  Yeah, that is the question, I guess, right?

• 1:56:39Speaker 00

  I think that's the question a lot of people have.

• 1:56:41Shane Parrish?

  Jensen's a remarkable sort of CEO.

• 1:56:44Speaker 00

  Jensen's a remarkable CEO and he does things very differently than anybody else. We had him speak at our base camp, which is our annual retreat for our founders. And he just came out with so many great stories about Nvidia, about his personal life, but also about his management style that is so different.

• 1:57:01Shane Parrish?

  I remember being there. That was, that was awesome.

• 1:57:03Speaker 00

  Yeah.

• 1:57:06Shane Parrish?

  Sometimes you've said in the past that sometimes the path to greater efficiency is doing things sequentially and sometimes it's doing them in parallel. Can you explain that?

• 1:57:15Speaker 00

  Well, I think most people are trained to do things in serial. They, they take a problem, they break it down into pieces and they do one piece at a time. Step number one, solve the problem number one, solve problem number two, because we need the solution to problem number one to feed into problem number two. And they eventually go down the path. And a lot of, like, if you're an individual contributor, you just, you write code, you just keep writing the code and you finish the code and you submit it.

• 1:57:46Speaker 00

  But if you're managing a team, you need to break down this piece of software into components so that you can give it to your team members. You now have all 10 of them working on it.

• 1:57:57Speaker 00

  As opposed to you write it, write it yourself and even if you're really good.

• 1:58:04Speaker 00

  Software writer, you literally have to be a 10x engineer on top of your 10x engineer. So you have to be 100x engineer to do it in the same timeframe that 10, 10x engineers can do it. And sometimes it's just more efficient to just break the problem down so that you can put them in parallel and then stick them all together.

• 1:58:24Shane Parrish?

  How do you think about companies and time span? And specifically, maybe with an angle towards positioning yourself to rapidly adopt to whatever the future brings versus trying to predict the future and running ahead of it?

• 1:58:40Speaker 00

  I think the consensus would tell you that it's very, very hard to predict the future. And your ability to predict the future is uneven. Because in the world that you know, you may be able to be very good at predicting the future.

• 1:59:00Speaker 00

  But the world is not stationary and the world changes. And in this new world, trying to predict the future when you don't have many facts or many patterns that you can go against.

• 1:59:12Speaker 00

  It's much better to have a machine that knows when to pounce than to try to predict what's going to happen.

• 1:59:19Shane Parrish?

  Go deeper on that, a machine?

• 1:59:21Speaker 00

  Well, your company is in some sense a machine. And so you're trying to figure out when you should pounce on an opportunity.

• 1:59:29Speaker 00

  You're building, you're building, you're building. And you decide, I'm going to take this path now. And you're going to make your company and go in this direction.

• 1:59:42Speaker 00

  Because you see the opportunity in this, in this path.

• 1:59:47Speaker 00

  Maybe make the example more concrete. Perhaps, you know, as an example, DoorDash started with food delivery, but specifically restaurant delivery. And they waited until they figured out an advantage that they can have in grocery.

• 2:00:04Speaker 00

  But the mechanism by which to deliver restaurant food and grocery food were pretty much the same. And figuring out when to enter the grocery market had a lot to do whether the company was ready. The customers were ready, the market was ready, the groceries were ready. And you can predict that customers want this.

• 2:00:31Speaker 00

  Before they want it, or you can just wait until you see lots of customers bang on the door, riding into DoorDash, hey, can you also get my groceries? And so it's a matter of what, do you want to be pushing the customer to do what you want? Or do you want the customer to to pull you in the direction that they want to go?

• 2:00:53Shane Parrish?

  Is the biggest risk there that you try to tackle two problems at once? Like they, I'm assuming they knew they wanted to get into groceries. So part of the risk at the start is like, if we're focusing on restaurants and groceries all the time, we're spending on one of those two things. And not all of it, but a lot of it's coming at the expense of the other. Or do you see that as, as no, it's not?

• 2:01:13Speaker 00

  It's a very sharp insight that you have. I think the one, the one thing that you'll find is that there are lots of examples that,

• 2:01:23Speaker 00

  that I could use to support your conclusion there. Because before DoorDash happened, there are plenty of other service solutions. And most notably, there was Grubhub. That was just the website. And then they pass the order to the restaurant and the restaurant delivered.

• 2:01:47Speaker 00

  And Tony's observation was that's not deep enough of a solution. And so why was it not deep enough? Well, there are a lot of restaurants out there that don't have their own delivery staff.

• 2:02:00Shane Parrish?

  Yeah.

• 2:02:01Speaker 00

  And why don't we just?

• 2:02:03Shane Parrish?

  You're creating problems for them in a way.

• 2:02:04Speaker 00

  Exactly. And so the only restaurants that would be on Grubhub's website were all the companies that already had delivery staff available. So what DoorDash did was to expand the market. And by expanding the market, they were very focused on that problem. Because like, really, you'll you'll deliver, you'll take the orders, I cook it and you'll deliver it for me. I've never heard this before. So you were just like educating the market for a period of time because you're just focused on that problem. As opposed to, besides Grab Home, which didn't do that, there was Postmates. Originally, Postmates wasn't

• 2:02:44Speaker 00

  just in restaurant delivery. They were doing anything. They would pick up from anywhere and they would deliver it to anywhere. And they would even pick up something from, I don't know, Bloomingdale's or from Walmart. But in that example, there's just too many different things that you could be, you could do, and it wasn't focused. And even more broadly than that, there was TaskRabbit where you can run errands. Well, one of the errands you can have them run, someone who was on TaskRabbit is to go pick up food from any restaurant. So simplicity of the solution is the reason why I think you want to start

• 2:03:24Speaker 00

  with a very focused problem. It's much easier to tell people, this is what DoorDash does. And then over time, you expand that. You expand the remit because you've earned the trust of the customer to allow you to do more things.

• 2:03:41Shane Parrish?

  One of the problems when you were saying that is like, how did DoorDash find drivers in those early days?

• 2:03:46Speaker 00

  Yeah, it was hard because if you, the one thing that, you know, if you sort of believed that it was more profitable to to transport humans than deliver food, then you would come to the conclusion that Uber and Lyft would get all the drivers and DoorDash would not get any of their drivers. And it turned out that, well, A, there are some people who would prefer to deliver food or a package over delivering people. They didn't want to have to have social interactions. And then there are some people with perfectly fine cars, but they're not perfectly fine cars to to transport humans. And so, early on,

• 2:04:30Speaker 00

  We thought it was going to be a problem, but it was less of a problem than we had originally imagined.

• 2:04:36Shane Parrish?

  One of the problems that I anticipated, or maybe from the outside looking in, I can be completely wrong, is when you sign up a grocery store customer, they want to work with you in a particular way, but it might not be a standardized way. And then you might say yes, because you want to sign up that customer. Maybe it's like Albertson's or something. But then you go to the next largest grocery store chain and they want to work with you in a different way. How do you think through the standardization, which is like, no, we work in this way versus creating all of these one offs? And I see a lot of startups do this where they want to sign a customer. So they'll violate sort of like their standard procedures and they'll create these one off contracts and technical solutions. And then they go to, and they're trying to get revenue so that they can still exist. How do you think about that trade off?

• 2:05:21Speaker 00

  It's a very, I think it's a, I use, I use the accordion example often, which is, you know, you, you, you pull the accordion too far and then you have to push it back in and you know, at some level, if you are super rigid, you're not going to win your first few customers. So at the very beginning, the accordion is completely folded and you, you, you do pull the accordion and you allow things that you may not have allowed. You, you may not want to allow in that very early days. And then it gets super far stretched and you're like, oh shoot, I need to standardize a bunch of things. And then first,

• 2:06:00Speaker 00

  you're not going to go back on these customers. So you, or, or merchants. So you're going to go back, you're going to go into the next inning with a lot more standardization. Or you break up your hundred customers into three personas or four personas and try to have four different standardizations. But trying to be overly standardized at the beginning is generally not a great idea.

• 2:06:28Speaker 00

  And the, the opposite of that is have a standardized product and then allow customization on the edges. And I think a lot of software companies try to do that or build a platform. Look, the platform is not changing. You're buying the platform, but on the edges we lack for customization. And you allow, you do it at the beginning. You find other developers who are willing to do the professional services on the side and go from there.

• 2:06:59Shane Parrish?

  It's almost like you earn the right to do standardization when you're trying to be the backend, where you have to accommodate at the start and widen the accordion. And then as you get scale and network effects and more and more benefits to the merchant or partner that you're partnering with, you sort of can more standardize. Is that true?

• 2:07:18Speaker 00

  That is true. And I also just think it's very, there's a lot of hubris in thinking that you can standardize at the beginning when you don't even know whether that's the right solution for everyone to standardize on. And so bring some customers. They'll tell you your standardization doesn't work for, not only just because it doesn't work for them, it may be that it doesn't work for many people and at least learn from that.

• 2:07:42Shane Parrish?

  What's the difference between working backwards and working forwards?

• 2:07:46Speaker 00

  So, working backwards is this idea that Amazon

• 2:07:52Speaker 00

  popularized, which was you start with the vision of the world that you want to imagine. And you, you think about if everything goes right, what is this, what is the world that we live in and what has this product become that you're trying to build? And at Sequoia, we call that the pre-poorade. And, you know, if everything goes right with this company, what has it become? And then you work backwards from there. What, you know, one, one year before that, what does it look like? Two years before that, what does it work, look like? And Amazon popularized by working backwards, meaning that go from the future all the way to today.

• 2:08:36Speaker 00

  And I love that concept in a sense, but I've also seen lots of founders struggle to take it from the future, which they have this great vision of the world and really map it all the way back to today. They map it somewhere five years out, 10 years out, but they can't map it today. And I also tell founders, okay, that's the future that you're aiming for. Here are the realities of today. What does it look like one year ahead, two years ahead, three years ahead? That's working forwards. And if the two don't match, it probably, you're not on the same trajectory. And so I believe in having founders work both backwards and forwards. Often, when you don't, when you work backwards and

• 2:09:21Speaker 00

  you think you have a great plan, and then you misexecute, and you don't know that you don't, you're not executing, it's because you haven't worked forwards on what the year one, two, and three look like to be on that trajectory.

• 2:09:35Shane Parrish?

  What are the two or three mental models you keep coming back to most when you're making a decision?

• 2:09:46Speaker 00

  I'm gonna ask you that question.

• 2:09:48Shane Parrish?

  This is your interview. Nobody's here to listen to me.

• 2:09:51Speaker 00

  I want to know what your three, two or three mental models that you use. I think the one that I learned from Amazon is whether this is a type one or type two decision. And you know, if it's a type one decision, I've learned from Brian Chesky to run out the clock because you can't go back. As a type two decision, and you know, you just move the, move forward, make a call, and of course, correct along the way.

• 2:10:16Shane Parrish?

  Type one being irreversible and type two, yeah.

• 2:10:20Speaker 00

  So if it's irreversible, run out the clock, meaning like, get all the information, make sure that that's a high confidence decision. Type two, if you can always change it, make a fast decision and keep iterating. That's one model. The other mental model I think about is

• 2:10:42Speaker 00

  You know, working backwards, working forwards, that's also top down versus bottom up is a similar sort of idea. Some problems are better solved thinking top down, some problems are more easily solved, just working bottoms up. Uh, another one generally is to break up hard problems into smaller and smaller bite sized problems and solve each of those individually.

• 2:11:11Speaker 00

  And just the way I live my life, this is not a mental model, it's a lot about consistent compounding and just build just every single day, doing the little things that sort of improve myself or oneself or the company that I'm working with.

• 2:11:27Shane Parrish?

  Talk to me how you think through the, the breaking problems thing, because you mentioned

• 2:11:34Shane Parrish?

  bringing it into smaller problems, solving those, and then you get the solution. How do you think of that versus the individual, like the optimal solution for that particular sub problem might not lead to the optimal solution for the bigger problem?

• 2:11:52Speaker 00

  Hmm. Yeah, so I think there is local optimization and global optimization that you're talking about.

• 2:11:58Shane Parrish?

  That's a much better way to word it, yeah.

• 2:11:59Speaker 00

  If you want to solve a global optimization problem, you need to pop up. And if you're trying to solve a local optimization problem, you want to go down. And um,

• 2:12:11Speaker 00

  you know, so I think the problem first and foremost has to be at the right altitude. And then you could break the problem down from there.

• 2:12:19Shane Parrish?

  Is there an example that comes to mind for your, your thinking?

• 2:12:22Speaker 00

  If you're trying to climb a mountain and you're like, the top down problem is what's the path? So even before you climb the mountain, you're, you're going to plot the path before you get onto the mountain. But once you're on the mountain, then you have a path, you're just going one step in front of the other on that path. And if you find that the path is not right, hopefully you've had some backup paths and backup plans that you can go one foot in front of the other. Path A doesn't work, well, path B might be a little better because I plotted the alternative plot to path B. So that's an example of like planning top down on your path.

• 2:13:06Speaker 00

  And your alternatives and doing a bunch of scenario analysis. And then when you're executing on a day to day period, you just literally just go execute. And I don't see that any differently than a company. You have a plan for the year. You have some scenario planning around it. And so the more scenario plans that you have, the more easily you can course correct. You know, you're, you're supposed to be on path A. You decide that you're still going on path A. You're slightly off. Let's go back on path A. Path A turns out not to be the right thing. We're going to pick path B because that's the second alternative. But we're going to go right, one foot in front of the other, plotting against path B.

• 2:13:49Shane Parrish?

  We always end these interviews with the same question, which is, what a success for you.

• 2:13:55Speaker 00

  I know that this, this question was coming and to me, the, the success is just the process and having a good process. Because if you live, if you have a process that's consistent to who you are and your values, and you live that every single day and you get up every day and follow, follow through on that process, you're already successful. You know, lots of people talk about success is not the destination. It's the journey. I think it's just the process before the journey. Which direction you're going to go. Well, why did you decide to go in that direction? How fast do you want to go in that direction?

• 2:14:39Speaker 00

  Before you can go on that journey, hopefully you've planned things out and you have had a process to sort of plan that out. And if you did that right, you know, you're going to be successful.

• 2:14:58Shane Parrish?

  Thanks for listening and learning with us. For a complete list of episodes, show notes, transcripts and more, go to fs.blog/podcast or just Google The Knowledge Project. Recently, I've started to record my reflections and thoughts about the interview after the interview. I sit down, highlight the key moments that stood out for me, and I also talk about other connections to episodes and sort of what's got me pondering that I maybe haven't quite figured out. This is available to supporting members of The Knowledge Project. You can go to fs.blog/membership, check out the show notes for a link, and you can sign up today. And my reflections will just be available in your private podcast feed. You'll

• 2:15:41Shane Parrish?

  also skip all the ads at the front of the episode. The Farnham Street Blog is also where you can learn more about my new book, Clear Thinking: Turning Ordinary Moments Into Extraordinary Results. It's a transformative guide that hands you the tools to master your fate, sharpen your decision-making, and set yourself up for unparalleled success. Learn more at fs.blog/clear. Until next time.