Lecture 13 - How to be a Great Founder (Reid Hoffman)

thank you Sam so when I look through the syllabus of this class and thought about what I could possibly add that would be useful in addition to the very skills one of the things that I've been thinking about has been how do you think about yourself as a founder how do you think about what the skillset is and what are the things that you should be thinking about in terms of am I ready how do I get ready is it the right thing for me these sorts of things so let's start with the perception of

what a great founder is and classically you know this tends to be Steve Jobs Bill Gates Elon Musk Mark Zuckerberg Jeff Bezos and it's an image of founder as superwoman or Superman right who is has this like panopticon of skills and I can use the word panopticon because I'm here at Stanford but the it's things like I know how to do product market fit I'm great a product I'm great at strategy I'm great at management I can fundraise right I can do all of these different skills and part of what you're looking for in a

great founder in the kind of theory of the founder as super person is I'm looking for someone who is awesome at all these things they're there they are well rounded they're diverse they can bat on all skills and you know part of how I found this kind of emphasized in my own the beginning of my own entrepreneurial journey as I remember reading an article that said you know Bill Gates who is smarter than Einstein right and you're like well look Bill Gates is really smart and is very accomplished but I'm not quite sure smarter than

Einstein secretary phrase that even Bill would want to be actually next to and it's partially because I think it's this image of founder as super person which is that a great founder is someone who can do anything you know jump over tall tall buildings in a single bound in all of these sorts of things and the reality right is a founder is someone who deals with a ton of different headaches and and no one is universally super-powered generally speaking you hope to have a couple of superpowers some things that are unique edge you some things

that are unique to the problem you're trying to solve some things that may help you give an edge because actually competitive differentiation and competitive edge is super important but but it's not it's not actually in fact a function of of genius and matter of fact frequently it's very hard to tell the difference between madness and genius because usually it's the results that play out and sometimes when you're dealing with uncertain environments you may even be genius and later be thought to be a mad person or you may be a mad person and you turn out

to be lucky and you're later thought to be a genius so it's it's actually kind of a challenging set of like how do you think about you know these sets you know what is the whole set of skills and when us mere mortals you know come into this kind of battle what is the wait right way to think about it and so you know when I thought about this question of how is one a great founder you know part of what you get to is oh and actually this is probably the slide that for people

on this this may have been a suboptimal choice for people on video but it's like these are all skills that are super important right these are all things that you say well okay this is this is really really important to do and you must in fact actually do this well and it begins to look like a superhuman task and so what I did is I decided to take a subset of these and focus on some of the the interesting things to think about what is it that actually makes a great founder because it's actually not

that you score 10 out of 10 or all these you know you'll be the entrepreneurial Olympiad but you you are actually the best at all of these things so let's start with team so one way to kind of I think talk about exploding that kind of the myth of the super founder is that actually in fact usually it's best to have two or three people on a team rather than a solar founder it's not to say solar founders don't actually play out and they can successfully but most often two or three people is actually in

fact a much better when I look at these things as an investor I say you know what is a good composition of a project and I and founders that are likely to succeed it's usually there's two or three of them and the reasons are because for example we've already talked about the fact that there's this very broad set of skills there's this whole set a question about how you adapt your company in order to be successful and if you actually have two or three founders you have you have different skills you can compensate because by

the way everyone has weaknesses you can compensate for each other's weaknesses you can in the diversity of problems that you encounter as a founder that you can actually attack them so one of the things that I I suggest when you when you look at essentially a founding team is to have a real high preference for having co-founders having a high degree of trust for those co-founders because one of the things that by the way part of the whole entrepreneurial thing is there's lots of ways to die one of the ways to die is you get

a year down the road with your co-founders and then you're going through a messy divorce right and that's a that's a that that is uh not always but frequently fatal and so and then also the diversity of kind of tasks that you're trying to do and actually okay yes I was going to say that will be suboptimal from a view point of being able to look at the slides the next thing is location uh and so frequently I've heard told to me it's like oh Silicon Valley aggregates all of this super talent which it does

in terms of like what what actually in fact it's it's the reason why Silicon Valley startups are so successful is because all of these great people immigration which is hugely important for for talent and founders and Hills you know emigrate here and that's part of the reason now it's actually if you think about it from basic math even if you take something that that Silicon Valley is super strong at which is essentially software skills in the last two decades not all of the great software people move here not all of them can move here there

many of them in various other parts of the world and and so why do I put choice of location as one of the things that comes down to thinking about whether or not you're great founder well the reason is is because what great founders do is seek the works that will be essential to their problem and their task and they realize it isn't just about like kind of like I am super person I can do this anywhere I can do this you know in you know the Antarctic etc is in order to be successful I

have to go to where the strongest networks are for the particular kind of problem or the particular kind of thing I'm doing and Silicon Valley by the way is super good at some kind of tasks some places that you essentially try to solve certain kinds of problems but it's not good at all of them let me take you know kind of two examples so one is Groupon I don't think Groupon could have ever been founded here even though it's a software product it actually even generates a network which you know obviously a lot of the

great networks are here and and uses a kind of Internet technology as a mobile product and everything else all of which we have a lot of great skills here in Silicon Valley and the networks are really good for this one of the things that's central for Groupon for its early days was having massive sales forces and massive sales forces strengths and weaknesses of networks tend to go together Silicon Valley tends to be pretty adverse to plans that involve like oh we're going to rent a 25 story building and in 20 of those stories we're going

to have floors of salespeople and that's how we're going to get our thing going that kind of plan here tends to not get a lot of interest tends to get a lot of criticism tends to not have talent aggregate to it tends to have Finance ears talk up and things like capital efficiency and network effects and other kinds of things that are that are key here and so it's actually not a surprise that actually in fact Groupon require was required to be actually in Chicago which is really good at this as a way of actually

kind of getting going and showing that even software startups can be in other places but even if you begin to think about it you say okay well what kinds of of of you know other kinds of startups would someone be an idiot to move here to do think of someone we're doing a fashion startup not fashion all up parsh mark which is you know a mobile you know marketplace etc which are a bunch of things are good here but like I'm designing a new fashion company I'm going to come to Silicon Valley to do it

that's actually not such a great idea right and as I say the fashion company might be a great idea but you want the network's to support what you're doing and so part of the reason why where should i locate my startup is a test for thinking about a migrate founder is because part of what happens when you're actually founding a company is you're going i will go to where it's successful this to do to be because the metaphor that I frequently use for entrepreneurship is jumping off a cliff and assembling airplane on the way down

and the reason is because it's hard it has a quasi mortal exit while you which your default dead and so you're taking every possible a chance to actually win and so great founders go look I'll move to what the network is and that network is you know this graphic is frequently Silicon Valley but for tech startups for mobile for networks remark applies is you know this is a really good place to do it for a bunch of other things you should think about whether or not it's a different location now here's something that you know

it's very in vogue all right very conventional to say you're contrarian these days and so let's talk a little bit about what contrarian is actually in fact is so it's actually pretty easy to be contrarian it's hard to be contrarian and right and in particular when you're thinking about is my idea contrarian or contrarian enough its how does a smart person actually disagree with me right is because if you can't think of a smart person who isn't like ignorant or just crazy or smells but as a smart person who is somewhat expert in the know

things that your idea has some serious challenges then it actually isn't contrarian right so concern and contrarian is also is always actually this is one things that Sam and I talked about at startup school is contrarian is actually relative to an audience right so when you want to be when you're when you're thinking about contrarian in terms of like a really good contrarian idea is like okay what would other say its consumer Internet good consumer and Internet people think is actually in fact not yet a good idea and part of when you think about contrarian

is to say okay what's the way that what do I know that other people don't know because it isn't just a oh I'm brilliant and other people aren't and that's reason why contrarian thing is right that's a very bad test might happen to be true of course lightning could also strike you in the field right you know so think a lot about like what is it that I know that other people don't know so for example in the very early days of LinkedIn part of what I advise all founders to do is go talk to

every smart person who will talk to you and give you feedback so with LinkedIn I walked around I said here's my idea what do you think two-thirds or more of my network including some of the very very smart people all thought I was nuts and the reason why I thought it was nuts was because they said well look it's a network product it's only valuable with a bunch of people in it first person no value invites second person second person first person it no value for either them they already know each other when do you

when do you actually begin to deliver on your use case which is like 500k to a million people right and so you're never gonna get to size it's never going to grow now what I knew that the critiques the critics didn't know was that I could think of a set of different ways by which people say look it's pretty easy to say look I believe in the vision of this or I think it's interesting or I think a product like this should exist or I'm willing to play around with it and I can you leverage

those sets of interests and grow the network to get to enough size that you could begin deliver on the value propositions in which LinkedIn had and that was the specific thing that I knew that the critics weren't thinking about and so when you think about being contrarian you have to think about how is it the smart people let's agree with me they disagree with me from a position of intelligence right and there's something that I know that they don't know that actually in fact will play out to be true now in this case in general

as a as a founder it's good to be contrarian in the real sense and right now the other last part on a contrarian Asst is to think about there's lots of different ways to be contrarian so for example a frequent one will be like oh yeah that's a good small idea but actually that's not small its large or you know actually in fact you can assemble the talent or while most consumer internet startups tend to be like for example is another LinkedIn example tend to be only successful with rocket ships actually a gradual compounding curve

can actually be very very valuable LinkedIn never had its rocket ship moment it was it was kind of compound year by year but that in the consumer internet tends to be a atypical to the pattern so here you begin to get to a bunch of sorts of problems that essentially founders run into which is like well should I be doing the work or should I be recruiting people and delegating the work and classically the answer to this is actually in fact you need to do both right and in fact not only do you need to

do both you need to do sometimes one at a hundred percent and sometimes the other one at a hundred percent and sometimes even though this is not so good at math both at 100 percent and so what you'll see is this is actually classic when you begin thinking about what is a great founder is you navigate what is apparent paradoxes so another one that I frequently talk about is you've got to be both flexible and persistent and the reason for this is entrepreneurs are frequently given the advice to you know have a vision stay firm

against adversity you know realize that you you have this vision that is contrary to what other people think and just hold stay on track get through the difficult times and get there the other piece of advice given with equal vigor is listen to data listen to customers pivot be flexible right part of the thing this comes out to being in terms of being a great founder is to say well when should I be persistent when should I be flexible and the vehicle that I most often use for this is you should have on a project

you're doing like a company an investment thesis that essentially says why you think possibly contrarian why you think this is potentially a good idea it should include what you know that you think other people don't know and then as you're going into the battle field you go is you know am I in fact increasing confidence in my investment thesis or decrease in confidence in my investment thesis because I've found increasing confidence then hope stay on track you know be persistent and by the way sometimes even with adversity your confidence can increase if it's decreasing that

doesn't mean jump out PayPal linked and airbnb a whole bunch of startups I've and I've been part of have had months where you were like oh my god this why did we ever think this was a good ideas kind of a valley of the shadows moment so example in PayPal was you know August 2000 we were burning twelve million dollars in one month the expense curve was exponentiating we had no revenue decrease in confidence however we say okay what do we do in order to fix that and that gives you your immediate action plan another

one is should you have belief or should you have fear right should you have you know could it should you essentially go well no no I have this vision of the way the world should be and I should ignore everything else and I should just go with that well again part of what being a great founder is is being both able to hold the belief to think about where it is you want to be doing and why don't want to be going but also be smart enough that you're essentially listening to criticism negative feedback competitive

entries where you kind of go on okay is this changing my investment thesis is changing what I'm planning on doing it doesn't mean you lose confidence you have the confidence but you also essentially have the parallel again in this kind of thing of how do you put these two things together should I focus internally build a product ignore the world ignore competitor oh sorry focus externally should I be recruiting should I be meeting people should I be gathering network intelligence again the answer is both and the reason why I'm focusing on these kind of it's

it's both rather than either/or is because part of what makes a great founder is the ability to to be flexible across these lines to sometimes be 90 percent one way sometimes be 80 percent the other way be executing the judgment on what is the current problem look like how is it that what I'm trying to solve this that I should say this is what we should be doing and how should I be dividing the work and part of when you think about these things as you say like this is another one as kind of classic

as people say well I'm completely motivated by data it's what customer said to user groups you know I've a lot of entrepreneurial methodologies lean other kinds of things we talked about is like gather the data be guided on the data well actually in fact data only exists within the framework a vision that you're building to hypothesis of where you're moving to and the data can even be negative and you can think well actually in fact this negative data means I need to change or alter the way that I'm thinking about something but I actually keep

on a specific vision about what I'm doing and by the way sometimes even when you have that specific vision you don't necessarily actually ever end up at that big vision that you were thinking about so for example you know at PayPal we distributed these t-shirts that said the new global world currency right well actually in fact one of the the I know Peters been here one of the jokes I told Peter is like well actually we do have this new world global currency what we're trading in is dollars you may have heard of it it's

existed for a while right we're essentially a master merchant for that now of course this presage is what might be happening with Bitcoin although now is the whole nother topic there however the key thing is is that vision of saying we are creating a kind of a universal network that allows anyone to to pay anyone to become a merchant to bring the electronics into the speed of commerce at any business that that is being transacted that vision kept it true north but we say well first we think we're going to have a banking model then

we think we're going to have you know a debt model oh no we're going to have a master merchant model and how does that actually play out so you always combining the vision and the data and the data is within the framework of of a vision and sometimes of course the what you learn changes your vision now this is one of the ones that I actually think we saved this special picture for one of the ones that I actually think is quite key is that normally entrepreneurs founders are thought about as having like they're risk

takers right they're they're they where's everyone else cowers in fear from this notion of risk they boldly go out now that's true you have to be a risk taker you have to be thinking about how do I make a really coherent bet on risk because in fact the only really big opportunity is the only contrarian opportunities smart people disagree with you on happen to be one that have risk associated with them on the other hand part of the skill set that when you beginning to apply how you think about risks as an entrepreneur is you're

beginning to think about like how do I take intelligent risks how do I take a focus risk that if I'm right about that one thing right then a bunch of other things break my way and once I start doing that I try to figure out how to make my my on shot possibility as high as possible eg how I minimize other risks how do I essentially take this risk in an intelligent way that doesn't just go oh yeah risk risk to the wind who cares but let's go and so this kind of combines that you

know this image which I think is the best of the of the of the images we found for this yet is kind of the sense of how to think about now back to what I was saying in terms of having an investment thesis part of having an investment thesis is you chart it out it's kind of a list of bullets you say like for example an early LinkedIn it was like look everyone is actually going to be benefited by public professional network everyone will realize including companies that it's better to have it play out this

way the initial set of adoption will come from essentially people who are like visualize the role this we're willing to play with it and then eventually the mass market will come on as they begin to have a network that is already delivering a value proposition to them that's what kind of an investment thesis can look like and then you know you got economics so like initially recruiting and then and then broadening other things you have that investment thesis and you say is my investment thesis increasing or decreasing and confidence do I think that the data

that I get from the market when I talk to smart people how does that how does that change my confidence in it and this is actually how you essentially minimize risk so for example very early very early days in PayPal the part of what happened is they said okay well we're going to do cash on mobile phones will the cash on Palm Pilots because it's really easy we actually realize the cash on Palm Pilots wouldn't work even before we launch the product because basically what happen is I went in and said to max and Peter

I said look here's our challenge our challenge is we're right this room probably don't remember what Palm Pilots are they were the like early PDAs and so uh we lived in where what was Palm Pilot central and the whole use case was splitting the dinner tab and how many people at everyone at the table would have a Palm Pilot split dinner tab zero to one in every single restaurant so you could even just by thinking it through you realize like the direction you're on is going to hit a minefield and you need to pivot and

that's when Max Levchin came up with the idea of saying actually in fact we could sync by emails we could have email payments as the backbone of this we're like ooh that's a good idea and of course that's what the whole thing kind of pivoted into and that's part of thinking through minimizing the risks as you're actually executing here's another one that's kind of classic which is well should I have this long-term vision or should I be solving local near-term problems and again the answer is both its these paradoxes and the question is is you

jump between them you should always have a long-term vision in mind because if you actually completely lose your your directions eventually you'll find yourself in some field there's not a good path out of but if you're not focused on solving the problem that's immediately in front of you your host right and so part of the question about how you put these things together is you say okay short-term what's the thing I need to be doing today have I made progress today have made progress this week but is it largely on path so I'll give you

an example of how this plays out in terms of financing or in terms strategy so people frequently think product strategy is fundamental to how startups like I have a product idea that's the thing I'm a founder actually in fact the next level down on strategy is usually product distribution whether it's consumer internet or or enterprise or anything else because actually in fact no matter how good your product is if it doesn't get the customers you're hosed so usually you have to have product distribution is more fundamental than the actual what the product is and the

one below it is financing and the reason why it's financing is if you run out of money and the whole effort goes away even if you have a really good idea it doesn't work so frequently when you're executing on a good strategy you're actually in fact when I'm raising money this fund raising I'm thinking about the next fundraising I'm thinking about how I'm set up for it I'm establishing relationships that would be key to that and I am I'm not executing like oh the only thing that matters is I get to the next is get

to next fundraising because you have this business at your building but I'm thinking that is a core strategy in terms of how I'm executing and frequently you're thinking about okay how does my product distribution work such that the financing works well and that's kind of how you architect these things together so how do you know if you might be a great founder well it's you should have some superpowers it's generally speaking in software useful to be a good product person it's useful to have good skills about kind of leadership of bringing networks in of persuading

people and it's useful to be able to and this is kind of the most fundamental is recognized whether or not you're on track or not to have both that kind of belief but also paranoia about am i tracking against my investment thesis and when you do that the right way and you're learning and you're assembling people and you're assembling networks around you that's generally speaking how you end up being a great founder now classically and and I deliberately put up five white men mail pictures is classically you have a kind of a these are the

ICONic founders but in fact founders can be very diverse they can be extraordinarily talented at different areas because there's different kinds of entrepreneurial companies there's different kinds of problems they're trying to solve and I don't just mean diversity in terms of classic you know kind of gender race excetera diversity and age diversity and experience you know jack ball was a was a teacher before he got into this that's the kind of thing that you can that you should think about and so the the question is is how you cross uneven ground how you assemble networks

around you how you get people to assemble this that it's a constantly changing problem to face when you are trying to found a company and so I think the thing that I was trying to get people to think about with this is to say there's not one skill set there's an ability to learn and adapt an ability to constantly have a vision that's driving you but to be taking input from sources and then to be creating networks around you and that's essentially what makes a great founder and your ability to do that while crossing uneven

ground in a fog which is kind of the the way that entrepreneurs because you don't really know like did you always know this is going to work no unless you're crazy right although sometimes crazy works so with that I will now go to a few questions but it was kind of this mindset of founders which is kind of key and if there's no question up here I'm curious about how amazing how you be targeted the earliest are the selected schedule the strategy for getting the right early adopters that you do with strengthen your investment thesis

really help it take off it's just like every startup phases that ship that same challenge so one of the really fundamental things is to is to think about product distribution is key and for LinkedIn we had a couple things going for us so one the web was boring in 2003 that basically what happened is everyone thought the consumer net was over and so people were doing clean tech and enterprise software and everything else that's a much harder problem now because everyone thinks the Internet and mobile is interesting and so breaking through the noise is really

key so the strategy we use would work we just actually set up send out some invitations to group people and then tune the mechanism to have and did PR to get people like one of the decisions we made early that was right was to say should we only allow it as invite only or should we allow cold sign ups the reason we should allow cold sign ups is because the people who are super enthusiastic about this weren't necessarily the people who know so they would sign up and spread it that sort of thing we're all

the kind of decisions we've made now that challenge is much harder because the challenge and you think about product distribution is is how are you competing for potential customers or potential members time and what do they think what do they have to believe in back in 2003 was like well a professional network that's potentially a good idea what the hell I'll play with it there's not a lot of other things for me to look at today there's tons of things and so your strategy day when you're looking at product distribution has to be what is

my really decisive edge what is the hack that I know that other people don't know so come to you howdy kill you know he's the Buddha Fung no no bomb Jeff like a happen now Rakesh so how do I know someone's a good founder or not well it's not I'm a huge believer in references um usually I only ever actually know hundred percent the time in this case I only meet with someone when they come to me through a reference so one of the things by the way is that thing is I after this I

have to run off because I have a meeting I need to get to if you want to actually get time and attention we find a reference it's not a pitch to using LinkedIn it's a question of this is how you sort out time you can find out like Sam knows me not the throat Sam under the bus all right yes and so a reference to me is in fact the way that I do this and so for example what I met with the Airbnb guys part of the reason why I could interrupt them two minutes

another pitch and say I'm going to make you an offer to invest I want to hear the rest of the pitch because I think what you're doing here is is is magical and awesome was because I'd already had references on them but that was only two minutes not even 30 minutes because I already knew about them before coming in and by the way by and large that's some version out is true of most of the great investors and it's that it's that network that's really key I think there was a question over here to hear

a strong single orders density of insight is a strong signal for great founders can you say another sentence Oh be able to still a thesis on a whole pry it off speed it down to a concise sentence well I would definitely say that the ability to say coherently what you're targeting and to articulate something that isn't trying to boil the ocean or a Swiss Army knife approach but it's like one focus like look if we're right about this then it works that is actually pretty important to big to being able to judge a founder because

if you don't have that level of clarity you're not going to be able to assemble the network behind you you're not gonna be able to investors not going to get employees you have to be able to articulate a very clear mission about what you're doing and insight is helpful although a little bit of this depends on the stage it is always if I find I find myself attracted to founders who've analyzed the problem a good way but but frequently I've seen great founders who do not present good analysis but have an instinct about what they're

doing and so you more chart what kind of what's going on around them when they can have like five years of Lego because wrap-up time like what what can you going to like keep like I believe I'll be the original Wow Oh so why how do I keep persistence when because actually LinkedIn went through you know let's see for those who remember we were we were treated as the is the is the is the little alternative to Fenster then to MySpace then to Facebook right so we had a lot of different like we are the

little teeny one next to these two these respective giants each of the time ultimately for me when I was think about LinkedIn this gets back to the investment thesis as a mechanism I continued to believe the action in fact the right economic system design for every individuals life and for organizations lives to have public professional profiles that that that that world is the way the world should be everyone's much better off with it and we are getting closer to that than everyone else it may be that it hasn't taken off as fast as I like

it may be that the general world is going oh this social stuff is really interested in we don't like we can only get in the news in the fall at the summer of 2003 by saying we were friends tour but for business which is completely like nonsensical once you begin on you begin a look at the thing but it's like okay we'll cover you because it's friends but for business and that was important to begin to get people to pay attention to us and so the confidence was that world I still have confidence believe that

it should exist and no one is getting closer to it than we it's taking us maybe longer than I'd hope to get there but that's okay so okay when you get wrong what you need to found that you think is going to be really good and you know it seems to be able to move it means opposing forces and on paper it seems like they're going to go the distance what is it that makes you get wrong about someone that looks good at first observation well to some degree you can only fully cross these kind

of minefield by actually going and doing it right so you're going to be wrong about your hypothesis the kinds of things that frequently get you wrong get get wrong or when you think that a person because they like for example one of the tests that I forget to use in an interaction is I push on the idea some and what I'm looking for is both flexibility and persistence I'm looking for know I have conviction and what I thinking and I'm arguing it but I'm listening to what you're saying and I'm adapting to the concerns and

whatnot of how you think about that sometimes you'll find someone who says look I've learned to mimic that behavior so I've learned to say for example I've learned to look look like I'm reasoning with you and I look like I'm I'm thinking about the challenge you bring up but actually in fact I'm ignoring you and ignoring me that might be fine ignoring the world in general is usually disaster and so those are the kinds of things that in the measurement you can see essentially getting wrong but but usually the kind of thing like most often

the kind of reference questions I asked about founders is like adaptability like one of the phrases that I frequently look for is infinite learning curve because each entrepreneurial pattern is to some degree unique and new and can you learn the new one right is way of doing it and so like does the learning breakdown or is there some major skill set is there an ego issue that gets in the way like well I must be the great like everyone everyone must adulate me and that will cause you to behave wrongly in adapting with a problem

those kinds of things I think I have one last question the woman in the back team and from your perspective what makes a good partnership and you're evaluating have a great co-founder co-founding team how to evaluate and then how to think about co-founders so the first thing is it's super important that you collaborate really well that was the kind of the point I was making during the team the the initial part of it because if you in fact don't have pretty good serious trust you know kind of a way of of it's 150 now so

stand right Oh 205 no no no I'll keep going sorry I misread the time so I will have time for more questions sorry I was trying to be trying to get the UM so okay let me give a little bit longer answer to the step so the key thing is when you're thinking about founders founders bounders is do you have a diversity of the necessary strengths across the whole range of strengths that would be useful frequently you need one technical founder at least frequently you need to have someone who is who is going to be

dedicated to the business side fundraising these sorts of things that's kind of classically skill set when you think about the two to three and usually it's kind of some composition across them and that's kind of like what you think of as founders one when you're thinking about a founding team when you when you get the next level deep for example one of the things that people will class with you tell you is like for example don't invest in a husband-and-wife team and actually that's look like that adds a little extra Freight to it and everything

else because you know there's personal dynamics also upset what's going on I actually think that what you're looking for is do they collaborate well do they help each other get to truth right so for example I am most heartened when I'm talking to a team that when they're when they're reasoning to each other they're not like oh we're just all singing from the same thing as like oh but did you think about this or what about this is a challenge like you're navigating the field of battle which has a bunch of risks like for example

one of the things that was pretty common in PayPal is Max who who invented the fraud systems and everything else would frequently come into Peter's office Peter teal Max Levchin and say look here are some things they're going to kill us and let me focus you on them right so it's not like we're all just kind of saying oh yes we're all singing our cumbias but we are adjusting to what is truth and what's the problem we need to solve what's the problem the short term what's the problem in a long term and how are

we tackling it and that composition with our team that collective problem solving that collective learning is the kind of thing that actually usually makes great teams I recall detail says we are multiplying house that we end up 140 characters so I asked you the Italian part to be punished given your second sub la my thinking and the sum of the dominic including or how to collapse signs or the vision to mass or this company you say in common this or any different founders different areas how do you identify them so the talk was aimed at

kind of what is unique about the mindset I think of founders that is great founder across all all founders that's that's part of what this was at attempting to say look because there are differences so for example in software speed to market speed to learning is really key in hardware if you screw it up you're dead right so accuracy really matters right because of you if you build and ship the wrong thing you're hosed so generally speaking as an investor and this is part of the reason why a lot of investors you know have a

certain set of things that they then learn pretty well and try to reapply because they try to understand a domain well enough to be able to identify which of the founders in this domain that really matter and if we're investing in this domain how do we do that well and so there are attributes that are unique per domain so for example you know like like if like one of the classic ones is how good must you be at operational efficiencies in terms of margins cost controls etc you're dealing in the world of atoms including even

in commerce you've got to be really good at that you're doing a digital gaming like a like a Zynga like straight up doesn't matter at all right so and and so you look for that kind of fits and proclivities and part of the beginning of this is it's not actually in fact that it's one person as good at everything I would be like one of the funniest conversations I had with with with a guy a friend of mine who worked for me I first startup social net is he looked at me and he said we'd

I would never hire you to be a manager of McDonald's I'm like yeah I wouldn't either I'd be terrible that right and so it's it's the skill set that fits but also the the whole point of this is actually being navigating a set of things that look like paradoxes sometimes being heavy on one sometimes heavy on the other and be having the right judgment at the moment in terms of what you're doing and that's what tends to be more Universal you will give your blanks to room speak a little bit about how to know whether

or not you should stay in or wake up as a way to give up also maybe like so the question is basically how do you know when to pivot part of the reason why having investment thesis and your confidence in investment pieces and being pretty clear on that is generally speaking the answer that I give people is if your confidence is unmeasured for a fairly long time or is decreasing because unmeasured for a fairly long time should be decreasing and it's decreasing and then you go into intense mode where you're trying to figure out what

kinds of things you would do that would increase your confidence right and that's failing that's a seriously good time to think about pivoting right and and you might have a theses on can we raise money you might have theses on will what's the pattern by which the product distribution or growth or you know viral invitation or SEO or anything else will work and it's like well I tried these three things and this fourth thing doesn't seem as good as these three and the next two things that I think about see we've been worse that begins

to decrease your confidence and that's when you think about pivoting a frequent mistake when it comes to pivoting is wait until you've essentially that crashed into the wall and everything is dead and you can't make any you can't maneuver anymore and that's that's you waited way too long now now in terms of personal career goals and so forth you know part of the thing that I would say that is one of the things that I had meant to talk to you during the slides that since I missed her at the time I rushed through it

a little bit one of the classic questions is balance and I actually think founders have no balance like one of the funniest conversations I ever had was with a governor of Colorado is like we're going to attract really great entrepreneurs here because we have this balanced lifestyle like like literally if I ever hear a founder talking about oh this is how I have a balanced life and so where they're not committed to winning right and so the only really great founders are like I am going to literally pour everything into doing this now it only

maybe for a couple years I may do this for a while and go do often but while I'm doing this I am unbalanced that this thing is honestly you don't take breaks not to say you don't you know go on dates or whatever else but you're super focused on this because it's really hard and there's lots of ways to die that's reason why the jumping off the cliff metaphor is one of the ones I classically use cert depends on maybe of identifying uncertain opportunities which others don't necessarily see overall how efficient do you think these

stars ecosystem is at identifying a good thing so how good is the startup ecosystem and identifying contrarian opportunities um let's see that's kind of challenged because the moment it kind of actually becomes in vogue it's less contrarian I'd say it's mixed sometimes because part of what makes a great investor is an ability to go look I take this radical Chadha take this radical talk shot I take this radical shot and there's enough people or investors there's usually someone if you can find your way to them Network finding your way through network sometimes difficult some night

tons of noise hard to get the signal on the other hand there's sometimes things that are just kind of like you know totally crazy like one of the funny things is you know a benchmark was the only one that would fund eBay you know if you talk to most of the people in the valley a year 18 months ago about Bitcoin they would have told you like what bit what do I have no idea what it is and by the way still unclear how Bitcoin will play out although I think the fact that there will

be a distributed trust system on cryptocurrency is I think almost certainly going to exist in the world and the real question is is Bitcoin the first or last cryptocurrency for there's new ones and new features last because it's the one has Network effects and is already going and so I think it's pretty good with it frequently what happens is people think they're contrarian because they're doing something they think is in a unique a unique combination I'll give you two examples and hopefully the the founders of these people who sent me these cool I get about

30 pitches sent to me a day that I don't basically don't look at and let's referral unless something in the title makes me laugh in which case I look at it mostly is comedy and I'll share to comedy ones one of them was wearable diapers which was the you know you have the computer monitoring you know whether or not the kid is you know taking a pee or poop and they let you know and you're like if you're that far away from your child and this kind of thing it's probably a bad sign of other

things and then the other one was kind of customized ecommerce bongs you're like oh I got a contrarian idea yes you do but not the highway right so anyway so you know you but so I think generally speaking the system is pretty good at it in the back man um a head of diamond goes how do you think about creating markets versus creating markets versus covering them yeah ok so this is actually it's a challenging question the the freaking like this it's a good follow on the contrarian thing like frequently there's this classic thing of

Oh does the market exist yet is that because it's going to be huge or non-existent the good news is it's usually one or the other right and so that means going after something that most people don't think is a market but you have a reason to believe it is actually sometimes frequently a good that however it can sometimes completely flame out one of the things you're doing when you're testing your investment thesis is what would lead me to think whether or not there's a market there or not because you know at the beginning there are

no markets and so though it is of course conceptually possible to create markets people think that there's a new need for this sort of thing on the other hand the problem is is how do you get fast adoption if people don't even know that they wanted as a category right so they say well but people they just realize like a classic entrepreneur misfire the classic one is if people just real like once it exists they'll realize that they really love it and of all the lineup and droves for it well there's a few entrepreneurs Steve

Jobs one of them who can do that most the time it doesn't work out that way and so you have to say well in your investment thesis why is it that you think when you're thinking about a market that isn't already existent that that you know that other people don't know on the contrarian basis that leads you to think that market should exist right and so for example a micro one with LinkedIn was actually in fact the classifieds means of recruiting was in fact an exercise of newspapers and exercise of information age and actually recruiting

direct to people is part of what the networked age and the Internet and that's actually in fact how recruiting should go now it was relatively easy to validate that but you know that's the kind of thing where you think about there's potentially new market yeah last question when do you know you know someone long enough to start a company from one of the things sent folders in the first person who's you need someone's been put on time but when you guys started PayPal like for example how long did you it was a lot of group

of people so how do you know okay I trust these people not to start coming so to read up I'm repeating the question in part because where it says recorded and everything else make sure that people hear it but the question that basically is how do you know that you trust someone well enough to be a co-founder there's a whole bunch of different variables that go into it and look because one of the risks that you take and you kind of get to a thesis of do I think that I know them well enough now

I'll parallel one thing that I think there's a parallel here that I think is super useful so one of the things I tell my portfolio company CEOs or founders when they're thinking about hiring a CEO is I think that the only way to do this is when you get down to the people that you're thinking you may hire as a CEO you spend 20 plus hours with them right where you go into as much depth in a conversation about anything you think is a possible difference of opinion belief work style so you've identified all this

upfront so that your your your jet it's not that you have a contract it's not like oh we're signing a contract that's how we do it but we've established a conversation we've we've gone to all the parameters we've had a conversion about what we might agree with the disagreement one of the things that I frequently think is worth covering is almost like kind of the divorce like why would we want a divorce what would lead me to say this isn't working right and to cover that upfront as part of it because then at that point

when you get into the field of battle which is hugely stressful you go through this valley shadow in the moment you've at least got the basis of we already conversed about a wide variety of things we've set up essentially some expectations about what you know how we might be playing together and if it begins they're very off that it's relatively easy to bring it up in a way that you're problem-solving and that's the kind of thing that I think you frequently you should be fairly confident that you have that level of trust for me frequently

it's to have a set of robust conversations such that it was like like if something comes up laters like we talked about this inversion we can we can bring that up so anyway with that thank you