Behind The Tech with Kevin Scott - Reid Hoffman: Investor, author & entrepreneur

Episode Date: April 26, 2019

Author, angel investor and entrepreneur Reid Hoffman talks about starting and scaling massively valuable companies, hyper-competition, and the secrets of blitzscaling. Hear from Reid about the challenges to watch out for and the keys to success.

Prior to going to China, when I go other places from Silicon Valley, I would say, oh, you're in slow motion, like you're moving slowly. Because one of the things we've really learned here in Silicon Valley is that speed and speed to scale really, really matters. You go to China and you go, ooh, we're in slow motion. Hi, everyone. Welcome to Behind the Tech. I'm your host, Kevin Scott, Chief Technology Officer for Microsoft. In this podcast, we're going to get behind the tech. We'll talk with some of the people who've made our modern tech world possible and understand what motivated them to create what they did.

So join me to maybe learn a little bit about the history of computing and get a few behind-the-scenes insights into what's happening today. Stick around. Hello, everyone, and welcome to Behind the Tech. I'm Kevin Scott. And I'm Christina Warren, Senior Cloud Advocate at Microsoft. And today, we're going to hear from the author and entrepreneur, Reid Hoffman. Yeah, I first met Reid when I joined LinkedIn. He was the co-founder and executive chair when I was there. And I think people know Reid broadly as a member of the PayPal mafia. and has sort of gotten himself fairly deeply involved with all things AI. So I'm super happy that he's on the show today. And he's also the host of the podcast Masters of Scale.

Yeah, everyone should go listen to Masters of Scale. It was more or less the entire inspiration for this podcast. So I saw how much fun he was having doing his own show. And one of the things that he does with Masters of Scale that's like really clever is these were conversations with people that he would have been having anyway. And he figured out a way to go have the conversations and to tape them. And then he does an amazing job sort of packaging up those conversations with a bunch of like really cool production. But like, it was totally my inspiration. That's awesome. I love knowing that. And so we've had a big list of amazing guests already on the

podcast. But I wanted to ask you, you always ask our guests about how they began their careers and what was the first technology they encountered or the first program they learned, you know, their educational background, stuff like that. And it's always really fascinating because people have really different stories each time. But I'm just curious, like, why do you think that it's important for people to hear these stories? You know, when I was younger, I always thought that there was only one way to become a technologist, that you had to look a particular way and to have a particular background and to follow like a fairly particular path. And like that was the only way to get the permission to go do interesting things and

like the highest probability way to be successful. And I'm old enough now and lucky enough that I get to interact with tons and tons of super interesting technologists. And once you get to know these folks, you will discover that there is no one true path. Like everybody's journey is so dramatically different. There's some commonalities in there, like obviously like you at some point have to get your spark ignited, your interest for tech somehow or another motivated. But like what ignites the spark and like what captivates each individual about tech and sort of draws them into this journey that they're then going to be on probably

for the rest of their lives is different. And I think that's a super important thing to share with the world, especially at a moment in tech where I think it's more and more important than ever to have as broad a swath, as diverse a swath of humanity as possible involved in the creation of these technologies that are increasingly influencing our future. I totally agree. And I really can't wait to hear about Reid's early days and what he's up to right now. Yeah, because he has a super fascinating journey, just like everyone we've talked to on the podcast so far. All right, let's chat with Reid.

Coming up next, Reid Hoffman. Reid is an investor, author, and entrepreneur. He's a legendary angel investor, co-founder, and executive chairman of LinkedIn, author of three books, including his most recent, Blitzscaling, and now a partner at the venture firm Greylock. Super glad to have you here today, Reid. Welcome to the show. You have tons of stuff to talk about. So I typically start these interviews by going all the way back to people's childhoods. And, you know, it's sort of interesting how people find

their way into their careers in technology. So, like, why don't you tell us a little bit about your first contact with technology as a kid? So, like many young boys, this was when the TRS-80, so-called Trash-80, and the Commodore 64, and all the rest had come out. Yeah. I think you and I are almost exactly the same age, so we have a mirror experience in some ways. Right. And I literally was just begging my dad to get a Commodore 64. And your dad's a lawyer.

Lawyer. And he was like, it's an indulgence. You know, it's like, it's too much money. Take three paper routes. You don't have to do this. Go figure this out yourself. But then what happened is one of my friend's parents bought him a Commodore 64, so I just go over there all the time. And what was it about the Commodore 64 and these sort of first generation of real commodity personal computers that sucked you in.

Was it gaming? Was it the complexity of the device? Was it something else? So gaming was definitely interesting. There was this kind of weird Starfleet Battles game that was kind of picking out which quadrant you were in and so on. Then that was kind of fun and different. But I think I probably put most of my time,

and this is when the programs are literally on the cassettes and those Commodores. Yep. Like, whoa. Like, it's well before floppy drives, which are now people are like, what are you talking about? Yeah. And it was actually, in fact, a lot of what was basic programming,

so you didn't have a lot of complexity, but doing stuff with language interaction. Like the fact that you could make a language interaction program, and I hadn't done, you know, like Eliza or anything sophisticated or interesting like that, but like where you could have like kind of mimicry or you could like have it be like the, I am the Oracle, you know, consult me, and then you could, you know, program in interaction. That's really funny because one of my favorite first games was not graphical. I remember it was the Trash 80 game, and I think it was called Empire. And it was like one of these sort of turn-based text games, and it was like totally engrossing. And the gaming stuff was what really drew me into computing. I sort of like,

not just the games, but sort of the mystery of how are these things made. Yep, the whole world. Yeah. And so from there, one of the things that you got interested in was like just strategy games in general. So tell us a little bit about that. Well, so when people ask me, it's like, oh, how did you learn strategy and business and so forth? And they're thinking I'm going to answer NBA or some of that. And it's like, no, no, it all goes back to Avalon Hill games when I was a preteen and a teen. Just like until very recently, most often the most interesting opponents

were actually human opponents versus computer opponents. And so I kind of got tired of kind of the computer game stuff and the Twitch games never really interested me that much. I had down cycle on the computer games. And so what I would do is get together with my friends and we'd play these very rich kind of strategy games, mostly military games, where the rule books are literally like an inch thick. Because it's like, well, actually, in fact,

your mastery of knowing how the rules played out in different combinations was part of how you could play surprising tactics within strategies, you know, on your opponents, your friends that you're playing with. And so I spent probably three or four years obsessively just doing that and fantasy role-playing games. And that was like every spare cycle was those. And what was your favorite fantasy role-playing game? Well, it's this thing called RuneQuest, which is a D&D variant that I think I adopted because the office and the people who I met at that office were in Emeryville, which was near Berkeley, which is where my home was. And so I could go and interact with it. And I actually helped them edit Scenario Pack. So the reprint of RuneQuest that was just made like last year actually has a credit to me, which is kind of entertaining.

That's awesome. Because I was actually working with them on it. I mean, all the credit's due to them, but I would go by the office. I'd suggest things to change the rule set. And how old were you? Twelve. Twelve, yeah. Yeah, so that's sort of incredible, actually.

Obsessive kid. And that was all you? So it sounds like your dad wasn't, so you just sort of figured this out. Well, my dad was initially extremely opposed because what it basically was, was you and all these geek boys are sitting around, and I don't see what the future of this looks like. I don't see you preparing for your economic future. It looks like you're avoiding reality to me.

And it was when the game company that produced RuneQuest was called the Chaosium. And when I brought back a check from the Chaosium from some of the work, he flipped a bit. He went, oh, this is positive. Maybe you'll be a game designer, and you'll be working on games. Okay, keep going. But super negative beforehand, and then moderately positive afterwards. So in a way, that was sort of your first entrepreneurial thing. Yes.

So you're like doing something non-trivial, sort of pushing against opposition from, you know, folks who are like economically and, you know, otherwise like supposed to be wiser than you. And like you just sort of do it anyway. And it was definitely in the things we share. It's like, I have a fascination on this, and I just am going to do this. Interesting. And so you go from doing this strategy gaming obsession as a preteen and a teen, and you eventually end up at Stanford, and you're a symbolic systems major. Is that a direct line?

No. So tell us a little bit about that journey. So I gave up fantasy role-playing games, I think, roughly, probably roughly when I was like, no, no, I should get serious about going out on a date and sitting around with a whole bunch of my friends geeking out on RuneQuest is not actually, in fact, going to be conducive to this. Right. Right?

Like, that weird alien crew over there, we stay away from them. Yeah. And so I went to boarding school, the Putney School in Vermont, which taught me a bunch of interesting things. Blacksmithing and woodwork and art. Yeah, like, so.

Oh, I had no idea. There's this whole, like, maker thing that you do that I did as a high school student. That's fantastic. Yeah. Drove oxen through the woods, did maple syrup farming. I mean, there's a whole bunch of different stuff. That's sort of amazing. And this is all in the 80s, right?

Yeah. Yeah. I mean, so like blacksmithing is sort of a thing right now, but like it was not a thing in the 80s. Yeah. And I was literally picking what's the thing that I will probably never get exposure to again because I always have that as like what's unique here. And I was like blacksmithing. I have no idea what that is. I want to learn that.

That's awesome. And then I went to Stanford. And I went to Stanford. I've always been something of a student of decisioning and decision making because we go we go through our lives decision-making all the time, and people don't realize that's one of the things that everyone should work on becoming more expert in. Right. Because we do this constantly.

What's your schedule for the day? Where are you going to travel to? And big decisions, jobs, marriages, like tons and tons of stuff. And yet, no one studies it systematically. They go, oh, you just do it. And you're like, no, no, no, no. It's just like running.

You don't just do it. You you're like, no, no, no, no. It's just like running. You don't just do it. You can actually get a lot better. Right. I hadn't done any of the reading or academic work yet to do that. I was like, how the hell does one make a college decision? Because, you know, it's like people say, well, do you like big colleges or small colleges? Or do you like the tech program? Or do you like the annual?

Or even like what you want to major in or be as an adult. Like that's a really daunting thing when you're 18 years old. You're like, I have no idea. It's like pick for the rest of your life right now. You're like, really? Yeah. You're like, ah. And so I went, okay, I can't make that decision.

And one of the things I had learned was can't make the decision. So what I'll do is I'll shrink to what's the first year. I'll compare on what the first years look like. Right. Right. And I went, Stanford had the program called Structured Liberal Education, which is two-thirds of your freshman year is with, I think it's about a hundred other people, where you're together from Tuesday through Thursday, 2.30 to 9 p.m., you're all together. You're in seminars, you're listening to lectures,

there's always a movie each week that you watch the movie to talk about like an art film. It's everything from art to philosophy and economics from the Greeks to the moderns. And I was like, I want that. That sounds really interesting. So, I just very oriented towards how do we strengthen public intellectual culture both in the U.S. and the world, which is who are we and who should we be as individuals in a society and have a discourse about it, talk about it, to get better, right, to learn together. And that's why I was attracted to Slee, and that's what I thought I was going to be. Like I thought I was going to be a philosophy professor. Well, you know, when I was thinking about this conversation that we were going to have today, I've heard you on many occasions say that at one point in your life, your goal was to become a public intellectual and to sort of serve this purpose of helping to

ennoble humanity, like in the true sense of the word, ennoble. I just sort of wonder, like, you must have made that determination that this is what you wanted to do when you were 19, 20, maybe younger. How on God's earth, as a 19 or 20-year-old person, do you decide to go do that? Because that's an unusual thing in seriousness to want to gravitate towards. Like, somebody might, like, as a flippant thing say, oh yeah, like I'm going to, like I want to be a public intellectual, like I want to be an influencer, I want to be famous. And like that's not what was motivating you at all. Yeah, it was definitely nothing about fame, which I still have no positive bit towards.

I mean, obviously I've become a little bit more famous, but it's no intention, no work towards it. I think it was two things. One of the joys of Stanford overall was, oh my God, are there a lot of amazing people, interesting people here. I learned a tremendous amount from the amazing different students.

Like this one's a concert violinist and that one's an Olympic swimmer. And this one, oh my gosh, all these amazing, like I'm really focused. I'm dedicated to how do I get to my top potential and potentially how do I help other people get to the top potential. And so that was that part. And then the structure of liberal education, you know, how does the weave of actually politics and economics and culture all come together? And

what does that mean in terms of these systems? And then all of a sudden, I'm going through this program, which is nicknamed SLEE at Stanford. And I'm like, literally, it's like weekly epiphanies. It's like, oh my gosh, that's amazing. I never understood that. And it alters your perspective on your role in the world, on humanity's role in the world, and what the world looks like, and what's there. And it's like, more of that, please. And I thought, not just for myself, but that's how we make progress. So, I wanted to participate in that. I wanted to help make that happen. And so, it's interesting in the sense that a lot of these sorts of decisions, like I had a different path. I decided when I was 17 years old that I was going to be a computer science professor coming from a family where neither of my parents went to college. And, you know,

it was just sort of like this weird abstract thing. And like, I was even more specific than that. Like, I was really interested in compilers and programming languages. And like, that's what I wanted to do. And I like think about it in retrospect, it seemed like this absolutely obvious thing that I wanted to do. And looking back at it 30 something years retrospect, it seemed like this absolutely obvious thing that I wanted to do. And looking back at it 30-something years later, it's like, wow, that was really a peculiar thing for a 17-year-old to fixate on. And part of it was people. I just came into contact with these really amazing computer scientists at the Science and Technology High School and just sort of the people I was interacting with. And I was like, wow, this person has revealed this world to me that's totally fascinating, and I want to be like them,

and I want to do for other people what they did for me. Yep. And the other thing that was amazing for me at Stanford, so I talked with the students, but I met some professors there because, you know, both you and I going through high school, it's like, oh, we're super smart. I'm very smart. You know, because you look around and you say, well, I've got intellectual capability.

I mean, it's not arrogant. It's just I am smart. And I went to Stanford and I met people like some of the professors, Peter Galison, Jean-Pierre Dupuy. And I went, I am never going to be as smart as you. Ever. Like I could train my whole life and it's never going to happen. Yep. Okay.

So, smart's only part of the thing. What else am I doing? Yeah. Yes. And so you declare symbolic systems at some point, which explains symbolic systems to folks. It's a combination of kind of psychology and philosophy and science. And it's like, what is that way that we understand it ourselves? And what are the way that we talk to each other and we get there? So I was going to create my own major, because Stanford actually has a pretty good program for doing that.

And then as I started doing it, I literally read the, oh, we're creating this new interdisciplinary major called Symbolic Systems. And it's kind of a combination of cognitive science and artificial intelligence. Then one of the things it allowed you to do was to declare your own concentration. So I made a new concentration, so I suppose a new major, called Computation and Cognition. Because it's like, well, what are the things that we learn from computation

that make us better cognitively? And what are the ways in which cognition is like computation? Right. Was the thing that I was like, okay, that's what I want to work on. And was that influenced at all by the, like, Hofstetter's book

had come out? So yeah, that was, yeah. And I've been planning on rereading it recently. I haven't read it. I should do the same thing. It's book had come out. So, yeah, that was, yeah. And I've been planning on rereading it recently. I haven't read it. I should do the same thing. It's been a long while. And, like, that book was amazingly impactful.

So, in some ways, it was a little bit of a brave move, I think, at the time to choose an AI-ish discipline. Because we were in AI winter in the 80s. So, like, there had been this sort of period where the hype around AI had gotten well past our ability to execute on it in the 70s and early 80s. And then this bubble popped, and a bunch of companies went bankrupt, and a bunch of academic careers got ruined. And when I was in grad school in the 90s, it wasn't the thing that you chose as your field of specialization. So I've always found it somewhat remarkable that so many people in your cohort chose symbolic systems at Stanford because it was not anything remotely like the obvious decision that it is now, where everybody wants to get an AI degree or some degree that's related to AI? I think it was the people who were like,

look, we don't want to do... Now, a bunch of CS majors thought it was CS Lite, so they're like... Of course. Yes. So they're like, you're getting away without doing the hard stuff like compilers. Like Jeffrey Allman, for example, said that to me.

That's funny. Yes, and looked super good. And I could easily have said the same thing. Yes, of course. But I think what the attraction was, some people were fascinated by AI, thought AI was nearer term than, still had the belief that it was generally winter. But for me, it was, I want to understand cognition. Yeah.

Right? And maybe we can create silicon substrate machines that can do a lot, all, some particular shape. Maybe we can't, but we know we have cognition, and I still want to understand it. And then from there, you go to Oxford to get a master's degree in philosophy. You were a Rhodes Scholar. Marshall. Marshall Scholar. And that was like a pivotal point. So, like, you had this big transition right around this time where it's like, my vision of becoming a public intellectual is going to maybe need to be something different

than I imagined it. So, what happened? So, I concluded that one of the problems in the AI cognitive science field is no one had a real concept of what cognition was. They were doing psychological models of features like how would memory degrade and so forth. But really, how are we doing cognition? And similarly, we're building intelligent devices, but we don't really have a good theory. It's only until relatively recently, we've really been thinking about this, that we've advanced the theory past, like, the Turing test as, like, oh, this is the theory. And you're like, oh, that's a hard thing to measure. And so, I was going to go do that. And then what happened is, and I thought philosophy might be doing it. So, I went to go study philosophy at Oxford. And what I realized was that the professional, scholarly, you know,

kind of pursuit of philosophy was not these kinds of questions I was looking at. So, what I, here's the essential insight it has. Like, you said, okay, abstract what a public intellectual is, at least in the theory then, which is a person who creates media objects to help us as individuals in society reflect on who we are and who we should be. Those media objects may be books, they may be essays. Obviously, now we have podcasts. Yeah, they could be TV shows like Carl Sagan is one of my favorite public intellectuals. His books and TV shows and documentaries were hugely impactful. Exactly.

And so, if you said, well, what if the media object was software? What if the software was the medium that we're interacting in, almost like Marshall McLuhan? And what if you actually could power that medium with a commercial model? Now, I learned a lot since then. This was all my pre-any experience with business, being a little bit of an academic snob saying, oh, those problems are easy. Like, these are attractions that I'm working on. And when getting into it, you're like, oh, no, I learned a ton. It was a great gift in my life to do that. And I was like, I should go work on software. And my thought, by the way, the specific thought at Oxford was there was these things called personal information managers, you know, once upon a time, now baked into phones and other things.

And I was like, well, what if we reconfigured them with a theory of human nature, a theory of how we relate with each other and what that would be like and what would that product be. And so, taking my theories of human nature and applying it to this product, that's what I should go do. And then I came back and I looked around and said, oh, the online revolution is happening. Online is what I should do. And so, you didn't jump straight into entrepreneurship, did you? So, you were at Apple for a little while? Yep. I wasn't really thinking I'm an entrepreneur. I was thinking I want to create these new products that have this kind of public intellectual impact. And so, I had some product ideas. So, I went to some VCs and I said, well, have you ever shipped commercial software? And I was like, no. And they're like, you know,

before you ask us for money, maybe you should learn how to ship software. Yeah. Right. Oh, that's a reasonable good idea idea. And so I've always been a fan of the Mac and so forth. And so I was like, I'll go

work at Apple in this thing called eWorld, which everyone assumes was electronic world. It was actually employee world

because it was a derivative of Apple Link. Oh, interesting. Yes, exactly. It's all the obscure facts and history.

And they were going and trying to compete with AOL, even though they basically licensed AOL. So, retrospect business brain

going, oh, that's a terrible plan. But, it was the getting online and these people know how to do software, know how to do online,

know how to do interfaces, all learn how to ship software there. And that was my first real job. And then from there, you start a company. Yes.

No, I went to Fujitsu to learn product management. Gotcha. A virtual world's product called Worlds Away. Because again, the social dynamic of these medium was the thing that I was kind of playing in. And then from there, I went to go start SocialNet.

And was it this thing that you were always planning to do? And like you were sort of, you know, like your VC suggested you were accumulating the chips. So you got permission to go do it. Or did you like have this moment where you're like, oh, my God, like, I'm so frustrated. I'm not going to be able to do the thing that I want to do inside of this corporate construct. Like, I have to go start a company. So, I was always willing to do the products within a company.

I had a set of kind of ideas of how I wanted to help participate in making individuals in society better. And you're kind of using the public intellectual theories, if not explicit writing, in order to do that. And that was a little bit of the, well, I'll try it at Apple, and I'll try it at Fujitsu. But I was definitively trying to pull out the set of skills that would be necessary to understand which are good products, how do you ship them, how do you go to market with them,

what are the things that go to market, I mostly learned from startup. I didn't realize how important the V0 to V1 is. Like, one of the things I realized going to SocialNet was I had learned a lot of the V1 to V2 game and the V1 to V11 game, but I didn't realize it was totally new to go V0 to V1. Like, I hadn't done that yet at a company or anything else, and that was a, you know, learning experience, which is usually lots of blood, sweat, and tears on the floor. And so I'd always kind of wanted to do these kinds of products, and it was kind of like, great, I'll go do it by starting a company. And I was kind of more naive, like the kind of questions about like,

oh, yeah, well, you just market a product, and then you have advertising, you charge something for it, and you don't really need to think about it. And it was the entrepreneurial experience that made me realize that actually, in fact, especially for online, but generally, one of the really core skills in entrepreneurship is really thinking how the business and the business model comes together. And even if it's a classic, oh, it's an enterprise, an enterprise sales force, you're really thinking through

in a lot of detail about what that engine of the business looks like. And, you know, technical architecture and all the rest, super interesting. You need to know scalable, but you also need to align

it to the business model. And I didn't really start figuring that out until SocialNet. Yeah. And that's sort of an interesting learning to have because I think

one of the things that a lot of people do is they have a thing that they're trying to accomplish that requires a multidisciplinary team effort. And it just seems to be human nature that you sort of look at the thing that you're interested in and are expert in, and you just sort of assume that that's the important part and like the rest of the stuff is either easy or that, you know, this is one of the things about your book Blitzscaling that I think is so fascinating is really it's sort of a systems theory thing that you've got to get right, especially in these modern companies where things can move so fast and you can't walk into these situations allowing your ego or your biases to inform too much of how you're structuring a culture, a team, a company, even the product itself.

Yep. So, SocialNet, what was that experience like? Well, a lot of the entrepreneurial aphorisms that I'm known for came from the brutal learning experiences. Yep. Like, if you're not embarrassed by your first release of your product in a consumer internet company, you released too late. It's an emphasis on speed. That was because we spent a year thinking we're designing this perfect

thing and we lost part of the market window opportunity, lost the learning opportunity. And you're like, speed, speed, speed, speed. And embarrassment, okay. Minimum viable product. That's part of what minimum viable product means. You're actually kind of embarrassed. You're like, well, it doesn't really do very much. Okay. Yeah. Right. But you're getting feedback. But you're getting feedback and you're learning because there are very few product geniuses in the world who can kind of go, look, I can labor behind the curtain and when I reveal it, it's coherent and everything fits together and is wonderful. Very, very few. So, for the rest of us mere mortals, it's learn and iterate and improve.

Yep. So, after social net, it was LinkedIn. That was 2003, right? No, it was PayPal in between. Oh, God, how did I forget PayPal? Yes. Hugely important. Yes.

It was a little small company. Yeah. So, yeah, you are part of this very famous cohort of people who went through a really interesting set of experiences at PayPal together. And so you basically ran strategy and a handful of other things at PayPal. It was a number of things. So when Peter and Max pulled together the company, they decided that each have the person they were closest to who had entrepreneur and business experience to be on the board. So for Max, it was this guy named Scott Bannister. And for Peter, it was me. We were part of the founding board of directors on it.

And there was a whole, like, we could spend hours just going through the PayPal journey. And then what happened is I decided, because SocialNet, I had learned a bunch of stuff that I would do differently, and I kind of felt it needed to be restarted with a unique distribution model, because I actually think one of the things when you're thinking about consumer internet

is you actually have to co-build the product and the distribution model together. That was one of the things I learned that's a specific consumer internet thing. And that was what I thought we needed to do. And the board was like, no, no, all we need to do is television advertising. And I said, well, I disagree, but I'll help you hire a CEO, I'll help you hire a new head of product,

I'll help you hire this stuff, and then I'm going to go off and do other stuff. And so I went to Peter and I said, hey, I'm going to go start a new company. Because I had an idea like LinkedIn, like binding the value of the product, the DNA of the product together with the distribution model, and like binding the value of the product, the DNA of the product, together with the distribution model.

Right. And you put the two other things together. I'd seen Six Degrees, and that had given me a lot of inspiration. Yep. And so I was going to go do this, and Peter said, no, no, don't do that yet. Come join us.

Join us full time. And I was like, well, you guys are already down the road. You've discovered your payments use case on eBay and a bunch of other stuff, and that's great. He's like, no, no, no. We don't have a business model. We're probably going to sell the company. And you have a lot more managerial experience than anyone else in the company.

So you come join. And I joined as COO. But then what happened is because I wasn't really there for career progression or, oh, what's my title? It's literally, Peter, what do you want me to do? He's like, I want you to go solve this problem. Okay, I'll go solve that problem. Right. Right. And so I was the kind of minister without a portfolio, working on everything from banking regulation to business development deals to

helping Max with some of the fraud stuff. What was maybe the most interesting thing that you worked on there that you can talk about? Well, as you know, there's tons of stuff. Yep. I would say, well, I was in charge of the whole eBay relationship, which obviously, since they owned a competitor, was a mostly enemy out of the frenemy relationship. Right. But there was kind of like trying to convert it from enemy to frenemy

was the kind of key thing, and how do you do that? I'd say probably the one that had the steepest learning curve was, this is kind of a classic, there were many, many stories from PayPal that were kind of classic to the entrepreneurial journey and entrepreneurial learnings. So Peter came to me and said, okay, you know that we thought that banking

was our business model, like, uh-huh. He's like, and you know that we've been applying for banking licenses, telling banking regulators that it's okay, they don't need to regulate us because we're in the process of applying for licenses. And he's like, okay, so I wanted you to go back to those banking regulators and tell them it's okay that we're not going to be a bank and that we're withdrawing our application and we're not going. And you're like, so you want me to go to the regulators and say, you know, you're concerned for protecting the financial system and the consumer. And that we had previously been acknowledging that we're a bank. We're now no longer acknowledging we're a bank and these aren't the droids you're concerned for protecting the financial system and the consumer, and that we had previously been acknowledging that we're a bank. We're now no longer acknowledging we're a bank, and these aren't the droids you're looking for.

There's nothing to see here. That's the mission you're giving me. He's like, uh-huh. I'm like, okay. So what defines a bank? So that was kind of the, oh, God. And there were a lot of, oh, God, moments that Peter handed me as tasks. But that was one of the ones, like, I had no idea what banking regulation looked like, what the law looked like, what the definition of a bank was.

Yeah. And, like, that's probably one of the things where I'm guessing even your early experience with these crazy strategy games really starts to, because, like, that's exactly what you're doing. Like, you're trying to sort of maneuver around inside of a complicated set of rules to accomplish this objective that's important for your company. Exactly. And the key thing, there's a long story, but the key story was the regulators get their mandate by we're protecting consumers. So what we did is we figured out, and John Muller, who was on my team,

the GC worked for me, and John Muller is awesome, figured out that there was this thing called deposit brokers, that if you put in money in a bank on behalf of an individual, it's still FDIC insured and protected. The FDIC had already done that regulation. So we went to meet with the FDIC to pitch them on, we would like to slightly modify your regulations about pass-through protection, but here's all the things, and let's talk about how it's all protected by the current banking system. Right. Because then when I would show up to a regulator and say, look, we're not applying for a bank anymore, look, the consumers are protected.

What are your other concerns? Right. And, like, that is exactly sort of the heart of brokering a good deal, where you've got this thing that you need to accomplish, but the counterparty also has an equally important thing that's very important to protect the consumers. Yes. That's a critical mission that they're fulfilling. But trying to, like, get into this space where you can do a deal where legitimately, like, you both can win, that's the only way to do a good deal. Like, both parties have to be able to win to, win to be true to the mission that they're on.

One of my favorite books, as you know, is Non-Zero by Robert Wright. And Non-Zero Some Games is one of the really key things that's part of our evolution of our society. So I want to talk a little bit more about this because it's like one of the things that excites me most about AI is I think AI can be one of these instrumental things that turns a bunch of zero-sum games into a non-zero-sum game. So like for folks who aren't steeped in game theory, like what's the difference between a zero-sum and a non-zero-sum game? So fundamentally, it's roughly does the pie grow or not, right? And in a zero-sum game, it's whatever I win, you lose. So, if there's 100 units, if I get 52, you get 48.

If I get 55, you get 45. Right. A non-zero-sum game is we figure out a way that, well, actually, I may still get 55, but maybe you get 50. Right. Right. And so, it's the pie grows. Right. Right? And so it's the pie grows. Right. And I actually think one fundamental part of ethics that should go across all ethical systems, all value structures is we should prefer non-zero-sum games. Correct.

Right? Yeah. how you apply AI, like you should pick important zero-sum societal problems and try to figure out how to put a set of incentives and policies in place to convert those zero-sum social good things into non-zero-sum games through the use of AI. And like healthcare potentially is one of them where we have this very interesting system right now where we have a finite amount of our gross domestic product we can spend on healthcare. And you can spend all of it. I think you're the one who actually said this to me. You can spend 100% of GDP and still not solve the fundamental problem, which is we're mortal. And so it's this terrible zero-sum game

in a sense, because you're always having to decide, you know, what the trade-offs are. And like anything that we can do technologically to create abundance in this system, to like get better diagnostics cheaper for everyone, to be able to influence things in a way where you're getting better healthcare outcomes for everyone, we should be doing. And it's hard to do without some flavor of technology, whether that's AI or something else. Yeah. That's what progress looks like. That's the universe we all want to be in, because we'll all be better off. And so this book, Non-Zero, that you referenced, I think the subtitle of that is like the arrow of human destiny or something.

And it's like a really powerful book. Like people should go read it. Yes. Because it's one of the things that gives you a framework for being hopeful about technology in the future. Yep. Let's talk a little bit about blitzscaling. Why did you decide to write this book? So I was in London, I think around 2013, 2014,

and I was on a panel of Silicon Valley people. And they were asked, what's the secret of Silicon Valley? Because part of what's amazing is where we're recording this, we're not about 30 miles of where we're sitting, it's about half of the NASDAQ. Silicon Valley, 4 million people round up, right? That's all the people, not the tech people. The tech people is a small fraction of that.

How is it that that happens? And so the classic Silicon Valley story is, well, we have an entrepreneurial culture that kind of downgrades the fear of failure. We have tech universities, venture capital, tech companies. We have people who immigrate here from around the U.S. and around the world in order to kind of do this.

And you have enough interesting shots on goal that you create all these amazing big things. Probably all necessary but not sufficient. Exactly. And in particular,

now that particular story is true in a hundred other cities in the world, not including China. Right. Where it's all cars trying to... So what you're saying is when they kind of,

like, you do the little checklist and you say, oh, well, I guess what we just don't have is enough entrepreneurial culture. We're too afraid of failure. And you're like, maybe your culture is a little bit more punitive to going out and failing versus getting a job at a bank or a big company or whatever else. But it's really not that different anymore. And so we're doing actually a disservice to these entrepreneurial environments by saying,

this is it. That's the story. And I said, okay, well, what is the real story that really makes Silicon Valley go? And it's actually the speed to scale. And it's the living playbook from the network. Like one of the reasons why when someone says, I want to do a software company, I said, well, if you can come do it in Silicon Valley, it's a very good idea. Right. Because the network helps you. It's the amplification of the network. And why is that? What's the, what are the benefits of the network? What's the knowledge set? What's the learning curves we're on? People don't really realize, like another classic one is during the

internet bust, a whole bunch of the world went, see, we knew those Silicon Valley people were crazy. They didn't understand internet economics and business models and look at like Webvan, that was dumb, you know, and da, da, da. And we did go, oh yeah look at like Webvan, that was dumb, you know, and da-da-da. And we did go, oh, yeah, we learned Webvan was dumb. We shouldn't do more of those. But we also learned other things. Like we learned, well, actually, in fact, spending a lot of capital to get to scale

really quickly in what are these modern markets, what we call Glen Gary, Glen Ross markets. First price Cadillac, second price steak knives, third price you're fired. Before you understand your customer acquisition costs, before you understand your long-term value, before you understand your unit economics, actually might be the exact bold right strategy. So we started doing free products, freemium. Like, I remember the old discourse around Facebook was,

well, how would you ever make money off that because that's only college kids? And you're like, well, there's lots of ways that may play out. And so they're like, oh, gosh, they raised money at like a billion dollars pre and so forth. And it was like, well, actually, in fact, because it's play that forward and work out the business model later. Yeah. Right? And you can actually do that.

And that actually can be good strategy. Right. And so we look, look, on these types of plays it works, on those types of plays it's dumb. And that kind of learning is the kind of thing that helps entrepreneurs around the world. Yeah, and part of it, too, is the density of all of the weird specialties you have to have when you're scaling up a company, which is something that you definitely saw at LinkedIn. Like LinkedIn, it's sort of like this interesting thing. Like you and I met when I joined LinkedIn to run engineering and operations there. And one of the things that I often describe to people

is like LinkedIn was on the launch pad for a while, like trying to sort of figure out like how to get growth tipped over where it reached a critical mass, where the monetization engine works. And then you hit the knee of this curve and then it's like a rocket ship that's going almost vertical. And you have this really short period of time to go in, like put all of your sort of scale infrastructure in place, like fix all of the technical and process

and culture debt that you may have, you know, accrued. And like, if we weren't in a place like Silicon Valley, we probably would have tipped over and died right about the point where, you know, the business started looking good. Yes, exactly. Where suddenly you go, oh, we actually got something. Yeah. And then, you know, like, if you aren't able to, like, very quickly, like, pull in these people and, like, large numbers of the right types of sales folks, the right types of BD folks, the right lawyers, the right marketing people, the right engineers. You could just sort of collapse under your own success.

Yes, exactly. Yeah, I'd love to hear your impression. The book has been out for- About six months. Yeah, six months now? Yeah. So, one of the things that's striking to me is like how vibrant the entrepreneurial scene is in China right now, like in Shenzhen, Shanghai, Beijing. And vibrant is probably a remarkable understatement of what's going on there.

They get blitzscaling, right? Yes. Well, we call it land of blitzscaling in the book, as you know. Yeah. And actually, in fact, one of blitzscaling in the book, as you know. Yeah. And actually, in fact, one of the things, credit to the Chinese entrepreneurial ecosystem and the hustle and everything else, prior to going to China, I would go places and I'd say, oh, you're in slow motion. Like, you're moving slowly. Because one of the things we've really learned here in Silicon Valley

is that speed and speed to scale really, really matters. What are the things you can throw overboard to move faster? How do you make decisions faster? How do you, like, all these things. You go to China, and you go, ooh, we're in slow motion. Right? And that's kind of a weird and startling effect, because when I went to

visit Lei Jun, the CEO and founder of Xiaomi, I think it was, they had 4,000 employees, and he said, oh, you Silicon Valley people, you're lazy. And I'm like, okay, haven't been called lazy before. I'm curious. I'll bite on the next sentence. And he's like, well, you're a Xiaomi. This is when there are 4,000 people. Our policy is 9-9-6, 9 a.m. to 9 p.m., six days a week, you're discoverable at your desk. So next time you come back and visit me, let's meet on Saturday at like 8 p.m.

in the office. And I was like, okay. Like, look, we try to work smart too, but that's impressive. Yeah. Well, the intensity, I mean, like, I don't know whether, so I had a professor in grad school who he liked to joke around that his students work nine to five twice a day, and like he actually wasn't joking. I don't know whether working that amount of time is actually productive, but the intensity is something. And, you know, maybe the availability thing even is like the more interesting part of it because things move so fast sometimes when you discover, oh, like this is the idea. This is the thing that works.

Like this is the critical like deal or opportunity that you've got to jump on that you just sort of need to be able to like muster all of your energy to go after these things when they present themselves. Yes. Yeah, super interesting. You know, it's another book that I think folks ought to read is Kai-Fu Lee's AI Superpowers book. Agreed. I don't agree with all of his conclusions, but if you look at it as a piece of reporting

about the state of the Chinese entrepreneurial community, like particularly around what's happening with AI companies, like it is quite factual and like a very good thing for folks to get themselves acquainted with. So let's talk about AI. In a sense, from the time you were a relatively young man declaring symbolic systems as your major at Stanford to now, a lot has changed in the field of AI. And you are super heavily involved, like you've invested in a bunch of AI companies, you are on Stanford's human-centered AI

Institute's advisory board and help get the whole thing kicked off, like you are recently announced, like you are on the board of OpenAI. And that you probably can't even talk about. Just this huge amount of your time is getting absorbed by these varied aspects of what's happening in the AI economy and in the scientific discipline right now. At what point did you decide that this was something that needed to take as much of your time as it is? So, I grew up in my academic thing in the AI winter. So, I kind of went, okay, this AI stuff is not going to work. Even though I was, by the way, David Rummelhart in parallel distributed processing.

David Rummelhart was one of my advisors. Yep. Some of the stuff that led to the deep learning I was involved in when I was an undergraduate. Yep. And so, what happened is I started hearing from my network, oh, there's interesting stuff going on. And then, you know, I have a relatively periodic dinner with Elon Musk. And Elon started kind of saying, you need to get back into this.

You need to get back into this. And to Elon's credit, I was like, no, no, no, no. All right, fine. I'll go take a few meetings. And I went, oh, we are now in a period where there's really, really interesting progress. And actually, in fact, there could be bad implications for like, just take, well, we have to understand data for racial bias and other kinds of things, whether it's credit scoring and parole, you know, like what's going to go on with robotics, how is it going to transform

industries, like every industry is going to get transformed. It's like, okay, wherever this path leads to, it is going to be like the electricity revolution. Like, we are going to have major, major technological transformations because of this. And so, like, I have a unique set of skills. I understand the commercial stuff. I understand technology stuff. I understand the multidisciplinary stuff.

I've done philosophy. I should start getting involved to try to help catalyze this the right way. And I just started meeting people, started figuring out like what are the places where I can have a catalytic and positive impact for what the outcomes for humanity and society are. And so what are some of the key concepts that you're thinking about right now for how we should be influencing what's happening, either in academia or industry, for positive social human benefit? Let's see, two things. So, one is to realize that while our natural reflexes from evolution are always to go to fear and worry first, to realize that there's massive opportunity and that we're playing for that.

And that opportunity could be like what you were mentioning earlier, medicine. It can be actually, in fact, if we transform a whole bunch of productivity that can do anything from what your book will be describing, which is that allow creativity and innovation in rural towns and all that. There's an enormous amount of great things that happen. We should play for those. And we should not lose sight of that's what we that could happen. Right. We should play for those and we should not lose sight of that's what we're playing for.

Right. And so that's kind of a, like, how do we maximally benefit, how do we become better, public intellectual, through this? And then think about, like, okay, how do we steer around,

not stop, but how do we steer around the pitfalls? Right. Like, what do we say, well, look, if we're going to have a whole bunch of displaced driving

because of autonomous vehicles, what are our ideas about what to do about that and have a healthy society where people have paths to better lives? And what are the ways we help with that? What are the ways that we steer towards good outcomes and avoid bad outcomes? So I think you're spot on, Reid. And I'm really glad that we have someone like you thinking about the pros and cons of AI the way that you are. I know that I certainly have benefited from our many, many conversations about AI over the past several years. And for that, I am super grateful.

So, I think we are well and truly out of time. We could go for hours. So, thank you so much for being on the show today. Always. Thank you. Cool. Awesome. Well, thanks for joining us for Behind the Tech. That was Kevin Scott speaking with Reid Hoffman.

So one of the big concepts that you and Reid were talking about is this idea of blitzscaling and how China is this land of blitzscaling. What are kind of your thoughts around that? Because it was striking to me, you know, he was talking about how big the entrepreneurial scene is in China now and how the U.S. is kind of in slow motion. What are your thoughts on that? Yeah, look, I think folks should go out and read Blitzscaling. It's a really fascinating book. And I think from a phenomenological perspective, describes a lot of the set of network effects that make Silicon Valley work the way that it works. Folks should not read the book and sort of think about Blitzscaling as a set of value judgments.

It just sort of describes a phenomenon. And, you know, it's really interesting that the set of phenomena that it describes are in total effect in China right now. If folks ever get a chance to go visit the big entrepreneurial communities in China, like go to Beijing, go to Shanghai, go to Shenzhen, it's really remarkable what's happening there. In a bunch of different ways, they have a level of hyper competition that's unlike anything that I have ever seen in my entire life, where you will have dozens of companies sort of swarm around an idea, furiously compete with one another, and then one of them will pop out and it will be this sort of very refined, very good thing that serves the need that little, you know, I don't know whether you want to call it, it's almost like Darwinian evolution that happens at this massive accelerated scale. And there are just some great companies

that are emerging out of this ecosystem in China right now. And it's something that people should pay fairly close attention to, because I think what it means for the rest of the world is a lot of the technology that we're going to be using in the future is going to come from these companies in China. It's interesting you talk about that because, you know, Reed was talking about how there are all these kind of like little mini zero-sum games. And that's kind of what you're saying. You know, you have all these companies in China who are competing against each other, and maybe one will come out that'll be really refined and be really breakthrough, but they're not afraid to go up against each other.

Reed has a funny term to describe this. So he calls them Glen Gary Glen Ross markets from the famous movie from my childhood. I'm guessing it was made before you were even born. No, it was not. It's one of my favorite films. I love David Mamet's writing work. It's great. So that's sort of the way that a lot of these markets work, especially in the Chinese consumer internet. It's really like a winner takes most sort of dynamic that plays out, which is like one of the incentives for folks just so furiously competing with one another because the first prize is so big. And, you know, the other thing, too, about these companies is they scale so fast. I mean, the U.S. startups, you know, their sort of ramp to 100 million customers can, you know, be a journey of multiple, multiple years.

And, like, there are many, many great businesses that get built that never get 100 million customers can, you know, be a journey of multiple, multiple years. And, like, there are many, many great businesses that get built that never get 100 million customers. You can get 100 million customers. It's not easy in China. Right, but you can get it because it's a billion people. Yes. You know, Didi Shuxing, or I guess now Didi Group, you know, with bride sharing, I think, is a great example of that. You know, I mean, like, Uber dominated, but Didi came in and was just like, okay, just with this one market, we can really do what you did overnight.

Yeah. The other book, Reid and I talked about it in our conversation that folks should go read, is Kai-Fu Lee's AI Superpowers book, because it's another book that describes the phenomenology of what's going on in Chinese entrepreneurship right now. His focus is mostly on AI because that's the investment thesis of the fund that he runs. But it's really a good portrayal of what's going on there. And like another interesting thing that's happening in the Chinese entrepreneurial market is like they've really mastered this sort of digital to physical divide. So like they are very good at making these companies where you might make an order or take an action on your mobile phone. And then there's this giant logistics network powered by human beings that sort of

fulfills the thing that you just requested, whether it's order delivery or ride sharing or like they're very, very good at that. Yeah, it's interesting to think about if we look at the last 40 years really being driven by Silicon Valley and what that's done as an impact to the world of what the next 40 might look like if it's not dictated by that, but is dictated or at least influenced by other parts of the world. Yeah, and I'm still very, very bullish and hopeful and optimistic about the American tech scene, sort of Silicon Valley and here in the Puget Sound area, which is another booming tech scene, and in New York City. And in fact, like the thing that I think can happen as technology is sort of progressing and like the platforms that we're building empower more and more people to build more and more interesting things using technology that hopefully we can

sort of spread this innovation engine throughout all of the United States. Because, like, one of the things that I spend a ton of time thinking about is, like, how do we get more tech businesses, more tech-powered businesses bootstrapped up and running, growing, and into their own mode of hyper-success in rural and middle America. I totally agree. Okay, so I think that we need to wrap up for today. Indeed. So I hope everyone enjoyed the interview with Reid. Reid, as I'm guessing people can tell, is one of my very dear friends. I could have spent hours chatting with him. I'm sort of

a little bit sorry that we could only open up this very narrow window into what is a very interesting journey through tech, but maybe we'll have him back on in the future. Definitely. And tell all of your geek and non-geek friends about this show, because this is a great show, whether you're into tech or business or just culture and the things that are driving us, because these interviews are so interesting. Exactly. So please help spread the word and don't forget to subscribe. See you next time.