How I Built This with Guy Raz - How I Built Resilience: Brian Chesky of Airbnb

Episode Date: August 13, 2020

In the early stages of the lockdown, Airbnb was in a freefall: it lost 80 percent of its business and laid off a quarter of its staff. But CEO Brian Chesky tells Guy that as people start to travel again—in cars, and closer to home—the company is beginning to recover. These conversations are excerpts from our How I Built Resilience series, where Guy talks online with founders and entrepreneurs about how they're navigating turbulent times.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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Airbnb.ca.ca. slash host. Hey, everyone and welcome to how I built this resilience edition. On these episodes, we're talking with entrepreneurs and business leaders about how they're adapting to these difficult economic times. And on today's show, we're going to hear from Brian Chesky, the CEO and co-founder of Airbnb. Back in 2016, we spoke with Brian's co-founder, Joe Gebia, and he told the amazing story of how they founded and built the company. And if you haven't heard it, be sure to check it out. Now, of course, we are in a very different time.

And a few months ago, Brian wrote a letter to the entire staff of Airbnb, letting them know that 25% of the company was going to be laid off. this has been by far for us the most difficult thing that we've experienced since we started the company a dozen years ago and i think joe and i used to talk about how starting Airbnb basically this idea that like strangers would live each other live with each other like that was the hardest thing we were ever going to do it was like pushing a rock up a hill and it turned out that trying to run a company that does travel preparing to go public in the middle of pandemic is about as hard and then doing it all via zoom it was even more difficult. And I think that what people want right now, just more fundamentally is connection. Isn't that like the thing that we've always wanted? We want connection to each other. And now you have to fight for it. You know, you have to make a conscious effort for it. You know, on the one hand, I'm closer to some people and I've ever been in my life. You know, probably closer to my co-founders, Joe N8, we talk all the time. And when you're going through crazy periods of time, it has a way of

bringing you closer together. But it also has a way of making your bubble a little bit smaller. And that's probably what's happened for me. Yeah. You wrote a letter to your employees that is posted publicly. And that letter is, it was remarkable. It was so transparent. You had to lay off a quarter of your employees in May. And you could see how painful it was for you to write that letter.

It was extremely transparent. You described the process for how you had to make that hard decision. But also, you know, that every employee would receive 14 weeks of pay plus severance and insurance for a year and they'd get to keep their laptops and there were resources to help the employees. Kind of walk me through how you came to write that letter and how you kind of dealt with that just emotionally. Yeah, there is no playbook, I don't think, to lay people off.

And that's the kind of thing that if there was a playbook, you should never use it. because the thing that people want more than anything is they want humanity, they want compassion. And that means that you need to treat people like people like individually and not robotically. You know, when the crisis happened, we felt it in mid-March. It was pretty serious. We spent 12 years building Airbnb and then we lost 80% of business in eight weeks. You know, we're like one of the success stories, right? And then suddenly eight weeks, there's.

all sorts of concerns. There's articles. Will or even be survived? I never thought I'd read an article like that. And we made a lot of hard decisions. We first cut enormous seminar cost. We cut over a billion dollars of planned marketing spend. Then we quickly raised two billion dollars. It's not easy to raise two billion dollars. It's more difficult to raise two billion dollars when you're a travel company. It's a pandemic and you've lost 80% your business in like eight weeks. The people get nervous. Thankfully, we had some great investors step up, but we had to do that deal, and that was like over the course of 72 hours to like get that deal done. It was the fastest deal I think I certainly have ever done and they've ever done. So before that layoff even happened,

I wrote a couple principles and I said, we have a handful of stakeholders. We have to first make sure that we act quickly and with all stakeholders in mind. We're going to be remembered probably for how we handled this crisis. Andy Grove, this, famous entrepreneurs said, bad companies destroyed by a crisis, good companies survive a crisis, and great companies thrive or are defined by a crisis. I said, we're not going to be the kind of company that will be destroyed by this. So we're going to obviously try to take care of each of our stakeholders. And when we got to the employees, we basically had exhausted options, having raised $2 billion,

we came the conclusion that we would have to do layoff when we confronted two hard truth. The hard truth, number one, was this, that we did not know when travel was. would return. Nobody did. And the second thing we knew is that when travel would return, it would look fundamentally different than the travel before the pandemic. And so our business would have to look different. And we'd have to change that shape of our business and what we focused on. And so then we just realized that we had to approach this with a sense of humanity. I said we should be, you know, as generous as we possibly could be and not less generous than that.

why would you do that? And so we came up with a handful of things that we did to try to help people in this very difficult time. We did a 14-week severance, puts a week per year service. We felt like, well, this is a health crisis. People need health insurance. And so we made sure that everyone had at least one year of health insurance, even after they were getting laid off.

One of the things that I'm most proud of that our team came up with, Joe and the team came to me and they said, you know what, we have a recruiting team. maybe we could dedicate a percentage of the recruiting team to do job outplacement for the people being laid off. Maybe we could basically be an outplacement team to help them find jobs. And the last thing I'll say is writing the letter, I just really wanted to make sure I was just brutally honest with them. But I also like, you know, a lot of times the problem with these things is there's a certain way to act. And a certain way to act is a way where you kind of like, you're not vulnerable. you don't take too much responsibility.

And I was like, you know, the one thing people want to know is that leaders have compassion. Because at this period of time, if leaders don't have compassion, then we are all in a very precarious situation. And compassion means actually having heart. I actually think business leaders do have heart. It's just that they sometimes have trouble showing heart. And so I used a word like love in a letter to a layoff. And it's kind of something very few people do. But I don't think it's something very few people.

feel. It's just that the conventions of business get really cold, but now I think it's pretty obvious that people do want to feel something. I mean, 1900 employees had to be laid off, but you still have a large workforce. How are you making sure that you're keeping morale among the people who are still working at Airbnb? Oh, it's so hard. I was warned ahead of time that not only is the layoff going to be difficult, but the months after a layoff, when you can't even gather people, that gets even more difficult. One of the things I've done is for the last, five months, I do a weekly kind of Q&A. I said, no matter what question you ask, I have this, I have this, I'm just got like this, you know, what the camera got, this is a little green

light next to it. And I'm going to stare into that green light every week. I'm going to just tell you everything that I can. And that's going to be our point of connection. And I tell people, you're not alone. We're going to go on this together. And I think that the key is you have to be optimistic. And optimism is not blind hope. But there are a lot of reasons to be optimistic. You know, when I was a kid, my dad used to say to me, things are never as good as they seem and as bad as they seem. Well, if that's true, things weren't maybe as good as they seemed in January, but that also probably means things aren't as bad as they seem here in July. I'm seeing the humanity of people, the love that's come through the surface. I mean, you suddenly now in a crisis, we're reminded of some of the things that are most essential.

And those things that are most essential are not the things that come in cardboard boxes to our front. door. That the essential is the relationships that we have with people. That's what we have the end of the day. Let's talk about the travel industry, Brian, and let's talk optimism for a moment. You know, when we told the Airbnb story on the show, you had a lot of moments of despair, a lot of troughs of sorrow. Originally, you and your partner sent out 20 emails to investors to invest and not a single one invest in your company. You've had several setbacks trying to a stand-up Airbnb in 2008, 2009. At one point, you made cereal, a box of cereal to get attention.

And I think you raised $20,000 with the sale of those cereal boxes. Yeah, like 20 or $30,000. It was, yeah, something like that. Joe told the story. We had to raise collectible breakfast seal. We were air, bed, and breakfast. So we said, well, let's do collectible breakfast seal for the Democratic Republican National Conventions in 2008.

Joe and I, we made these ObamaOs. there were Cheerios and Captain McCain's, a Maverick in every bite. And at one point, we're like literally hot glowing these cereal boxes in our kitchen. I remember wondering, I wonder if Mark Zuckerberg ever had to like hot glue cereal boxes in his kitchen to start Facebook. Of course, the answer was not. This was an ominous sign, but kind of we lived through it. So, I mean, clearly there were times in the founding of this company where you were really

coming up with different creative ideas and trying different things out to see what worked. what's that version of the of the cereal box now what are some of the things that you are doing as a business to get creative and to think about building resilience when the pandemic hit we said we are going to be decisive felt like if I was a captain of a ship it felt like suddenly something hit the side of the ship and you had to move very very quickly and so it was kind of all hands on deck first thing is we had over we had customers cancel over one billion dollars of reservations. Now, this would already have been hard except for the fact that this was a billion dollars that our host were expecting. And these people, many of them depend on to pay the renter mortgage. We had a huge predicament. What do you do when a billion people want a billion dollars or refunds? And another group of people tell you, well, if you don't get that billion dollars, then we're going to be in a really bad spot. Well, that's a really bad no-win situation.

It's not our money. We just hold the money. What we decided to do is we refunded all stays related to the pandemic where people need the cancellation because we can travel. But then this caught is a huge shortfall with our host. And we're bleeding cash at this point. Like, and have never in our history had we bled cash. In fact, we had more money in the bank than we raised before the pandemic. Suddenly, we're losing a lot of money. We took a quarter of a billion dollars, $250 million, and we sent it to our host. Just didn't loan it, just sent it to host. You know, they would have needed even more, but it was the most we could do. Then our employees rose up. They offered up to a million dollars of their own money through things like perks and travel credits

to give to our host. And Jonae and I said, well, let's add a zero to that. We got that to 10 million dollars and we created a little special grant program. Then suddenly we noticed that there were nurses, EMTs and doctors, and they were going into hot zones and needing places to stay. Hosts were telling us, hey, we can host these people. And we created this program called frontline stays to provide housing for frontline workers. We had more than 100,000 hosts, list their homes for a discount. We waive fees. Some of the homes were free. So we've been trying to be adaptable. You know, suddenly, the last thing I'll say is the following. Our business drops by 80% in eight weeks, and we thought, well, this is going to be a really, really long road,

and it is, but something remarkable happened. Businesses started seeing glimmers of hope and recovery. And what ended up happening is people weren't getting on planes. They weren't crossing borders, and they weren't traveling for business. But you know what they were doing? they were saying, I need to get out of the house. And they were getting at a car. They were driving to a remote destination within about 200 miles and staying at Airbnb. And so we've seen a major surge in bookings in non-urban areas, small towns, rural communities, people staying longer.

People saying, if I'm going to work from home, why not I just work from any home? Right. And they get that a home on Airbnb. So it's a totally different world. And I think, I mean, maybe the most fundamental change that I see. see in our world that's going to happen, if you're so fortunate enough, typically upper middle class person or upper class, not everyone can do this, but for those who can, they're realizing maybe I'll go a month here, maybe I'll go a month there. And you're seeing not only

population redistribution, but you're also seeing travel redistribution, that all these new communities are really welcoming guests and they're going to welcome them for a longer period of time. That is a fundamental change in our industry. When we come back in just a moment, Brian tells us more about the travel trends we might start seeing this fall and how Airbnb will try to respond to them. Stay with us. I'm Guy Raz, and you're listening to How I Built This Resilience Edition from NPR. Hey, welcome back to how I built this resilience edition. Earlier this year, Airbnb experienced an 80% drop in business. But CEO Brian Chesky says that people are traveling again. They're just not getting on planes, and they're staying much closer to home.

are going to instead of traveling to the same 20 cities, going to same hotel districts that are really crowded, and then standing in line to get their selfie photo instead of the same landmarks to put it on Instagram and say, look, I got that too. They're going to have to make some different choices. And maybe those won't be so bad after all. What they're going to do is they're going to travel outdoors. For example, there's 400 national parks in the United States. Right. Most Americans live within a tank of gas of a national park. And national parks have historically not been the main way people travel. They go to Miami. They go to Vegas. You know, they go to Times Square. Well, I think that if this is a time of reconnection, you know, maybe this is a time reconnection to family, this also could be a time of reconnection with nature and the outdoors for a lot of people. I mean, where are we seeing huge growth? Cabins, air streams, camping. This is, that's the kind of travel that you're going to see. I think this is, going to just change trends. I think people are going to want to kind of reconnect to nature. This is a big change. I mean, yeah. I mean, are you seeing, I mean, we're seeing a world where, you know, it's impossible to get an RV. Totally. We are totally booked out for these. And so is there sort of a future scenario where Airbnb more aggressively gets into the business of

RVs? Oh yeah. 100%. I mean, I don't even know how many thousands of RVs are on Airbnb right now. I'm going to have to look. But we're probably, without having a intended to be in that business. We're probably one of the largest RV rental companies in the world as far as they're not our RVs. It's the communities. But yeah, I'm sure thousands and thousands of RVs. We have thousands of treehouses, thousands of air streams, thousands of years, thousands of houseboats. And I think that people are discovering unique one of a kind. They want things that are a little more intimate, more local. And one of the cool things about Airbnb is like the most insane space that you ever imagine, these A-frame homes or,

these really interesting architectural gems. They're saying, I want to go somewhere with an interesting home. This home is in the middle of blank and it's really cool looking. And so you're starting to see some really interesting homes in Airbnb being booked. There is a giant boot that you can sleep in in New Zealand. Somebody built a giant boot. It's like a 15-foot-high boot. There is a dog that you sleep in.

It's called the Dog Bark Park B&B. It's like a 20-foot-high dog. And it's a B&B. and I think in Idaho, and it's got a waiting list now. Yeah. I mean, look, all of these examples are awesome and exciting. This is a question. I love this question from Jip Yee.

Have you guys considered having a category of, like, house is suitable for work from home or quarantined homes, like a little bit of category for those things? I love that. We have not done it yet, but I love the idea. I feel like this is a good sign that we should do it. One of the things we now do is, for example, your internet speed never mattered more in your life

that it does right now, right? Like, one of the things is making sure that people know the Wi-Fi speed. So over 1,000 hosts have already updated the speed of their Wi-Fi on their Airbnbs. We want to get hundreds of thousands of hosts just to update. What kind of Internet do you have? What's the speed of your Wi-Fi? What's the buffering rate? Just because some people, like, they have work where they need to rely on it.

And then we're going to ask, like, in reviews to confirm, like, Wi-Fi speed. So really basic things like that, which you kind of took for granted before we asked, do you have Wi-Fi? Now it's like, well, how fast is the Wi-Fi? Because it really matters to people. I have to assume, like, with the hotel industry and the travel industry, a significant part of your business does come from business travelers, right? And presumably your business is still significantly lower this year, this time, this year,

than it was last year. It's not, no, it's not. Not significantly, wow. So you're seeing, you're already seeing sort of similar numbers right now than you were last year? Yeah. So it dropped by about 80%. And, I mean, you know, nobody knows that this is pent up demand or not. No, we're around last year's levels.

All around the world? Averaged out. You know, Latin America and Asia are lower. North America and Europe are higher. Wow. And that's because people aren't getting on planes. Mix shift from hotels to homes. I mean, if you're in a city and you want to go out of the city to a small community,

the smaller the community, less likely they have a hotel because a hotel only works with density, right? You need a bunch of rooms. You need efficiency. And so people are basically traveling and going to small communities. Well, it turns out that's actually a really good use case for a home. And we try to be very responsible. We work with local governments to have reopening protocols.

We hired or brought on the former search of general in the United States, Vivek Murthy, to create a cleaning protocol. And then people don't want to be in crowds and they perceive Airbnb as a safer option. Yeah, we're getting questions about that from our listeners. I mean, in terms of cleanliness, how do you ensure that the host are keeping their properties clean? And there's a question from Mary Elliott Coglin Nauer via Facebook. How do you guys make sure that the hosts are really sanitizing their homes? Yeah, so this is the whole program that we're doing.

We launched this thing called the Enhanced Cleaning Protocol. We asked hosts to go through basically like an online course. If they go through the course, it's got like basic cleaning protocols. They get a badge or a seal on their listing. You'll see it. And it says right below the listing. I think it says enhanced cleaning protocol. We've created gaps between checkouts and check-ins.

of about 24 hours to make sure that obviously there's some gap and people aren't kind of interfacing with each other. These are some of the things. And now we're working on other things like updating a review system. So when people stay, they can rate the cleanliness and did the host seem very responsive. And then we're going to be working on ways to essentially verify the standard of cleanliness as well.

That's a little bit harder problem. But there's a whole system that we're working on. You know, to this point of going public, I mean, is that on the back burner now of taking the company public? No, when this interview is over, I will be resuming work on that. To go public, you've got to write this securities document called an S-1, and it's like a 300-page-turner. It will not compete with your favorite American literature as the Sunday night reading.

But we're going to file it late March. we put on the shelf. And recently we've been dusting it off, you know, and you have to update it because the business has changed. So you've got to kind of write it more differently. So that's what I'm doing. And we don't know when we'll be public, but I basically said, we'll be ready this year if the market's ready for us. If the market's not ready, we'll be ready when they are. Brian, you know, when you think about where your business is going to be in five years and what you've learned from this time, you know, as a leader, it's been really difficult. It's been extremely challenging. You're sort of wearing your vulnerability on your sleeve, which I think

a lot of people appreciate. What do you want to take with you into the future in five years time from now that you've really learned about yourself and your leadership and your company during this time period? You know, you can learn a lot about somebody in a crisis. And I've learned two things about myself. First thing I've learned about myself is I can handle a lot more pain than I thought I could. It just turns out that like whatever I was afraid of, I think, and this is true for so many of us. Whatever happens, I think we can get through it because we're generally not alone.

I think sometimes people listening, they probably feel alone. I bet you everyone's less alone than they think they are. But we're actually together. Everything's connected. We're all connected. If you kind of lean on the support of those around you, you can handle so much more than you think you do.

I mean, most people listening do have connections and we just need to remind ourselves to them and reach out to them. And the second thing I've learned, is to kind of follow your own heart, your own institution. You know, before a pandemic, everybody was stretched thin. We were sprawling. We were going into all these businesses.

You know, just kind of feeling pressure of trying to make everyone happy. And the pressure of trying to do everything and trying to make everyone happy kind of makes everyone not really happy at all. And then suddenly something happens. You're in a crisis and you can no longer make what I call business decisions. So then you shift to something else. And that's what I call principle-based decisions. If you can't predict where the world's going, just write out the principles of what you stand

for and have faith knowing if you do the right thing that it's going to sort itself out. And by the way, what's your alternative at this point anyway? And so I started realizing that like we need to get back to the basics. We need to get back to roots, back to what is truly special about Airbnb, which is connecting people, about belonging, because we didn't start this company to be a travel company. We didn't start his company to be a real estate company. It was about connection, and if it took a crisis for us to get back to that core truth, then that's what we're going to focus on.

We're not alone, and we all have something the world needs, and we need to focus on that. That's what I'm going to take out of this. Yes, indeed. Brian Chesky, thank you so much for joining us. Thank you very much. That's an excerpt for my conversation with Brian Chesky, CEO and co-founder of Airbnb. To see our full interview, you can go to Facebook.com slash how I built this. And if you want to see all of our past live interviews, you can find them there or at YouTube.com slash NPR.

If you want to find out more about the How I Built This Resilience series or other virtual NPR events, you can go to nprpresents.org. This episode was produced by Candice Lim, with help from Will Mitchell, Tyra Lockhart, Matt Adams, Gianna Capadona, John Isabella, Julia Carney, Neva Grant, and Jeff Rogers. Thanks for listening. Stay safe. And I'll see you in a few days. I'm Guy Raz, and you've been listening to How I Built This?